April 2008 | By Ramon Diaz Bernardo, Professor of Marketing at IE Business School

For years now, the energy sector has spurned marketing, but changes in legislation and share structures have brought about a shift in attitudes. Iberdrola is a prime example.

Marketing in energy enterprises, especially electricity companies, is a relatively new phenomenon. Indeed, until a short time ago, many of these companies did not even have a marketing department. The nearest they had was the public relations function or relations with the media, but not much more.

However, for a few years now, electricity companies have been discovering the world of marketing and the question is: why? What has led these companies to invest in marketing? Like almost everything in this sector, the answer has to do with changes to sector legislation and changes to the companies´ capital ownership structures. Yet, in my opinion, until the domestic consumer has the real capacity for choosing his electricity supplier, there will be no real competition. The introduction of a certain level of competition among electricity companies has led them to start investing in their corporate image and it has given rise to a concern for building a differentiated position. In addition, the electricity companies have invested heavily in marketing aimed in some cases at attracting investors (in the case of public invitations to bid) and in others at defending their “independence” (in the case of public takeover bids, especially if they are hostile).

Iberdrola is a good example of building a position in the energy sector. What is Iberdrolaâ??s position? In my opinion, Iberdrola seeks to be a source of green energy, ecological, responsible and environmently-friendly. How? First of all, green is the corporate colour, the logo is made up of three leaves on a green background, the subsidiary they have just floated on the stock exchange is called Iberdrola Renovables (Iberdrola Renewable Energies) and its advertising campaigns appeal to the values of ecology and respect for the environment. Are they advertising their “green” position successfully? I think so and I think that it is a relevant position for many consumers and marks the difference with regard to its direct competitors (Endesa and Unión Fenosa). Therefore, I think it is a good marketing strategy.

As for the second factor behind investment in marketing (the changes to capital ownership in the sector), I think we shall see an increase in the movements affecting Iberdrola in the coming months and we shall also see its investment in marketing grow. And I venture to predict the objectives of the campaigns: on the one hand, reinforcing the “green” position and, on the other, reinforcing Iberdrolaâ??s “Spanish identity” to defend itself from a possible foreign takeover bid. And this would be coherent with what the company´s chairman said not long ago: what on earth does Iberdrola have to do to be considered as a national champion? The outcome will be interesting.