New entrant aiming to upset the Big Six's retention strategies, but will it make an impact?

Hudson Energy, a US-based supplier, is entering the UK SME energy supply market with the promise that it will offer what every customer wants and needs: faster, efficient, transparent, and cheaper energy supplies. However, with only a niche offering of instant service through brokers, it is unlikely to compete across enough of the customer base to truly worry any of the Big Six UK suppliers.

The business to business (B2B) energy supply market is a complicated place: customers vary hugely in size and in the services they require from their supplier, even in the small- and medium-sized enterprises (SME) category. While the number of suppliers operating in this space has traditionally been low, Hudson Energy has announced its intention to enter the fray.

Initially entering just the electricity market to avoid the seasonal volatility of gas prices, Hudson Energy aims to introduce practices to the UK supply market such as returning quotes to customers in "minutes" after being contacted online. It will also conduct the majority of its business through brokers, allowing the company to minimize costs – and, hopefully, prices – by not requiring significant numbers of sales and administrative staff.

But will customers see enough difference in Hudson Energy's offering to tempt them to switch and remain with it? Indeed, high customer service levels are already a standard offering in the B2B market, and existing suppliers offer dedicated account managers, something that Hudson Energy will not offer due to its use of brokers. Established suppliers also use social media to ensure that queries are dealt with quickly, competing directly with Hudson Energy's fast service promise.  

Hudson Energy's customer acquisition and retention strategy is fairly simple compared to those already active in the market. Research currently being conducted by Datamonitor Energy on utility retention strategies shows that while customers react most strongly to price strategies in the SME segment, strategies to enhance customer service can encourage customers to accept a price premium. Hudson Energy should be focusing on a price strategy, as acquiring customers through brokers will not allow it to develop the relationships needed to provide premium levels of customer service.

As such, it is unlikely that Hudson will cause a revolution in the SME electricity segment. The Big Six (EDF, E.ON, RWE npower, Centrica, ScottishPower, and SSE) have the resources to provide retention strategies to cover the entire market. Hudson Energy, on the other hand, will be targeting a niche, and although this will allow it limited success, the UK is unlikely to see the Big Seven any time soon.