Know your customers if you want to retain them

Customer segmentation and customised messaging are essential if you want to win and retain customers – and that means leveraging something you have in abundance: data. By David Tuohy.

Recently, online switching service Which? Switch published its customer satisfaction survey. It highlighted the importance and impact of placing consumers at the heart of services, and ranked the winners and losers.

The survey researched 8,902 energy customers’ opinions of 25 UK gas and electricity companies. It revealed that the challenger energy providers were in the lead across all categories, compared with the big industry names. This included: value for money; customer service; clarity and accuracy of bills; complaints handling; and how the supplier helps the consumer save energy.

It also revealed that with the amount of choice available today, unless there is a significant price difference or customer service incentive to stay with a current energy supplier, then consumers will move. This sentiment is echoed by the switching rate of energy consumers. In the UK, it increased by 12.6 per cent between Q4 2014 and Q4 2015. While still too low, according to both Ofgem and the Competition and Markets Authority, switching rates continue to rise.

Given this fact, there is clearly a need by UK utilities to continue improving their competitive positioning if they plan on becoming – or remaining – relevant. Paying more attention to consumers – what they want; what they need; and what will keep them engaged – is the only way to effectively deliver competitive offers and value for money. So, what is the best way to achieve this?

Listening equals winning. In the UK, the opportunities are plentiful for acquiring and retaining new customers, winning back former ones, and cross-selling new products and services, especially for those energy providers that are serious about taking a consumer-centric approach.

Achieving this is easier said than done. At the heart of it all lies data. By using data effectively, utilities can challenge the market and drive competitive marketing practices.

Furthermore, by using data and analytics, utilities can target those consumers most likely to respond to particular offers, segment a targeted population into like-minded groups living in homes with similar energy requirements for tailored messaging, and build trust through the personalisation of offers and billing.

Use data to acquire and convert sales. This process can sound daunting, but it need not be. Here are a few steps that can be taken to follow this approach.

•    Micro-targeting. Widely used in political campaigning to reach individual voters, it allows energy service providers to identify those individuals with the highest propensities to respond to specific product or service offers.

•    Scoring individual consumers. This relies on careful analysis of demographics, energy usage, and contextual data. This information, combined with predictive analytics, narrows the pool of consumers designated for outreach. This dramatically lowers the cost of a campaign.

•     Segmenting messaging. Narrowing the audience greatly increases the likelihood of acquiring new customers. Propensity scoring alone has a threefold lift in customer sign-ups over traditional untargeted marketing efforts. But by adding segmented messaging, combined with a personal score or personal savings estimate, the probability of increased customer acquisition, interest and engagement increases by 5 or 6 per cent.

Stay away from off-the-shelf messaging. Utilities in the US, for example, often use off-the-shelf, lifestyle segmentation models to divide their customers into broad groups. But those models do not correlate well with energy consumer behaviour, so some service providers are forced to do a bit more ground work.

They conduct primary research to collect data and develop energy-centric segmentation models and messaging schemes that are customised to their service offering and geographic territory, and resonate with their customer base.

Personalised recommendations, consumption information, individualised cross-selling offers, product bundling, proactive high bill alerts, weekly challenges employing gamification techniques and other context-driven notifications, as well as thermostat optimisation, are just a few of the ways energy providers can continue to build trust and customer loyalty. Whether it is about comfort or cost savings, contextualisation is critical.

Energy simulation models pave the road ahead. Home energy simulation models, based on physics rather than regression-based approaches, are the most powerful and practical tools for personalising energy products and services.  

Competition is so intense that simply knowing your customers better than your competitors can be a big advantage. Utilities that use data and tools to better acquire, understand and engage their customers can quickly gain market share from those that do not.  And in Europe, where meters are often read just once a year, they are not just the best option, they are the only option

David Tuohy, senior vice president Europe, Tendril