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behavioral loyalty

The importance of behavioral loyalty in the Utility industry: how to retain customers through personalization

Today the main challenge for companies in the Utility sector is to retain their customers in a market that has become fluid and hyper-competitive. Here’s how to achieve this through personalization and behavioral loyalty.

There are two ways to face change: ignore it, get overwhelmed, or accept it, analyze it and take advantage of the opportunities it brings.

There is a huge and strategic industrial sector, which has perhaps undergone more rapid and radical change than any other in recent times: we are talking about the utility industry.

If until a few years ago the market of electricity, gas, water, internet and telephony was monopolized by a few giants with a decades-long history and solid business models, today everything has changed.

In recent years, the market has opened up, the players have multiplied and the playing field has become hyper-competitive. The giants in this area have overturned their structures and their brand identities. The themes of sustainability and energy efficiency have taken the spotlight, and, above all, the individual customer is no longer considered simply a number but the real center of their business.

This is where the real challenge is playing out.

It’s no longer a question of competing on the narrow price margins of a pure commodity supply; the new companies that are entering the market are well aware of this, and even the big players understand it. The key to success is to talk to your customers and learn how to do it in a personalized way.

This is what the main multinationals in the sector, such as Engie and Enel, are doing. These companies have chosen to rely on a company like Doxee who is specialized in B2B personalization and CCM services in a digital, interactive, and customer-oriented perspective.

Today, in fact, users are the real assets, the real added value of companies. Winning new customers, and above all, involving and retaining those you already have, are the safest and most effective ways to increase revenue, turnover, and market positioning.

These are increasingly difficult and complex challenges, in a landscape where customers are more and more informed, have more and more say on the matter (and social networks on which to broadcast their opinions), and can change operators with unprecedented and absolute ease: often it only takes an online search and a few clicks.

 

The goal: Customer loyalty

The Utilities and Energy industry is experiencing an unprecedented and growing revolution.

The objective that all companies aim for is customer loyalty, with the possibility (and hope) to cross-sell and up-sell operations. On the other hand, the main problem to be kept under control is customer churn—the rate that companies leave your company for another.

We have already described what the churn rate is and how it is calculated. We have also written about how to monitor it. Finally, we have suggested some concrete and effective methods for significantly reducing churn rates, through the analysis of the big data and a customer care approach that is as personalised as possible.

But here are some data points that are worth more than any theoretical speech, and that those involved in marketing and customer care in the Utility sector cannot ignore.

First of all, for a company, winning a new customer is 6 or 7 times more expensive than retaining one; this was the result of an in-depth study by Bain & Company. Another study by Bain & Company, and covered in Harvard Business Review: a 5% increase in the customer churn rate can lower profits from 25% to 95%, depending on the type of business and the specific company case. In short, those are scary figures that are making companies pay attention.

Now, let’s look at data from the Utility sector in recent years.

In Europe, the annual average of users who change their gas, electricity, or water supplier is between 12 and 15%, with a continuous trend in constant growth. Portugal has a rate of abandonment that reaches 31.1% (according to data from the Council of European Energy Regulator). In the United Kingdom, according to data provided by Ofgem (the British electricity and gas regulator) the annual churn rate has risen from 13% in 2015 to 18% in 2017. The trend, therefore, is clear: it concerns Italy, Europe, and, more generally, the entire international scene. In New Zealand, for example, the percentage is already around 25%. Finally, Google Trends searches relating to the change of supplier of electricity, gas, water are constantly increasing.

Therefore, the real problem to face is how to reduce the churn rate. The only way to do so is to establish effective strategies of dialog with the customer, to increase engagement and build customer loyalty.

 

The importance of focusing on Behavioral Loyalty

In general terms, loyalty is almost a mental state of the customer, who shows that he prefers the products or services of a brand or a company over those of competitors, on an ongoing basis.

We can talk about attitudinal loyalty, brand preference, and customer satisfaction, all expressions that insist on the same concept, analyzed from different points of view, of the Net Promoter Score (metric introduced by Fred Reicheld of Bain & Company).

Beyond the differences of specific cases, it is important to understand how customer loyalty is fundamental for gas, electricity, water suppliers: they are, in fact, essential services that affect the everyday lives of their customers. It’s not about “sexy” services or great appeal. It is, rather, something that the user takes for granted; and when there are problems or shortcomings in this regard, anything can become dramatic very quickly.

That’s why, for companies in the Utility sector, it’s better to talk (and therefore focus) especially on Behavioral Loyalty, which specifically measures the actual behavior of its users. Are people continuing to do business with our company? Are they interested in up-selling and cross-selling opportunities? How do they communicate with us? Through which channels? What are their preferences? What are the touchpoints that are most likely to annoy and distract them?

These are questions that, today, have concrete answers, even when the audience of users is very large: this is thanks to big data analysis tools.

To be convinced of the centrality of this issue, which is closely related to customer care services, 89% of customers switch to a competitor precisely because of negative experiences in the field of customer service (according to the data from the Customer Experience Impact report).

 

Personalization: the most effective way to increase Behavioral Loyalty

Knowing who your customers are and, more concretely, how they currently behave, and how they have behaved in the past, is the most effective way to entertain good, fruitful, and lasting relationships with them.

It is one of the oldest and, if you think about it, “natural” trade secrets.

These same ancient mechanisms are now in place by the most innovative companies in the world. Sixty percent of Netflix subscription renewals come from personalized messages based on the behavior of individual users. And, 35% of Amazon’s sales come directly from personalized suggestions, generated from previous purchases and behavior choices.

The entire Utilities and Energy industry is moving in the same direction. Companies are investing in effective 24/7 customer care, tailored to the individual user, based on an in-depth analysis of its characteristics and how the customer has acted in the past.

Think, about the timeless bill. Once it was simply a cold, impersonal and, let’s admit it, often incomprehensible report. Today, instead, it has become a powerful tool for interactive dialog between company and customer: a touchpoint full of simple, transparent, and omnichannel opportunities. Here, you can program up-selling and cross-selling actions. And here you can also work on customer retention.

The interactive and personalized bill, with the important addition of the video tool, has already been tested by leading utilities and energy companies like Engie, Fastweb, and A2A, thanks to the collaboration with Doxee, with significant and positive results.

 

Here, then, is a concrete example of how personalization, combined with an in-depth and intelligent analysis of the data of individual users, is the real frontier to win the challenge of loyalty in this open, complex, and hyper-competitive market.

Click here and read our Iren case study:

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