Electricity retailing is often seen as a scrappy commodity business trading only on price. But when utility retailers embarked on campaigns to offer cheaper rates in newly deregulated European and US residential markets, they found few takers. A fraction of US and European households with freedom of choice have switched: fewer than 15 percent in Sweden and the United Kingdom, fewer than 5 percent in the United States, and fewer than 2 percent in Germany. Price-centered marketing has not only largely failed to entice consumers but also resulted in price pressures that have brought down the margins earned on the loyal customers who haven’t switched. So if a low price isn’t the answer, what is?

Electricity retailers need to understand the preferences of their potential customers. We tested nine electricity brand concepts, each based on one of five key ingredients—low price, service, new technology, environmental friendliness, and health and personal well-being (Exhibit 1).¹ Several of the brand concepts, which build on the idea of bundling electricity together with other household services, were tested with residential focus groups in the fully deregulated markets of Germany and the United Kingdom, as well as in Spain, where households should have freedom...