April 01, 2015
Utility Warehouse: Bundles of Growth
by Barbara Seale
Headquarters: London, England
Executives: CEO Andrew Lindsay
Products: Utility and essential services throughout most of the United Kingdom
In a country where network marketing is a small, not-well-understood industry, Utility Warehouse is growing by being the utility supplier you’d recommend to your mum.
The company offers discounted rates on energy, landline and mobile phones, and broadband service throughout most of the United Kingdom. Its nearly 50,000 distributors promote Utility Warehouse, which markets utility service bundles that give its members the option of flat monthly rates on a single bill for all services. Members can pick and choose the services they’d like to get from Utility Warehouse, but the more services they include in their bundle, the more they save on each service, and the more their Utility Warehouse distributors, or Business Partners, earn.
Utility Warehouse serves almost 600,000 residential and business customers, about 2 percent of the U.K. market. The customer base has grown over the years, taking the company from $731 million in 2011 to $1.1 billion in 2014. Utility Warehouse comprises approximately 99 percent of Telecom Plus LLC’s business. Telecom Plus trades on the London Stock Exchange under the symbol TEP.
|International headquarters of Utility Warehouse and its parent company Telecom Plus in London, England.|
Utility service deregulation in the U.K. has followed a similar path as in the United States. It started with telecommunications in the 1990s. Telecom Plus was an early pioneer in the deregulated utility industry, going into business in 1996 to offer deregulated phone service. Service offerings have expanded over the years into mobile phones and broadband, and then into energy when it was deregulated in 2001.
“The vision of the company’s founder Charles Wigoder had always been that we should be a multi-utility provider,” explains Andrew Lindsay, MBE, CEO of Telecom Plus PLC, who joined the company in 2007. “People didn’t tend to get looked after well by the big companies. They just came home to another bill that needed paying. But he had a vision that a multi-utility provider could give the convenience of a single bill based on the principles of good customer service. Then in 2006 he came across a new route to market for the U.K.: network marketing. Our business plays to that strength.”
He adds, “About 70 percent of our customers choose to be billed in equal installments each month. It’s a big messaging thing for us. In the U.K., no one knows how much they spend on utilities. We give them visibility to know how much they’re spending. It’s their biggest nondiscretionary budget item. It might be £2,000 (about US$3,082) a year across all their services.”
The company adopted its Utility Warehouse brand in 2003 to broaden public perception of the services it offers. The shift has even changed the way employees and managers view the company.
“Increasingly we don’t view ourselves as a utility business,” Lindsay observes. “We view ourselves as a discount club. Our customers become members, and we try to look after them the way golf or country club members would like to be looked after. We give them value. Our rates are not necessarily the very cheapest, but they’re always fair, and we make sure existing members are always the first to benefit from any new, lower prices that we introduce. Two years ago we stated our mission to be the nation’s most trusted utility supplier—the one you’d recommend to your mum.”
The mission has become the compass for decision-making within the company as it grows. Managers and even lower-level decision-makers ask themselves, “Is this decision consistent with being the nation’s most trusted utility supplier?” Lindsay notes that the company has almost 800 employees now, and more and more of them must make decisions that are guided by what the company is trying to achieve. “This mission must be part of our DNA,” he insists. “We must live and breathe it, and our business practices must demonstrate it—both in our culture with Partners and our staff internally.”
|Utility Warehouse executives engage the audience at its recent international convention.|
For example, Utility Warehouse’s competitors run endless advertising campaigns enticing customers to switch to them. Lindsay says that the pitch typically offers a year’s free broadband service or discounted energy—all introductory tariffs.
“Existing customers are paying about 2 to 3 percent of their costs a year to fund those advertising campaigns and teaser tariffs,” he says. “We fundamentally disagree with that. We can’t expect our Partners to recommend our services to mum when a year later she’s going to get ripped off. She must know that she’s with a trustworthy provider. Virtually all our competitors will hook mum in on a year’s free broadband service or a big energy discount for the first year and then start charging over the odds. We don’t do that. But our members will be paying less than they were to their previous suppliers before they switched. It’s all based on trust, savings and simplicity of service.”
Lindsay notes that one of the company’s challenges is the British culture and the limited understanding of network marketing. Over time the company has had to adjust its approach to better reflect its marketplace.
“There’s a British reticence to talk with friends and family about money,” he explains. “Americans are bold, confident. We are more reserved. When I joined the business there was much more marketing to prospects around ‘the opportunity.’ That’s a much more American model. We’ve wound that back. We focus more on generating an income that pays for basics—the mortgage, fuel or education expenses.”
Even so, over the next year the company plans to reach many more interested prospects. According to Lynda Mills, Director General of the U.K. DSA, people in the U.K. are turning to direct selling as a real alternative to traditional employment, with 68,000 direct sellers (17 percent) working full-time hours (more than 30 hours a week). This is up 20,000 from 12 percent in 2011. “Direct selling here in the U.K. really has entered the mainstream,” Mills says.
While Utility Warehouse has Partners who achieve a full-time income, the company’s focus is on the average person who wants to supplement his or her salary by working part time, equipping them to gather members who save money on as many services as they choose. While the company sponsors opportunity meetings, most recruiting and member gathering is one-on-one. Partners earn a small commission each time they recruit a member, but the real value is in the monthly residual income they get from that member for as long as that member is with Utility Warehouse.
|Telecom Plus CEO Andrew Lindsay (center) celebrates with Utility Warehouse Partners during an incentive trip.|
A few Partners identify prospects outside their warm market by exhibiting at town hall meetings and other community events. They invite attendees to enter a prize drawing for a car, providing their contact information and answering questions about the utilities they use. The Partners then use that data to recruit and gather members. Lindsay says that the tradition has been “remarkably fruitful over the last 10 years,” and has enabled the company to reward top Partners, who can earn the use of a Mini Cooper. Around 600 Partners across the U.K. drive the Utility Warehouse-branded white vehicles with purple stripes.
“What’s clever are the savings we make from a corporate perspective,” Lindsay says. “If I’m selling you gas or electricity, I need to make a margin. If I’m adding mobile phone or broadband, I have the same overhead, but now I have additional revenue streams. My costs didn’t go up, but my revenue goes up. I can afford to make a lower margin on the services. We’re competitive for each product, but if I can put them all together, then we become disproportionately more competitive with each service. It’s a strong incentive for members to choose all of them and a clear incentive for Partners to upsell so that they make more commission and stay with us longer.”
Utility Warehouse helps those Partners earn money and rewards members for sticking around by offering several ways to help them save money. In addition to the savings on their utilities, the company offers a CashBack card—a prepaid MasterCard that members can use to shop in-store and save between 3 percent and 7 percent at more than 40 leading retailers. Then by using the company’s exclusive online portal, which it calls The Clubhouse, members also can save up to 20 percent at some 2,000 online retailers, including eBay and Expedia. The company also helps take the worry out of paying utility bills through its optional Bill Protector service. For an optional monthly payment of £2, (US$3) members can benefit from £10,000 (US$15,400) of accidental death insurance and up to six months of payments of Utility Warehouse bills if they are unable to work. The offerings help further differentiate Utility Warehouse from its competition. Lindsay says that the options are possible through the company’s robust, integrated IT system.
The same IT system also enabled the company to launch its new online application process in March 2014. Partners loved it. Some 10,000 of them flocked to training during the quarter following its launch—about 400 percent more than usual during that period. The huge numbers tested the company’s training resources, but the results were worth it. Right away Partners began using the new process for around 75 percent of all residential customer applications.
With an updated, streamlined customer application process in place, the company then turned its attention to recruiting new Partners. It introduced a half-price “joining offer.” But the offer went far beyond a simple promotion. Utility Warehouse hired U.K. celebrity Sir Terry Wogan to become its brand ambassador. Wogan has been a leading media personality in the U.K. since the late 1960s. He recorded a video that now headlines Utility Warehouse’s new website, which was revamped to support the video’s messaging. Then Utility Warehouse offered Partners a free Samsung Galaxy tablet equipped with all the digital tools they needed to sign up new members—and build their teams. The cherry on top: The half-price promotion.
|Partners enjoy the view during a recent incentive trip.|
“It was a lesson in psychology,” Lindsay says. “If I tell our Partners they can earn a bigger commission for a month for signing up new members, I get a little response. But if I say that they can offer a special incentive to each new member, they go mad! They now have a reason to go out and talk to prospects. They get incredibly busy. Distributors are much keener and more active if they have something great to talk to people about. So we have begun to offer periodic time-limited promotions. We typically see extraordinary upticks in activity.”
During last April’s month-long promotion, Brand Partners recruited about 3,000 Partners, about triple the usual monthly number. Customer growth followed. Partners gathered 16,739 new customers during the quarter, compared to 13,372 during the same quarter of 2014. The company repeated the half-price promotion in January 2015. Results weren’t yet available when Lindsay spoke with Direct Selling News, but he expected results to be as strong as they had been in April.
Those new Partners learn to run their businesses through initial online training, followed by classroom training in one of Utility Warehouse’s 60 training centers. In those centers, experienced Partners who are qualified trainers run six-hour courses, usually for about 20 Partners at a time. At all centers combined, some 3,000 Partners a month learn the ropes or enhance their skills.
The company’s culture and resulting success are being recognized in multiple ways. Company-sponsored surveys reveal that more than 93 percent of members say that they would recommend Utility Warehouse to a friend. About 30 percent of new members also express confidence in the company by choosing the company’s five-service bundle, the Double Gold Bundle, which gives them the best possible rates. The company was recognized as “Most Trusted Broadband Supplier” in the Moneywise 2014 Customer Service Awards, and nominated by Which? magazine in two categories at its 2014 Annual Awards, including the award for “Best Customer Service.” The company was named Best Gas and Electricity Provider in both the value and service categories in the 2014 Moneywise Home Finances Awards and was recently nominated as a finalist in the 2015 European Business Awards.
|Through membership sales top Partners earn the use of a Utility Warehouse-branded Mini Cooper.|
The tributes create credibility that helps the company grow. Lindsay predicts continued growth, not so much in new types of service, though some are on the horizon. (He says that insurance is another service industry that is ripe for the company to enter, for example.) But the greatest opportunity he sees is to continue growing the company’s current customer base. Lindsay says that growth will be methodical, steady and as risk-free as possible. Meanwhile, Utility Warehouse will continue to invest in the building blocks that support its growth. In March it moved into a new facility that gave it about three times the office and call center space it had previously.
“We’ve got 2 percent of 25 million households as members,” he notes. “We see a huge opportunity to take our business to many more of those customers over the coming years and to become a household name that Partners are proud of and that resonates with customers.”