Don't try to acquire new customers until you are able to service them

Figures published by Citizens Advice last week show that the energy supplier ‘Extra Energy’ is currently top of the league table for customer complaints amongst all energy suppliers.

I have a confession to make: Extra Energy is my own supplier of both gas and electricity. I switched to them two years ago after doing a price comparison on a well-known website that is owned by a consortium of Meerkats.

Yes, that’s right; I foolishly chose them purely because they were the cheapest!

Between January and March this year, Extra Energy received 1,682 complaints per 100,000 customers. This is the highest ratio of complaints over the five year period that the data has been collected. (Incidentally, one of those 1,682 complaints was from myself, relating to a cock-up about my direct debit payments).

Extra Energy is a new and relatively small company. They only launched in 2014, but have grown rapidly to over 500,000 customers by offering some of the cheapest tariffs in the energy market, something which has been aggressively pushed on internet price comparison sites.

The company claims that it has struggled to cope with this demand. Ben Jones, the Managing Director of Operations at the company said: "It is true to say that the first quarter of the year was a challenging period and some customers were affected. Unfortunately we did not put customer service resources in place quickly enough."

But here is the really interesting point: the league table results show that both small and large suppliers are capable of delivering good service, proving that a company's size is no excuse for poor customer service.

In my opinion the reason Extra Energy has performed so poorly in the league table of complaints is not because of their size. It is because they have aggressively pursued speedy customer acquisition (through low pricing) without having robust customer service strategies in place beforehand.

I've seen this happen before in other companies. In fact I am guilty of it myself, having once been in charge of marketing at a company where a massive PR success story (including wide coverage in the national press and on TV) led to us not being able to cope with the overnight increase in demand. It’s fine to have marketing success, but you must also have the customer service strategies and processes in place, ready to cope with the increase in demand. I suppose I learnt my lesson the hard way. But at least I got a free meerkat toy! 

Moral of this story: Don’t pursue an increase in customers until you have the customer service strategies in place ready to cope with the increase. Simples!