Octopus Energy gets its tentacles around M&S with smart digital strategy

In mid-July, UK high-street retailer Marks & Spencer (M&S) announced it was joining forces with energy industry challenger Octopus Energy to revamp its energy supply business.

The new tie-up will underpin the M&S Energy brand once the retailer’s current deal with Scottish & Southern Electricity (SSE) – one of the UK’s ‘big six’ utilities companies – ends in September, according to M&S Energy head, Jonathan Hazeldine, who added:

Octopus’ values of responsible and transparent pricing and digital-first customer service mirror our ambitions for the business.

That ‘digital-first customer service’ is important to this deal: at its heart is Octopus Energy’s bespoke, cloud-based billing and online customer service platform, known inside the company as Kraken, after the legendary squid-like sea monsters said to dwell off the coasts of Norway and Greenland.

Built entirely by in-house developers at Octopus, the platform is closely integrated with group messaging system Slack, which injects it with a wide range of social features that enable customer service and support staff to communicate with each other and collaborate to solve customer issues quickly.

Customer-focused choice

Naturally, Octopus Energy CEO Greg Jackson is delighted about the M&S deal. Since it was founded in 2016, the company has positioned itself as a specialist in renewable energy and is the largest investor in solar farms in the UK, also investing in wind generation, anaerobic digesters and rapid-response gas generation. For many UK consumers, it’s their best chance to effectively make their homes carbon-neutral. Jackson says:

For M&S to choose a two-year old company to become the deliverer of such an important service felt to us like one of the strongest seals of approval we could possibly receive. M&S spent more than a year kicking the tyres, really testing us to see that we could live up to our promises – even to the extent of having director-level people signing up to us as ‘mystery shoppers’. The fact that they went on to choose us, even though their mystery shoppers weren’t all straightforward customers, is really exciting. It shows it really was a customer-focused choice that they made.

Whether customers are straightforward or not, the Octopus Energy workforce that looks after them is known as its DigiOps team. They’re remote workers, many of them women returning to work after having a child. There are about two dozen of them, stretching from the Isle of Wight to Inverness, providing customer service, often out of hours, simply by logging on to the Kraken platform. Says Jackson:

Many are women whose previous employers were too inflexible to provide them with a great career once they’d had kids. So we’ve got an accountant, a bank manager, a scientist, a forrester, lawyers, teachers - women who’ve had wonderful careers, with bags of experience, who are highly motivated but who need flexible working hours, which we can provide.

They generally work from home – or indeed, wherever they can log onto Kracken to work – which is why the Slack elements of the platform are so important. Says Jackson:

We’ve put a lot of effort into providing them with what they need not just to do that core job of helping customers, but also have all the social aspects of work. They are using Slack to seamlessly blend all the social aspects of getting to know each other and helping each other out to get the work done, so remote work for them doesn’t become lonely or dispiriting – and that’s absolutely by design.

Incoming communications

Kraken also underpins the ways that customers interact with Octopus Energy. In effect, it’s the company’s ‘core engine’, according to Jackson, handling incoming communications from the company’s mobile app for customers, as well as email and social media such as Facebook Chat and Twitter. Telephone calls are handled separately from the DigiOps team, but in fact, only make up around one-quarter of incoming communications, with digital accounting for the bulk. To date, in two short years, Octopus Energy has signed up around 300,000 customers. With the M&S deal, it could potentially be a great deal more.

The bespoke nature of Kraken is vital to Octopus’ digital-first approach to customer service, says Jackson.

There are standard platforms available, certainly, but as a customer, there are two major issues with that. First, you’re not in control of them. If the platform provider adds new functions or takes some away, that’s what you get. If you’re providing something like DigiOps you need to be in control. If you don’t own your own customer experience, you just don’t own your own business. Plus, you want a competitive edge, but if you have the same software as your rivals, then you’ve got the same capabilities as them. This doesn’t let you differentiate, it doesn’t let you compete. You can ask the provider for new functionality, but as soon as you get it, your rivals get it, too.

Building in-house, from scratch, he claims, has enabled Octopus Energy to deliver a level of sophistication - and disruption - that other utilities can’t provide, with their creaking, elderly systems. Take, for example, the company’s Agile tariff, launched in February: this tracks wholesale electricity prices, enabling customers to take advantage of times when there is an excess of supply and electricity prices ‘go negative’. That can happen on days that are particularly windy or sunny, for example, and turbines and solar panels produce more electricity than is needed.

When this happens, customers on that deal are alerted by text, email or via the mobile app. So when demand is low, Octopus Energy will effectively be paying its customers to use electricity – to charge an electric vehicle or put a load of dirty laundry in the washing machine – but will charge more (around three times its standard price) when demand is high. The clever thing is that customers are always kept aware of how they’re charged, and why, and can choose their tariff accordingly. In other words, true transparency.

A smart move for M&S

It’s an intriguing model from a business that is using tech in some very smart ways. According to M&S, the retailer’s deal with Octopus should:

...create a more progressive, digital and commercial M&S Energy.

Clearly, M&S has wider issues to tackle. At the start of July, its chair Archie Norman told shareholders that the company was on ‘a burning platform’. In May, M&S reported a 62% fall in annual profits to £66.8 million, after a £514.1 million bill for restructuring that included £321 million to pay for the first phase of a programme to close 100 stores. Said Norman:

We don’t have a God-given right to exist and unless we change and develop this company the way we want to, in decades to come, there will be no M&S.

All that said, Octopus Energy looks like a very smart move for M&S Energy. M&S has already said that it expects eight out of ten customers to save money by moving to Octopus via M&S Energy, compared to their current deal. The new partnership plans to announce its new tariffs this month.

After that, much will be up to Octopus Energy’s own digital savvy to convince those who move that they’ve done the right thing. And there’s much to suggest that Octopus Energy is already doing the right thing by customers: it is the only company to be rated a Preferred Energy Provider in 2018 for consumer watchdog Which?, out of 31 possible companies. It has a TrustPilot rating of 9.5 out of 10 and was uSwitch’s top-ranking energy supplier this year, too.

As Jackson put it in his official statement on the deal:

M&S will be using the digital technology we’ve built, enabling dramatically better customer experience online and helping drive the M&S digitisation strategy.