Extended Expert View: Alliances in UK energy retail

Publication Date	December 2005
Publisher	Datamonitor
Product Type	Report
Pages	19
ISBN Number	not applicable
Product Code	DAT00499

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Summary

Introduction

This document provides an analysis of niche marketing, loyalty scheme, sales tie-up and white labelling alliances in the UK residential energy market. It aims to explain the penetration of alliances, the factors influencing this and the alliances to date.

Scope

An analysis of sales and marketing alliances in the residential retail market.
An explanation of the types alliances that exist, by four categories and descriptions as to their strategic use.
An explanation of what alliances exist (or have existed), with descriptions of the parties involved and the basic relationship undertaken.

Highlights

The four types of alliance are: white labelling; niche marketing alliances; sales tie-ups; and loyalty partnerships. Niche marketing favours suppliers most; white labelling the least; loyalty partnerships and sales tie-ups are operational.

Alliances have not heavily penetrated the UK market, due to the dominance of the major players and the tier1 balance. Suppliers have generally perceived white labelling to be de-valuing, sharing the balance of power with a non-utility player.

White labelling has provided Scottish Power with scale, niche marketing alliances have assisted with new tariffs, and loyalty partnerships have been targeted at improving retention. With no requirement for the big six suppliers to enter into alliances, such alliances will remain small-scale or niche.

Reasons to Purchase

Gain insight into what alliances exist, the value they bring to the residential supplier and the reasons for their existence.
Understand that the market power of existing suppliers, coupled with the wholesale market has reduced the need for suppliers to enter into alliances.

Content

Chapter 1 Executive Summary
- Barriers in forming alliances, have hindered their penetration, yet they can assist in scale, differentiation and retention.
Chapter 2 Alliances In Uk Energy Retail
- The four types of alliance are: white labelling; niche marketing alliances; sales tie-ups; and loyalty partnerships.
- Niche marketing favours suppliers most; white labelling the least; loyalty partnerships and sales tie-ups are operational.
- Alliances exist in the energy market because both parties need each other to provide sales or marketing differentiation.
- Alliances have not heavily penetrated the UK market, due to the dominance of the major players and the Tier1* balance.
- Suppliers have generally perceived white labelling to be de-valuing, sharing the balance of power with a non-utility player.
- Many alliances exist today, the biggest are ScottishPower's two white label deals with LTSB and Sainsbury's.
- Niche marketing alliances typically target eco-friendly or older customers. The largest loyalty schemes have entered the energy market, through half the major suppliers.
- Apart from two white label deals, the retail market has been largely unaffected by sales tie-ups and white label deals.
- White labelling has provided ScottishPower with scale, niche marketing alliances have assisted with new tariffs, and loyalty partnerships have been targeted at improving retention.
- Benefits of alliances, in retention and differentiation, are mitigated by the market structure and position of the "big six".
Chapter 3 Appendix
- Methodology, related reports and contact details
List Of Figures
- Figure 1: Datamonitor's framework for classifying the four types of alliance.
- Figure 2: Alliances have not heavily penetrated the UK market, due to the dominance of the major players and the Tier1* balance.
- Figure 3: Desciptions of the main aliiances in the UK [1]
- Figure 4: Desciptions of the main aliiances in the UK [2]
- Figure 5: Datamonitor's framework classifying alliance, seen in the UK retail market