Powershops's sale to Shell is a brand blunder that shows the importance of purpose to any business.

Powershop’s problem with purpose

The sale of green electricity retailer Powershop to Shell this week surprised customers and key stakeholders, but the bigger surprise was that either company thought it could be good for business. Because the essence of branding tells us this won’t end well for Powershop. And the reason why is a lesson in the importance of purpose for every organisation.

Brand is a story that starts with purpose

A business’s brand is way more than just its logo. It’s the story of what a business stands for. It’s a promise to the world. In fact, your brand doesn’t even really belong to your business – it’s a fragile understanding shared between the business and the world.

At the heart of each brand is the organisation’s purpose. Why does it exist? As Simon Sinek beautifully articulated, that “Why” is what drives true loyalty.

Similarly, in Jim Collins & Jerry Porras’s landmark study “Built To Last” they found that, way back before it was fashionable, having a corporate ideology (in Sinek’s terms, a “Why” and a “How”) was a hallmark of visionary businesses.

Call it purpose, call it an ideology, whatever. But the key to having one is that every action of your business must stay true to its purpose. Because if you act contrary to your purpose, your brand stops making sense and the connection to your stakeholders falls apart.

Purpose drift

Take Volkswagen. It built its brand on being “the people’s car”. That’s literally what their name means in German. But then in 2004 it launched a pricey prestige model, the Phaeton, to try to compete with BMW and Mercedes.

The Phaeton was an embarrassing sales disaster for Volkswagen. As reviewers pinpointed, the problem was that the car was “magnificently irrelevant”. Regardless of its quality, what prestige car owner wanted to be seen driving a VW?

Volkswagen's prestige Phaeton car failed because it wasn't true to the brand's purpose.

Volkswagen had lost sense of its purpose. People who had believed in VW couldn’t afford the Phaeton, and the people who could didn’t believe in VW.

But Volkswagen’s sin was “just” a betrayal of values. A sustainability leader selling out to one of the world’s biggest oil and gas companies? That’s being seen by many Powershop stakeholders as a betrayal of the planet.

Shellshocked

While the effect of “purpose drift” can sometimes be slow and subconscious for consumers, here the situation’s different. Powershop’s customers are presumably more values-driven than most in their buying decisions. After all, they’re choosing to pay a premium for green electricity. Those customers were very consciously engaging with Powershop’s “Why”: to revolutionise the energy market and end damaging use of fossil fuels. But now that “Why” is irretrievably lost.

Powershop 2.0 purports to be continuing its mission, but the reality is its corporate parent runs this renewables company with its left hand while its right hand continues polluting the planet with fossil fuels.

And Powershop knows the cost of this. I’m a Powershop customer (or was until yesterday). Surprisingly, I hadn’t received any email from them letting me know about the sale. JK, of course it’s not surprising. They didn’t want their customers to know. But the word is out and the damage is done. 

Powershop’s already losing customers – one green competitor reported receiving two weeks’ worth of sign-ups on the day of the Shell announcement. It’s already losing corporate partners too. And its internal culture must be in disarray, as staff find themselves working for an organisation who some no doubt see as the enemy. It’s a brand and culture catastrophe.

And as for Shell? They want to diversify into the zero carbon market to shore up for their eventual transition to clean energy (and earn a bit of profit from both sides of the fence in the meantime). But whatever they paid for Powershop in their joint $729m buyout with ICG (which took the Australian renewables infrastructure of Meridien Energy, Powershop’s former owner), it was too much. They bought a customer list that’s already rapidly depleting. And a brand that now stands for greenwashing and reduction of choice in renewables. Shell would have been better off establishing their own renewable electricity retailer from the ground up. One that they could better argue is growing the renewables market. 

Sadly the deal to sell made sense for Meridian. The New Zealand company has chosen to offload its Australian operations because it sees the Australian energy market as “highly politicised”, with government and regulatory interventions creating “significant uncertainty.” (Yet one more cost of Australia’s current climate policy malaise).

But the deal makes no sense for Powershop. Because the only way Powershop is a brand fit for Shell is that its values and value are now shells of their former selves. 

 

by Lucas Testro
Creative Director

We’re experts in developing brands that build a foundation for lasting success.

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