Producing a Marketing Strategy

Producing a Marketing Strategy
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. [image] 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. [image] Another driver of customer value is recognizing that customer needs can evolve over time ? but only when services is a key differentiator. [image] 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? [image] 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. 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. [image] Are all customers created equal? ? my answer is a resounding no. By recognizing this they can meet their differing needs, and can target their marketing Strategies to create value for their customers, and thereby create increased value for Centrica?s shareholders. They have done so already, and are confident they have the strategy to do so in the future. Marketing?s four P?s Most people have a tendency to lump ?Sales and Marketing? together, thinking of them as synonymous. This is not the case, however. Marketing is a completely separate function that helps position products and services correctly so that Sales can be more effective. At the core of Marketing are the ?four P?s? ? Price, Product, Promotion, and Place. Marketers adjust each of these components to arrive at a mix that the customer will prefer over competitors. 1. Product. The product is the full bundle of goods and services offered to the customer. This includes the appearance, functionality, and support or non-tangibles the customer will receive. The physical product itself is part of ?product? as well as any packaging it arrives in. Branding strategies. Centrica trades under six brands ? British Gas, Scottish Gas, AA, Goldfish, Direct Energy and Energy America. The six brands relate respectively to the home, the car and finance. British Gas has key values that differentiate its products and services from competitors. The values of British Gas reflect trust, reliability and expertise. They also reflect a simple, fresh and different way of doing things. The brand symbolises the product and service delivery the customer can expect. British Gas is Britain?s leading supplier of energy to the home: British Gas has approximately 13.5 million domestic gas customers and nearly 5.5 million domestic electricity customers. To date over two million gas customers have returned to British Gas having tried one or more of the other suppliers. Many of those who have returned have told them that they have done so because: - they did not receive the service they expected from their new supplier - or they did not receive the savings they thought they would - or they have been attracted by British Gas competitive electricity prices Around a million more customers have chosen British Gas as their first gas supplier British Gas is the most popular choice of electricity supplier amongst customers switching. Roughly 1 in 2 householders switching electricity supplier are choosing British Gas. Around 60% of those who have switched electricity supplier have chosen British Gas. Every week approx. 20-30K customers return to British Gas or choose them as their first supplier. Around 40K customers switch to British Gas for their electricity supply every week. Customers that have switched to British Gas for electricity have seen their annual bills cut, in real terms, by an average £30 in the two and half years since competition was introduced British Gas customers have seen even bigger savings. Despite recent gas price rises their current annual gas bill is still on average £55 cheaper in real terms than in 1996 2. Place. This is where and how your product is distributed and sold. Will you sell it yourself, through a broker, or a distributor? Will you run a retail store or sell only to retailers? If a service, do you deliver in person or through the Internet or telephone? These questions all involve ?place?. Places of product distribution. Their primary channel for attracting new customers is direct sales. This takes the form of sales direct to the customer in their own homes as well as via promotional sales stands at exhibitions, in supermarkets and other High Street locations. Their primary channel for attracting new customers is direct sales. This takes the form of sales direct to the customer in their own homes as well as via promotional sales stands at exhibitions, in supermarkets and other High Street locations. The main target areas for export are North America and Western Europe, where the company?s unique experience of operating in a fully competitive market can be utilised. British gas is a new player in the European gas market through the opening of a new pipeline with connects the UK to the Continent. The Interconnector pipeline was completed in October 1998 and since then it has been supplying gas direct to three major industrial customers in Germany and the Netherlands. The Interconnector has been called one of the most important European infrastructure projects in recent years. Skills in energy buying and trading, and in marketing and sales can be applied in these different markets. The physical linking of the UK and European gas markets, together with the new EU Gas directive, will be a major driver of competition in an EU-wide single gas market for natural gas, and will enable British gas to develop its trading links with European partners. Although the pipeline was originally conceived to carry gas from the UK to the Continent, it has been designed so that gas can flow both ways. This means that when economic conditions change, e.g. combination of a strong pound and/or low oil price which makes UK gas more expensive they can import gas from Europe at a more economic price for supply to the British market. 3. Price.This is how much you charge for your product or service. Considerations include whether you will charge the same amount all of the time or vary it in some way. Varied pricing could occur according to geography, time frame, or volume. Additionally, with a service, price can be varied according to level of service. Market price risk The key market price risks facing the Group are:
natural gas commodity prices both in the short-term market and in
respect of long-term sales and purchase contracts;
electricity prices from the Electricity Pool; and
escalation indices on long-term ?Take or Pay? gas contracts, of
which the most influential are general price inflation and oil
product prices.
The Group?s policy is to hedge a proportion of the exposure for a number of years ahead. The extent to which the Group can use traded markets to manage these risks varies with the liquidity of those markets. Nevertheless, where opportunities do exist the Group aims to manage part of its risk by:
reducing ?Take or Pay? exposures through price and pricing
mechanism renegotiations where commercially advantageous;
the use of financial instruments such as oil and gas swaps, gas
price derivatives, and electricity contracts for differences;
hedging against the dollar element of the oil price exposure with
forward foreign exchange contracts; and
use of bilateral agreements for gas and power.
During the year the financial and risk management committee regularly monitored the magnitude of the Group?s price exposure and the level of hedging activity in the light of a substantial rise in the market price for gas, the availability of forward prices and market liquidity. The net loss from trading in energy derivatives as set out in Table 1 mainly related to economic hedging activities, which to some extent protected the Group against the potential impact should the market price for gas fall. The Government?s New Electricity Trading Arrangements for England and Wales are due to be implemented in 2001. They believe these arrangements will reduce price distortions in the existing Pool mechanism, bringing increased liquidity and transparency to the wholesale electricity market, thereby extending the range of opportunities to manage electricity price risk. Pricing Initiatives Over the course of the year they reduced their prices to customers on their Standard, Prompt and Prepayment gas tariffs. They also introduced an Advance Payment tariff which offers customers a 15% saving from standard prices. They have guaranteed cheaper electricity prices than the local electricity supplier until 2002 and by supplying both fuels they are passing on administrative savings to customers. British Gas Trading intends to withdraw Standing Charges from all gas and electricity tariffs. This will be replaced by a two-tiered tariff structure. The first tier will be for all annual consumption below 4572 kWh with the remainder charged at the second tier. In gas, an increase in own gas production and lower supply operating costs more than offset the impact of higher external gas costs, which averaged 16.5p per therm during the year (1999; 15.6p). As predicted at the half year the cost of their externally sourced gas rose to around 19p per therm for the supply year from October 2000, as a result of indexation, including that due to oil price increases. 4. Promotion. This is the advertising and selling part of Marketing. Often, promotions are categorized into push versus pull. Advertising pulls by making the consumer aware of and ask for your product or service. Incentives, such as premiums or price reductions, push your product out the door by encouraging your customers to purchase in volume, more, or more often than he would otherwise purchase. Marketing Campaign British Gas launched the first in a series of ?Expertise? TV adverts at the beginning of 1999 which have run into 2000. These ads have featured real service engineers carrying out proper work for real customers. They were shot in a ?fly on the wall? documentary style and directed by BBC2 ?Cutting Edge? director Dominic Savage. These have proved to be highly successful, with market research showing extremely high levels of unprompted recall among the general public. They have also made minor celebrities out of some of the engineers who have appeared in them and led to interviews on the evening news slots of local TV stations. The first campaign of 2000 supported one of the most significant changes British Gas customers have seen in recent years. From 1st April for gas customers and 1st May for electricity customers with British Gas the standing charge was removed and replaced with a two tier pricing structure. The press coverage had been so strong that an overall theme ?British Gas shaking up the energy market? was used to promote the removal of standing charges and reduction in prices. The campaign used TV, press, posters, radio and Internet advertising. The activity kicked off with a ?road block? TV strategy which meant the first ad ran on all commercial TV channels simultaneously to help generate maximum awareness, innovative new posters, which were shaking, were used also to promote the shaking up the energy market message. A promotion was also developed with the Capital Radio network, which used the shaking theme further with customers shaking to win exotic holidays around the world. The announcement and subsequent campaign had a significant impact on sales and strongly enhanced customer perceptions. The advertising activity generated sales far in excess of forecast. Direct Marketing British Gas talks to its customers in a number of ways, informing them of products and services that are relevant to them and may be of interest. Direct marketing utilises the Internet, direct mail, telephone calls and literature enclosed in bills to inform and alert customers to new offers and every year they make over 35 million contacts with their customers. Their activity conforms to the guidelines set by the Advertising Standards Authority and the legislation introduced under the Data Protection Act setting out how companies can talk to customers and what information they are allowed to use to target customers. Publicity & Promotions Above the line advertising ? TV, Press, Radio, and Posters ? is used largely to build and develop the emotional values which form the basis of the British Gas brand offering and appeal across the whole customer base. Below the line advertising ? direct mail, telephone calls, face to face contact, Internet, literature enclosed with bills ? is used largely to deliver rational propositions which are relevant to individuals or segmented groups within the total customer base. British Gas runs advertising campaigns to ensure the value of the brand is optimised, and to promote new products and services available to all their customers. Before any advertisements appear they have to be cleared by the relevant external advertising authority, to ensure they are legal, decent and honest. The company uses different methods for the customers to pay their bills in order to attract them:
Advanced Payment: customers who pay for a year?s gas in, save
around 15% against late payment by cash/cheque.
Direct Debit: customers who pay by monthly direct debit, save on
average 13% against late payment by cash/cheque.
Prompt payment: customers who pay their quarterly gas bill within
10 days of the bill issue date save around 10% against late
payment by cash/cheque.
Cash Cheque: customers can choose to pay quarterly but they do not
receive a discount if the bill is not paid promptly.
Prepayment: customers purchase credit in advance. This form of
payment usually suits customers wanting to pay for small amount of
gas but at frequent intervals.
Deregulation of the UK Domestic Energy Market Between April 1996 and May 1998, the British domestic gas market was opened up to competition. Between September 1998 and June 1999 the British domestic electricity market was opened up to competition. Between September 1998 and June 1999 the British domestic electricity market was opened up to competition. This means 24 million homes can now choose their gas and electricity supplier Britain became the first country in the world where domestic consumers have the freedom to choose their energy supplier The opening up to competition means householders can buy their gas and electricity from any licensed supplier rather than just from their local company or what was the incumbent supplier. Competition has brought reductions in both gas and electricity prices and customers can shop around to find the best deal. According to the National Audit Office electricity customers have saved around £750m and gas customers around £1billion a year since competition began. Changing supplier does not involve any disruption in supply nor installation of new wiring or pipes. Britain was the first country in the world to deregulate its domestic energy market and the move has been very successful. Ofgem announced on 26th November 2001 that competition in the gas and electricity supply markets is well established and is bringing benefits to customers across all income groups. This is borne out by new independent research by mori, which shows high levels of switching, high levels of customers? satisfaction and continued savings. Effective competition protects consumers Since the gas and electricity supply markets were opened to competition 38% of electricity customers and 37% of gas customers have switched supplier. They continue to do so at a rate of 67K customers per week for gas and 100K customers per week for electricity. Last year?s National Audit Office review of the gas market demonstrated more than 90 per cent of customers were aware they could choose supplier. The latest independent research released by Ofgem on 26 November 2001, shows that more than 15 million customers have so far switched their gas and electricity supplier. Most switchers and non-switchers believe it is easy to switch. Of the customers who have switched 93 per cent of electricity and 90 per cent of gas customers found the process easy. Ofgem further commented: "it is clear from this survey that gas competition is now delivering the best deals for customers on price and choice. Electricity competition is heading the same way." How the strategy is based on the principles of marketing Centrica?s aim is to be a leading supplier of essential services in Great Britain and internationally. They offer dependability and value for money, taking care of the essentials for millions of customers every day. They are committed to building shareholder value by increasing the number of products and services they sell to customers, and by increasing the margin they can earn from those sales. Looking at the changes of the technology British gas is trying to keep up with it. Their computer system preparations for Year 2001 were completed on schedule and they are pleased to report that as a result they have not experienced any disruption to operations or customer service. From commencement of the programme in 1997, they spent a total of £36 million on potential Year 2001 computer based issues, of which £29 million was treated as exceptional costs. All these expenses on the technology ensure that the applications, payments, complains etc, are processed faster and accurately. Customer demand. Over 18 million consumers use their products and services. As they fulfil universal needs such as heating, lighting and peace of mind for those devices that help to run the home (ie central heating systems) there is no one consumer segment that can be identified as typical British Gas customers. For those homes that purchase all their energy needs and have a service contract for their central heating system, families, adult?s aged 35 to 54 years old tend to be more common. Recent product launches.
Debit card payment facility for all gas and electricity customers
Accidental death cover ? free for all gas and electricity
customers. In the event of accidental death covers customers?
energy bills. £360 for either gas or electricity and £600 for
both. They are the first UK energy supplier to offer free bill
payment cover to all their energy customers.
Comprehensive Plumbing cover option for British Gas 3 million
Three Star Service Cover customers.
How and why they changed their strategy. Their Marketing approach has changed dramatically in recent years with the introduction of competition to domestic energy markets. Whereas previously the majority of marketing activity had been aimed at brand development, there is now a much greater emphasis on promoting specific products and changes in price. The pace of marketing in the industry has increased dramatically with the onset of competition and lead times for new campaigns are now much shorter than previously. Competition ? How it has changed their business The introduction of competition has had a profound impact on their business. Whilst the business has always aimed to deliver excellent customer service, there is now a realisation that customers can choose to switch to a new supplier if they are dissatisfied. This has led to a renewed focus on the customer who is at the heart of every decision they take. Methods of working have also changed dramatically. Industry processes have changed consistently and their own people and systems have had to adapt accordingly. Their staff need to be able to deal with an increasingly broader range of questions from their customers and must also be adaptable to move with the marketplace as it develops. A clear analysis of the external influences affecting the development of the marketing strategy. The development of the marketing strategy for the production of gas and electricity is affected by many external factors including: Government Government policy is very important in determining how open and innovative these markets can be. British Gas trading, now operates in a market place that has been made considerably more competitive as a result of Government policies. Government policy can have a great impact on how the company?s businesses operate. Government can help to deliver the conditions that business needs, such as low inflation levels and competitive tax rates. Of course, Government cannot make individual companies successful, only the people in the business itself can do that, but Government can provide a framework in which firms can thrive. British gas shares society?s concerns about key environmental issues such as global warming and air quality, and they aim to play a part in meeting Government targets in these important areas. Legislation === The government affects the business with the Laws. For example: The Competition Act 1998 prohibits anti-competitive agreements and practices (price fixing and market sharing) and the abuse by a company of a dominant position in the market. A company can be fined up to 10% of turnover if it fails to comply. The Act affects all businesses in the UK and reflects existing European legislation. British gas has trained relevant employees on the Act to ensure that its activities are compliant with the Act. The Utilities Act 2000 aims to update and align the regulatory regime for gas and electricity to facilitate further competition in the sectors and to provide similar levels of regulation for companies operating in both sectors. Consumer interests, social issues and environmental concerns lie at the heart of the Act ? for example, electricity suppliers will be required to obtain a proportion of their electricity from renewable sources (wind farms, solar projects etc) to help towards achievement of the UK?s Kyoto target. The role of Ofgam. The government through Ofgam, the gas and electricity regulator, is allowed to set standards for companies to encourage its customers to install energy efficiency measures. In the past these standards have only been set for the Public Electricity Suppliers, however, from April 2000, British Gas Trading, along with all the other gas and electricity suppliers have been set energy saving targets. These have to be achieved through encouraging customers to install energy saving measures by offering grants and discounts. The majority of the measures have to focus of those members of society who are the most disadvantaged or those in fuel poverty (this is defined as households who spend at least 10% of income on fuel). These standards are known as Energy Efficiency Standards of Performance or EESoPs, the current EESoP targets have been set for a 2 year period which will end on 31st March 2002. Work has already begun on the next set of EESoP targets that will run from 2002 to 2005. EESoPs along with other government initiatives will help the UK fulfil its Kyoto Climate Change targets to cut greenhouse gas emissions by 12.5% below 1990 levels by 2008-2012. Additionally, the Government has a domestic goal to reduce carbon dioxide emissions by 20% below 1990 levels by 2010. The regulatory regime under which their domestic gas supply business operates will change from April 2000 to reflect the increasingly competitive nature of the gas market. The regulator?s final proposals represent a demanding but acceptable settlement as part of an overall package which will remove price controls for their Direct Debit customers and signals a firm intention to remove all price controls subject to continued development of competition in the domestic gas market. Weather- how it effects the business. Gas sales to the domestic market are particularly sensitive to weather, which in turn can have a material impact on profits in their gas business. In the past they have disclosed the estimated financial impact of weather upon their performance using a long-term (65-year) temperature average. In recent years there has been a shift in UK weather patterns, with a tendency for average temperatures to be generally warmer than experienced over the long-term. Accordingly they now consider that a ten-year rolling average is more representative of seasonally normal temperature. Using this as a benchmark, the weather in each of the last two years was still nevertheless regarded as ?warm?. If the weather had been normal as defined by the ten-year rolling average, operating profits would have been £109 million higher in 2001 compared with £77 million higher in 2000. Have any changes in the law affected your business activities? The Competition Act 1998 came into effect on 1 March 2000 and prohibits anti-competitive agreements and practices (price fixing and market sharing) and the abuse by a company of a dominant position in the market. A company can be fined up to 10% of turnover if it fails to comply. The Act affects all businesses in the UK and reflects existing European legislation. Centrica has trained relevant employees on the Act to ensure that its activities are compliant with the Act. The Utilities Act 2000 aims to update and align the regulatory regime for gas and electricity to facilitate further competition in the sectors and to provide similar levels of regulation for companies operating in both sectors. Consumer interests, social issues and environmental concerns lie at the heart of the Act ? for example, electricity suppliers will be required to obtain a proportion of their electricity from renewable sources (wind farms, solar projects etc) to help towards achievement of the UK?s Kyoto target. Weather risk ==== Gas sales volumes, and to a lesser extent electricity volumes, are influenced by temperature and other weather factors. In Britain, weather derivatives are still in the early stages of development. In both 2000 and in 1999 a small number of weather derivative transactions were entered into, in order to hedge part of the Group?s weather exposure. Unrecognised Deferred -????????????????????????????????? -????????????????????????????????? Gains £m Losses £m Total net gains/ (losses) £m Gains £m Losses £m Total net gains/ (losses) £m -????????????????????????????????? -????????????????????????????????? Gains and (losses) as at 1 January 2000 33 (23) 10 3 (14) (11) Arising in previous years that were recognised in 2000 (26) 19 (7) 11 7 18 Gains and (losses) arising in previous years that were not recognised in 2000 7 (4) 3 14 (7) 7 Gains and (losses) arising in 2000(i) 165 (55) 110 2 5 7 -????????????????????????????????? -????????????????????????????????? Gains and (losses) as at 31 December 2000 172 (59) 113 16 (2) 14 -????????????????????????????????? -????????????????????????????????? Of which: Gains and (losses) expected to be recognised in 2001 90 (30) 60 8 (2) 6 Gains and (losses) expected to be recognised in 2002 or later 82 (29) 53 8 - 8 -????????????????????????????????? -????????????????????????????????? Table 1 Gains and losses on financial instruments held for trading. The net loss from trading in energy derivatives included in the Group profit and loss account for the year ended 31 December 2000 was £92 million (1999: gain of £10 million). Energy derivatives used for this purpose comprised energy futures, swaps, options and electricity contracts for differences. The net loss for the year mainly related to economic hedging activities established to partially protect the Group against a fall in the market price of gas. The net loss, which is partly realised and partly a provision at the year end, arose because of the rise in gas prices during the year and does not reflect the favourable impact of those increased gas prices on other wholesaling activities, or profits on other physical trades also included in the Group profit and loss account for the year. Gains and losses on hedges. The Group uses financial instruments to hedge its currency, interest, energy price and weather exposures. Changes in the fair value of these derivatives used are not recognised in the financial statements until the hedged position itself is recorded therein. Unrecognised and deferred gains and losses on hedges arose as analysed below: Competition ? How it has changed their business The introduction of competition has had a profound impact on their business. Whilst the business has always aimed to deliver excellent customer service, there is now a realisation that customers can choose to switch to a new supplier if they are dissatisfied. This has led to a renewed focus on the customer who is at the heart of every decision they take. Since the introduction of competition British Gas has repeatedly reduced the price of energy to their customers. This improvement was largely achieved through lower unit gas and storage costs, and a higher level of own gas production. British Gas has a successful track record on price and offers customers genuine value for money now and in the future. Methods of working have also changed dramatically. Industry processes have changed consistently and their own people and systems have had to adapt accordingly. Their staff need to be able to deal with an increasingly broader range of questions from their customers and must also be adaptable to move with the marketplace as it develops. Related to market share. Their Energy Supply business has grown in the six months ended 30 June 2000, with their share of the residential gas and electricity energy market in Great Britain rising from 35% at 30 June 1999 to 38% at 30 June 2000. They were supplying 3 million customers with electricity as at 30 June 2000, and they are now well on the way to achieving their revised target of 4 million electricity customers on supply by the end of 2001. The rate of customer losses in the residential gas market continues to decline, and their market share stood at 71.7% as at 30 June 2000 (30 June 1999; 76.4% and 31 December 1999; 73.3%). Competition in the Energy Markets. The domestic gas market was opened to full competition in May 1998 (19.5 million homes). Their overall market share at the end of December was 80% (15.9 million homes). In areas where competition has been established for over a year, their market share was 75%. In the domestic electricity market, by the end of December around 850,000 consumers had signed supply contracts with them, a level well in excess of their original targets. The number of customers actually supplied was lower as the transfers from the regional electricity companies are being phased in from September 1998 until mid way through 1999. Primary data collection and analysis I designed a questionnaire to collect information about the opinion that Centrica/British Gas customers have for their current marketing strategy and what they may consider to include in the new marketing strategy to improve their products and services. In Appendix 1, I have included a copy of the questionnaire used to carry out the survey. The analysis of this survey is included below. Analysis of the questionnaire I asked 100 people to fill the questionnaire in Appendix 1 and after analysing my primary research data I put together the following results, strategies and suggestions. My questionnaire results show that 70% of the people surveyed were British Gas customers. Initially they thought that the main age group that uses their services was 21-30. The results of the survey show that people in the age groups 31-40 and 41-50 are the higher users of the services. This can be explained that those are the age groups which have families and as a result make most of our services. They used to invest more for the advertising of their product on TV, radio and newspapers, but the survey showed that 40% were influenced by TV advertisements and an unexpected figure showed that many people were influenced by the Internet and also friends. I would recommend that more attention should be paid to ?friends? in order to have a higher effect to attract the new customers through this way of promotion. A suggestion of making this process work better would be providing a special offer. For example: get 5% off for 2 months if a person refers to you as the reason for choosing their service. 80% of the people asked said that they were aware of the services provided by the company. 45% said that they were provided with gas only, 15% provided with electricity and 10% were provided with both gas and electricity. This percentage is expected to increase as people would lie to take advantages of the special offer offered by the company. (See pricing initiatives). A proof of this assumption of increase would be the fact that 30% of the people asked, which mentioned to be Centrica/British Gas customers, expressed interest in both services. My findings show that unless the company undertakes a major TV branding program nationwide only 22% would be informed through leaflets, magazines, newspapers and public relations. 33% of people expressed negative views regarding the price. A reason for this would be the low amount of special offers offered. Another special offer that Centrica/British Gas may wish to consider is offering 7% off if applied from the internet and direct debit. 60% of the people who said that they were already customers of the company used the advanced payment option since it offers the highest discount. Another 22% had chosen the direct debit option. The views expressed for the other options were minimal. From the resources I discovered that just a shameful 17% were slightly aware of those discounts offered from the different methods. Thus I would suggest that the next branding strategy would be concerned with price initiatives as this is the second most important option that people value after service. The strategy of being able to pay by meter or account is met with positive views as it simply creates in the customers the perception of added value. 77% of people said that they were satisfied with the customer service. 94% of people expressed desire to continue with the service. The low amount of (6%) that were thinking of changing the service was based on the people?s attitudes of not bothering to change the service as it would take a certain amount of time to stop the account with Centrica/British Gas and begin with another one.

Producing a Marketing Strategy 7.9 of 10 on the basis of 3671 Review.