It’s no secret that the utility sector has long struggled to retain customers. To try and tackle this, in 2019 OFGEM introduced an energy price cap to ensure loyal customers weren’t billed above the odds for their utilities – an issue that the industry had long been criticised for.
However, this hasn’t seemed to curb the problem. We recently surveyed over 2,000 utility consumers to uncover what makes them stick with a utility supplier, what sways their buying decisions and what they expect from the brands they buy from, as well as looking at how valuable a customer is to a provider across their lifetime.
We’ve compiled our findings into a report which can be used as a useful resource to shape customer engagement and loyalty strategies within the utility sector moving forward. In this blog, we’ll explore some of our key findings.
How utility providers currently measure up.
Our research found that only one in ten people feel valued as a customer by their utility provider, which leads to a quarter of them admitting they regularly search for better deals.
With only one in ten consumers admitting they have remained loyal to their current utility provider for more than five years, and 15% actively aiming to change utility providers every year, our research highlights there’s still a long way to go for the sector when it comes to customer retention.
Interestingly, half of those surveyed said they would pay more for a product or service over their competitors if they trusted them/trusted they were reliable, so it’s definitely worth noting that customers are willing to pay the price for good service.
What causes customers to seek new providers?
There are a number of factors that would cause a utility customer to switch providers. Our research found that price, reliability, good customer service and discounts/deals were listed as having the biggest impact on a customer’s decision to stay with a provider. Despite this, just 6% said they’re regularly offered perks by their utility provider, and three in five said that bad interactions ‘often’ result in them cutting ties, making it clear that utility providers aren’t always giving customers what they want.
Receiving rewards for continued loyalty to a business is a huge perk for many consumers, and whilst it’s not the be all and end all, it’s surprising that fewer than one in ten utility customers are being offered any sort of perks. While this might have been appropriate two decades ago when it was pretty difficult for customers to switch providers, in an age where it’s much easier to find better deals, utility providers would be wise to take note of brands in different sectors such as Monzo, Tesco, Starbucks and Nando’s – all who offer great rewards, such as discounts, deals and freebies to their customers in return for repeat custom.
An increased focus on ethics and values.
We’re also seeing an interesting shift towards more purpose driven spending, which our research echoed. The priorities of 2021 customers are completely different than they were a decade ago. Nowadays, the growing prominence of ethics and values goes hand in hand with spending and loyalty.
One-fifth of consumers we surveyed want to see brands take an active stance on environmental issues, with 16% saying they care about using ‘greener’ energy providers. Plus, more than one-fifth of those interviewed say they would leave a brand if they engaged in unethical practices.
Moving with this shift towards people wanting to buy from brands that reflect their values must be a crucial consideration for utility providers moving forward and it’s no wonder we’re seeing challenger suppliers such as Bulb performing well and really taking the lead when it comes to purpose, customer connection and service.
Keeping a customers, at what cost?
Now we’ve explored what consumers are and aren’t looking for in order to remain loyal to their utility provider, it’s important to highlight just how much the value of a long-term customer can bring to utility providers. It’s a well-known fact that it’s more cost-effective for a business to retain customers rather than acquire new ones, and this is especially true in the utilities industry. Our research found on average customers spend around £550 per year on their utilities, and customers usually stick with their providers for around 3.7 years – equating to a customer value upwards of £2000 across this loyalty period.
On average, it costs approximately £500 to acquire a new customer within the sector based on the exchange rate in June 2021, going to show the ROI of focusing more on retention in the long-term as opposed to the acquisition of new customers could be substantial.
So, what can providers do to keep customers loyal?
Clearly, there are various factors that impact a customer’s decision to remain loyal to their utility supplier for an extended period of time. Whilst the utility sector is by no means the worst when it comes to customer loyalty, there’s plenty of room for improvement.
Whilst there are many actions providers can take to better their brands, rewarding customers for remaining loyal to them is a great place to start, as well as offering exceptional service and tailored deals/discounts that will directly benefit them. While it’s not going to be an issue that can be resolved overnight, there’s plenty the industry can be doing to improve its standards when it comes to bettering customer loyalty and offering an improved customer experience.
Find out more and download the full report below.