A Customer Loyalty Test In The Face Of Energy Price Hikes

A Customer Loyalty Test In The Face Of Energy Price Hikes

In this guest post, Yann Burden (lead image) from marketing platform Pendula, talks the marketing challenges in Australia’s energy sector, as raised fees are now turning into raised bills and, ultimately, customer churn…

Australia is home to one of the world’s most cutthroat energy markets. Over 25 energy retailers are locked in competition for the approval of roughly 10 million customers. Aussies are amongst the most fickle energy customers globally, with annual churn rates regularly exceeding 20%.

Following recent, widely publicised price surges, the marketing units of Australia’s energy sector are facing a unique test. As national news is prodding customers to shop around, marketers are saddled with the task of holding onto their customer base. I’ve worked in the energy sector for just under a decade, and I can’t think of a more challenging environment than today’s. But, as with all challenges, it’s an opportunity to thrive for those who are well-prepared.

Retaining profitable customers will be pivotal for the energy sector, especially as global events continue to drive up energy costs. The relentless pace of change and impending sense of crisis (whether through climate change or interest rates) have necessitated companies across industries to rethink their offerings and meet the modern consumer’s demand for speed, visibility, and real-time customer service. We can all take a leaf out of the energy industry’s book in the upcoming months.

The old tactics of passively relying on customer inertia won’t cut it. However, there’s a wealth of information out there hinting at what could effectively foster loyalty. Here’s what marketers should be focusing on to ace the forthcoming loyalty tests in their industry:

*Kick-off loyalty building from day one

The first day is paramount; it sets the tone for communication and trust-building. Once a new customer comes onboard, send a welcome message and invite them to set their communication preferences. Keep building trust with regular updates on usage or billing changes, and suggestions for switching to more appropriate plans.

*Play the long game – inefficiency can cost you

Call centres and email – both result in subpar customer experiences and are costly to maintain as primary communication channels. They’re also not ideal for cross and upsell opportunities due to their sluggishness. Energy providers that adopt advanced communication strategies and processes can expect significantly improved cross sell and upsell rates. For a real-world example, one of Australia’s largest providers upped its solar sales 10 per cent by ditching traditional marketing campaigns for a more flexible system, sending personalised SMS on sunny days in the customer’s region to discuss solar installation.

*Be innovative

Businesses that leverage their customer data, along with inferred data from third-party and external sources like property, weather, and even local sports results, can provide hyper-personalised, innovative interactions. However, don’t fall into the ‘build an app’ trap. Focus on creating systems that let customers purchase new plans and offers through their everyday messaging apps. If you aim to build loyalty, get rid of this friction.

*Identify moments that matter

In a highly regulated market, energy companies often broadcast generic information. A customer-first approach requires connecting with customers at critical lifecycle moments. Presently, Australia is experiencing a cost of living crisis. We’ll see a marked uptick in upset customers reacting to energy price increases that will be first felt in the months to come.

The energy sector’s challenge is to prevent this situation as much as possible, which can be achieved through exceptional customer service, unexpected perks, and customised experiences. By automating such experiences, companies can increase retention rates without over-serving. For high-risk customers who show signs of leaving, automated (yet still personalised) win-back strategies can help control churn rates.

Prevention is better than cure. If customers feel they’re on a one-way street with the energy provider – only negotiating when threatening to leave – churn rates will soar. By the time they’re ready to negotiate, they’ve usually researched alternatives and are prepared to switch.

Building systems to automate this proactive retention process is no mean feat, but it’s an investment that promises significant long-term returns. The energy sector faces an extremely tough challenge ahead. With the ‘cost-of-living crisis’ being the most significant risk highlighted in the WEF’s 2023 Global Risks Report and the Australian government scrambling to combat soaring energy costs.

But for marketing and AI geeks like me, it’s exhilarating to witness our energy sector’s innovative adaptations to their communication strategies in these changing times. Loyalty, a long-ignored aspect of the marketing mix, will finally get its moment in the spotlight.

 

 




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Pendula Yann Burden

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