Utilities lag behind other sectors in fostering loyalty

Utilities should look to the supermarket sector as a good example of how to retain valuable customers, according to new research which shows they are lagging behind other industries.

A survey of more than 2,000 people conducted by customer engagement specialist Ello found utilities have “room for improvement” when it comes to fostering loyalty.

As such, it recommended the sector should look to reward loyal customers and utilise the data available to offer tailored deals and discounts to different demographics.

On being asked how they define loyalty, the vast majority (65 per cent) of consumers said it meant continuing to purchase a product from a brand over a period of five or more years.

The survey found just one in ten people feel valued as a customer by their utility provider(s), leading to a quarter ‘often’ looking for better deals.

Despite price, reliability, good customer service and discounts/deals being cited as the biggest impact on a customer’s decision to stay with a provider, just six per cent said they were regularly offered perks by their utility, and three in five said bad interactions ‘often’ result in them cutting ties.

Just one in ten admitted they have remained loyal to their current provider for more than five years, while 15 per cent actively aim to change providers every year.

Other sectors such as supermarkets and banks were highlighted as having better customer retention rates than utilities, with more than 70 per cent remaining loyal to both sectors.

In contrast gas and electricity suppliers are in the bottom three sectors for customer loyalty, with just 53 per cent of customers being loyal, slightly ahead of insurers and fashion retailers.

Ello said this presented a “great opportunity” for suppliers to adopt some key learnings from the supermarket sector to determine what they could be doing differently.

Additionally the report examines how much loyal customers are worth to the sector.

While more than half of consumers admitted they are loyal to their existing supplier, as many as 40 per cent admitted they are not, signalling a clear divide across the industry’s customer base.

The research found that over a 12-month period the average consumer spends £550 on their utilities, while they are typically loyal to their supplier for 3.7 years.

Ello said with the average cost to acquire a new customer estimated to be approximately £500, based on the exchange rate in June 2021, the return on investment of focusing more on retention for the long-term vs acquisition of new customers “could be substantial”.

Elsewhere the report looked at the buying habits of different generations, with millennial behaviours being considerably different to their baby boomer parents.

The silent generation (aged 75 plus) were the most loyal out of any age group, followed by generation X (40-54) and baby boomers (55-74).

Price was the most important factor for all generations, however the number of those in each group who say it is a priority varies. Baby boomers are the most likely to say price is important (64 per cent), followed by the silent generation and generation X (both 55 per cent). For generation Z and millennials the percentage is 23 and 39 per cent respectively.

“While these generational trends are a great base, suppliers need to remember they have a wealth of data at their fingertips, presenting a valuable opportunity to create bespoke personalised offers for their customers to help instil loyalty,” it said.

The report concludes with three main recommendations.

These include offering tailored deals to appeal to target demographics, ensuring company and customer values align and offering rewards such as loyalty perks to customers who stay with the provider long-term.

Michael Kalli, managing director at Ello, said: “Achieving loyalty isn’t always easy, especially when customers don’t feel it pays to be loyal and in many cases are rewarded for switching. There are a number of reasons for this and each one must be addressed in order for organisations to improve.

“Our research has found the reasons customers choose a new provider include poor customer service, unethical practices, a lack of trust, not offering perks, or even a single bad interaction. It is so important to address these issues and ensure each is prioritised to improve customer loyalty rates across the industry.”