I need to produce a marketing strategy for a new or existing product. I have chosen Centrica/British Gas PLC and I will produce a marketing strategy for its main products: gas and electricity.

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INTRODUCTION

I need to produce a marketing strategy for a new or existing product. I have chosen Centrica/British Gas PLC and I will produce a marketing strategy for its main products: gas and electricity.

The marketing strategy will include evidence and information about:

1.      How the strategy is based on the principles of marketing.

2.      How I used sources of primary and secondary marketing information.

3.      How I analysed the impact of the external environment on my marketing decision.

4.      How I analysed the marketing context and decided on an appropriate strategy.

5.      How I developed a coherent mix of strategies to meet consumer needs.

6.      An evaluation of the reliability of the differing marketing models used.

     

“Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives”. This definition stresses the importance of beneficial exchanges that satisfy objectives of both those who buy and those who sell goods and services. The purpose and objective of marketing are; marketing seeks (1) to assess the needs and wants of prospective customer and (2) to satisfy them. The key to achieving the two objectives is the idea of exchange or the trading of things of value between buyer and seller.

 

Their Brand

Centrica/British Gas has changed a lot from the old state owned monopoly, which was privatised in 1986. Over the years, they have established a reputation for doing more than simply supplying gas and related services and putting the needs of their customers first. Their brand is as important to them as it is to their customers. It is valued not only for what it offers, but for the way in which they offer it:

There are four key words that summarise the attributes that customers most value in their dealings with British Gas. They are chosen to define clearly and accurately what lies at the heart of the brand.

·        Warm

·        Responsive

·        Experienced

·        Responsible

On an emotional level, Centrica/British Gas helps to bring warmth, reassurance and comfort into the lives of customers, enhancing their well being and supporting daily life in the home. The products they offer, the service they supply and the way in which they communicate with customers would all reflect and build on these core values.

A team of marketing and brand experts at Centrica/British Gas continually commission extensive research to better understand their brand, the needs of their customers and how to evolve their range of services and products to meet those needs.

 

I have identified the secondary data relevant to the marketing strategy of the company.

Customer Service

They place the highest priority on quality of service to their customers and track their perception of service delivery. In addition to customer satisfaction tracking, undertaken by an external market research agency, they closely monitor the level of complaints received. For British Gas as a whole, complaints to the Gas Consumers Council (GCC) decreased by 3%. Complaints in their gas supply business, excluding those relating to the switching of suppliers, fell by 18% compared with last year. Including change of supplier complaints, the overall levels of gas supply complaints rose in 1999 by 1% compared with those in 1998. During the first six months of this year complaint volumes to the Gas Consumers Council have continued to fall, down 23% on last year. Home Service's complaints were down by 7% and Gas Supply complaints were 26% lower. The efforts they have made, together with Ofgem, to improve and simplify the process for customers changing supplier, have reduced the number of complaints within the change of supplier category by 33% compared with the first half of 1999.

Customer Relationships

Centrica regards Customer Relationship Management (CRM) as central to the Group's strategy. Across their businesses they serve some 18 million households, who take from them approximately 34 million products and services each year, giving them one of the largest customer bases in Great Britain. In the first half of 2000 they have continued to invest in CRM capability, and this is reducing their cost of customer retention and acquisition, as they better understand and meet their customer needs.

Costumers value – All costumers created equal?

Centrica was formed out of the demerger of British Gas in 1997, which had operated as a traditional vertically integrated, utility - from “drill bit” to “burner tip”.

Focus was engineering excellence rather than customer service.

In Centrica, customers are their passion and focus. Centrica has one of the largest UK customer bases and growing both top line and bottom line.

Through their well-known brands in Great Britain, they aim to take care of the essentials for millions of households and give people the services they want. They work hard to understand their customers' needs and respond to them. This is rightly the focus of much activity within all parts of their business and fundamental to their success today and into the future.

As a leading supplier of essential services, Centrica looks after customers in and around their homes, through a wide range of services. They are focused on taking care of the essentials.

They deliver these essential services, and value, through they brands. Their brands are the starting point of their relationship with the customer, and from, which they create shareholder value. Customer value is based both on today’s relationship, and what the customer is potentially worth in the future. In their business, “size does matter”. They have nearly 400 million customer contacts every year - 400m opportunities for developing and broadening the customer relationship. First competitive advantage is their brands, and second is the scale of their business and depth of their relationship with customers.

There are two simple drivers of customer value. On the graph below the yellow line shows as product holdings are added under the brand umbrella, the 2nd and 3rd products generally have a higher margin. The red line shows churn rates fall by nearly half when a customer takes more than one product.

Put together, the increased margin and reduced churn of increased product holdings drive real value creation.

Another driver of customer value is recognizing that customer needs can evolve over time - but only when services is a key differentiator.

 

They look at customer value along three dimensions:

  • Increasing customer contribution i.e. annual margin
  • Building customer commitment leading to value creation over time, by extending the lifetime value of a customer
  • Generating customer advocacy where customers are enthusiastic about their  service and recommend it, leading to expansion of their customer base.

Going back to their 400 million contacts with customers, they can begin to generate powerful customer insights from this segmentation analysis.

With segmentation and careful targeting, they can improve the effectiveness of their marketing efforts, can pin point groups of customers with high propensity to take up a given offer and construct offers appropriate to the particular customer segment.

Moving towards “Segmentation of One”.

Graphs shows extract by customer decile for British Gas. Each decile represents

the same number of customers.

Left hand chart shows dual fuel customers by decile. Interesting to note, bottom

10% destroy value - due to low consumption patterns, high cost to serve, poor payment record and high churn. Top 20% of dual fuel customers are worth some 40 times more than the bottom 20%.

Right hand chart plots same deciles, and shows customers taking our added value gas service cover. Here the top 10% of dual fuel customers is seven times more likely to take a service cover contract than a customer in the bottom decile.

I could conclude here that not all customers are created equal. But, how do you know which customer is in which decile, and how do you target individual customers?

The answer is their Customer Hub. Their analytical segmentation tools have only been available for off-line analysis.

Their are adding further CRM capability, creating an on-line, real-time view of the individual customer - a powerful tool for call center agents, sales force and gas engineers. They will know the value of any customer at any point of interaction, and can target offers & service accordingly.

Investing some £340m over 4 years, anticipating a benefit of £100m per annum from higher sales, reduced marketing costs, and increased productivity & customer satisfaction. This again shows the benefit of scale in their industry.

Success can only be guaranteed if all aspects of the “offer” to customers are executed with excellence. Need excellent CRM tools, but also innovative service solutions, grounded in unique customer insights, delivered flawlessly through their extensive channels to market, backed up by warm & friendly staff.

Centrica’s competitive advantage & superior shareholder returns achieved through advantaged brands, advantaged data and analytical tools, and advantaged channels to market. These factors come together under “marketing” and lead the way in developing insights and new products to meet customers’ needs.

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Customer relationship, like any other human relationship, made up of three core components - recognize me, remember me, value me.

Customers want product and service offerings tailored to their requirements. They want value for money, us to recognize their need for a quick and convenient service, with the minimum of hassle so they can have complete trust in their ability to deliver.

Believe Centrica’s strategy is delivering a unique and advantaged customer experience that integrates all aspects of the customer relationship.

Are all customers created equal? - my answer is a resounding no.

By recognizing this they ...

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