Flipping the Switch: How Digital Engagement Creates Loyalty

In the competitive European electricity market, choice is a boon to consumers—and a true headache for energy providers. In some markets, as many as 40 percent of customers switch providers each year, making it a Herculean task for providers to build a predictable, let alone growing, enterprise each year.

While domestic consumers are just beginning to embrace retail shopping for energy, it is commonplace within the commercial sector. Focused on the bottom line, business customers shop around for the best rates, so they “churn” at much higher rates than domestic energy users do. Yet because even small businesses use much more energy than the average home, energy providers will fight to acquire and keep as many of these customers as possible. How can energy providers escape this cycle and encourage business customers to see the value in sticking around, rather than shopping around?

FirstFuel’s new report “The New Energy Consumer—Tapping into the Business Customer Segment” describes several strategies to reduce customer churn and improve engagement in the business sector. The paper begins with Accenture’s widely-read New Energy Consumer findings on domestic energy consumers and adapts them to the business marketplace. The report’s themes are relevant to any energy provider struggling to “flip the switch” on switching.

Mind your business (customer)

Every business customer believes they are unique. And in many ways, they are right. Compare even the closest competitors, and there are bound to be differences no energy provider could perceive at first glance. One coffee shop uses high-pressure electric espresso machines, while another heats water on a gas range for each cup of pour-over. Their energy profiles will be vastly different. If energy providers do not detect these differences, they will never offer the personalized experience that customers expect.

Indeed, Accenture’s New Energy Consumer study found only 35 percent of small business consumers think they are receiving a customized experience from their energy provider. Because business customers can be so vastly different from one another—a school is not like a grocery or a dentist’s office—the bar for personalization is simply higher. Many providers are investing in customer relationship management and analytical tools to overcome this important challenge and keep their customers loyal.

How to deliver this customized experience? Advise customers on their energy use habits. Help them understand the components of their bill, new rate designs appropriate for their facility, or ways to save energy. Deliver recommendations online, in print, or in person—the right channel will depend on the customer.

Going digital can reduce churn

Digital interactions are becoming an integral part of the energy retail business because they are lower cost and directly impact customer retention. One large European energy provider found that business customers with digital accounts churned at half the rate of customers without digital accounts. Acting on this insight, the company launched a campaign to double its population of businesses with online accounts. This strategy helped preserve market share and revenue by maintaining customer loyalty.

A well-executed digital transformation will use data to help identify the characteristics of customers who will respond positively to digital tools and use this information to drive the most interested customers to these valuable resources. This example shows how a digital customer service is not just a cost-saving trend—it can directly impact an energy provider’s core business. This is particularly true in the business sector, where even small changes in churn can have a dramatic effect on the bottom line.

Taking a targeted approach to switching

Though every energy provider should take steps to guard against churn, not every customer is equally likely to switch. Accenture’s New Energy Consumer research found that in the residential sector, customers fall into three groups—those who will stay, those who may switch and those in the middle.  That first category “those who will stay” can often be better left alone—awakening them with over-engagement can lead to switching. The second category are inherently difficult, what targeting or prediction can help to renew a contract before a customer is tempted by another offer? And how to manage the unpredictable middle category?

Today’s energy provider should utilize the data at hand to take a targeted approach to switching. By building intelligent energy profiles that include not only demographic or firmographic data, but also energy use and meter data, will help energy providers understand customer preferences and energy behavior. Understanding each business individually is the key to creating unique value propositions that can identify, attract and keep the highest value customers.

Competition is fierce for business customers—and businesses are laser focused on value and the bottom line. Although business customers are challenging to retain, there are now digital and data strategies available—such as those in “The New Energy Consumer—Tapping into the Business Customer Segment” that can help energy providers flip the switch on switchers.