New regulations could affect how utilities communicate with their customers. Scott Logie says developing personalised strategies now will help convince customers to consent to an ongoing relationship.

With energy provider switching at a six-year high, it has never been more important for businesses in the sector to focus on building long-term relationships with consumers.

Until now, providers have been able to draw from a goldmine of data to successfully drive acquisition, customer engagement and loyalty. However, new EU regulations coming into force in 2018 may pose a significant challenge to those using data as a means of customer acquisition and retention, and could seriously impact companies’ ability to communicate with consumers.

GDPR and the age of consent

The General Data Protection Regulation (GDPR) is a long-awaited and much-needed piece of legislation due to be implemented in May 2018. Designed to address concerns around data protection and privacy, it will give consumers far more control over their personal information. Under GDPR, individuals will have the right to be informed how their data is being used, the right to change incorrect data, and the right to have their data erased, among other new clauses.

One of the most significant changes that will impact the utilities sector is that of consent, otherwise defined as the permission given by an individual to allow the storing and processing of their personal data. Draft guidance issued by the Information Commissioner’s Office last month reinforces the high standards set by the GDPR around consent.

Consent will now have to be obtained on an unambiguous basis, requiring businesses to use active opt-in protocols and provide granular details upfront about how data will be used. Methods such as pre-ticked opt-in boxes will no longer be valid and neither will tying up consent requests in other terms and conditions. What’s more, for each type of communication method being proposed, consumers must be given separate consent options so they can select which ones they do and do not agree to.

The impending GDPR has many businesses worried as they embark on a long journey of obtaining consent to access and use valuable customer data. Although some will adapt readily, others will inevitably face much more difficulty. There are two main reasons for this.

Issues for the utilities sector

The first surrounds trust and transparency. While customer trust in the utilities sector has improved since the “dark days” of 2014, it is still fragile and the sector is lagging behind its peers. The 2016 Edelman Trust Barometer revealed that the UK energy sector ranked fourth from last globally, indicating that there is still much progress to be made.

There is also a perceived lack of transparency associated with the utilities sector, with frequent accusations that the big six energy companies are keeping loyal customers on the most expensive standard variable tariffs (SVTs) without their knowledge.

Trust and transparency play a major role in the willingness of individuals to part with their personal information, and the utilities sector has a steep mountain to climb in convincing consumers they can be relied upon.

The second reason centres around the fact the utilities sector is not something consumers want or need to engage with regularly. Consumers don’t do a weekly utilities shop. Once they have signed up to a new deal, it is highly unlikely they will seek to change their tariff or provider in the immediate future and will therefore not welcome regular marketing communication.

In the case of retail brands such as Sainsbury’s, Amazon and Boots, customers are happy to share data in return for tailored deals, relevant information and offers – the perceived value exchange is considered worthwhile. In contrast, consumers simply don’t want a relationship with their utilities providers. As far as they are concerned, ­utilities are a necessary evil and provide little incentive to offer up their personal data for.

Maintaining relationships

There are a number of ways utilities companies can overcome the challenge of sourcing consent and embrace GDPR as a force for good. Executing highly targeted marketing campaigns in the run-up to the regulation should be a natural starting point. This would require profiling existing customer databases to identify different consumer segments, and developing highly personalised strategies to convince them to maintain an ongoing relationship with your brand through consent.

Each target audience will have different attitudes towards utilities, underpinned by lifestyle factors, purchasing behaviour and communication preferences. By analysing these attributes, utilities can build a detailed picture of their customers and understand how best to persuade them of the value of data exchange in a way that is relevant. By conducting this analysis, companies can do themselves a favour by determining who their most valuable customers are, and who are not worth investing time and money in.

Driver of business

While the GDPR presents a significant business challenge to utilities in particular, it is long overdue and a much-needed way of building and maintaining customer trust.

Instead of fearing the regulation, businesses should embrace privacy as a driver of business, leading them to be more creative in their approach to customer engagement.

The GDPR is a great opportunity to strengthen weakened reputations, by giving knowledge and power back to the customer and allowing them to make fully informed choices. If implemented correctly, it could be a prime opportunity for the utilities industry to improve its reputation and build more profitable relationships with consumers. The sector should embrace this data challenge and look forward to a new age of openness, honesty and transparency.