Differentiating In The Energy Retail Market With Customer Experience
Updated: Mar 31
Electricity and gas are some of the most commoditised products that are in the market.
What one gets from the socket is of the same specification and the same quality – 230 V and 50 Hz in Europe, for instance, - and the local equivalent for gas – regardless the provider you select. So, if the product cannot be changed, how can the providers differentiate in the liberalised highly competitive energy markets?
The first thing that comes to mind is the price. One can gain market share with it, but using the price as a long-term differentiator is difficult, as energy is traded in the exchanges and you buy it more or less at the same prices as your competitors. In addition, if the retail price goes under the wholesale one, it becomes more profitable to sell the energy generated at own power stations to the competitors than to own customers.
Surely one can create unique tariffs?
Yes, but if they are successful, they do not remain unique long as competition can quite easily copy them – green tariff, eco + tariff… It is very difficult to create truly unique products, when the core of the product is 100% standardized.
What can you do to stand out?
There are two things, that are hard to copy and that create loyalty. The brand and the customer experience.
Clear brands are what customers appreciate in the energy market. But creating one is, unfortunately, very costly and time consuming.
The second thing is to create experience that customers appreciate, which also supports that brand. For most households, energy is a really low-involvement purchase, and, normally, they do not bother about it. This means it is difficult to create engagement, but, on the other hand, if things work, customers stay loyal.
According to our research, except for the highly mobile group of constant switchers, most people only change providers, when things go wrong or it is too cumbersome to deal with you. They feel let them down and the problems are not quickly enough. This can be anything from an incorrect bill, mix up in the accounts, to just confusion between what the sales person has communicated and what is seen by the customer.
Here are the seven steps that you as an energy provider can take to create loyalty:
1. Know your customers.
What are their key expectations towards you? What do they value? You have your brand promises, but do you know what resonates with your customers and why they have chosen you? For one British customer we surveyed their customers and it was really eye-opening to see what was the real reason customers joined and how that varied across the segments.
2. Decide on your target experience level.
Companies cannot and should not try to please everyone every time, but they should instead define their brand and experience promises. They can try to be the friendliest, the greenest, the most reliable, but they cannot be everything. So, you will need to choose! This is typically an iterative process that we do with the management as each choice opens opportunities, but has costs associated.
3. Get the organisation behind the plan.
It is your team who will deliver the promise, so involve them in the work! In our projects, we always ask representatives from different functions (and not just managers) to contribute and to challenge.
4. Understand what the chosen CX strategy means concretely for each touchpoint.
High level brand statements are useless or even counterproductive unless they are made real with actions. If one wants to be the easiest provider to deal with, how should the customers see it when they want to change their tariff, for instance. We use here journey maps as a common framework.
5. Set measures – unless you measure, you do not know if your plan is working.
Set the measures based on what is important to the customers (see point 1) and what is predictive of their behaviour (point 6). This, for example, can be the percentage of the billing queries resolved during the first call. We advise to create a system of measures that link to higher level satisfaction and business KPIs like the NPS and the retention rate.
6. Use the data actively with machine learning.
The utilities know their customers and have a lot of data. Use that to segment the customers, to predict churn and to be relevant! Most utility customers do not read your marketing communications, because they are too generic. But with your data you easily can propose relevant to your customers offers.
An example: we have managed to lower the churn by 11% for an electricity provider by feeding CRM data to an artificial intelligence model to choose likely leavers and for each the best campaign to retain them.
7. Monitor and update – no one gets this completely right the first time.
Watch the data and the business impact and tune the plan. With one Swiss customer, we discovered that the customers appreciated the quicker response times, but they were unhappy for having to call in the first place. When we looked at the root causes with the team, we discovered that many calls were due to the different words used on the invoice than in the marketing, and customers were confused.
Electricity and gas are low-involvement commodity products, but with the experience that meets the customer expectations and smart use of data you can stand out from the crowd.
Ilkka Huotelin is the co-founder of Be Customer Smart, a specialised consulting and artificial intelligence company helping the energy companies to compete with right customer experience.