Energy companies face a myriad of challenges, from increased competition and saturation within the market, to the big one – switching customers. But what if you could offer them extra value, at little cost to your brand?
Over the past few years, the energy industry has changed in the UK significantly. Impacted by the economic challenges brought on by a global pandemic, followed by an ongoing war. Prices shot up, amid a cost-of-living crisis, endangering companies’ customer relationships and brand affinity.
Energy companies face a myriad of challenges, from increased competition and saturation within the market, to the big one – switching customers. With recent socio-economic developments, such as lower government-mandated price caps, further eliminating the competitive pricing models, energy companies must innovate to maintain customer loyalty and reduce churn rates.
The UK Government cap was reduced by 12% from March to the new tax year. This means consumers are ready to switch, searching for the new best price. The terms ‘energy provider’ and ‘cheapest energy’ spiked in interest at the beginning of this month.
While consumers are searching for the best price, affinity towards providers is at an all-time low over the past few years. So, how can providers create loyal customers and change perceptions, while capitalising on the switching surge?
Pricing is the biggest factor in consumers’ decisions. But what if you could offer them extra value, at little cost to your brand?
Understanding the utility sector landscape
Utilities are, of course, essential services that power our homes and businesses. Understanding the importance of utilities in people’s lives underscores the importance of effective marketing strategies in this sector. This is not a product people choose to buy, it’s a necessary monthly cost, which makes it hard to build customer loyalty in this sector.
The sector operates within a complex regulatory framework that varies from region to region. From government policies to market competition, factors such as deregulation and privatisation can significantly impact the marketing strategies employed by utility companies. In the UK, for example, government caps since the soaring price rates in recent years have helped to keep costs down for consumers.
Some of the key challenges in the industry of late are:
Rising Customer Churn Rates
One of the most pressing challenges facing energy suppliers is the increasing rate of customer churn. As consumers become more empowered to switch providers easily, either due to regulatory changes or technological advancements, energy companies are experiencing higher levels of customer turnover. This churn not only impacts revenue but also places strain on customer acquisition efforts and brand loyalty.
Pressure on Profit Margins
With heightened competition and a growing number of alternative energy sources, traditional energy suppliers are facing pressure on their profit margins. The proliferation of renewable energy technologies, coupled with government incentives and subsidies, has driven down the cost of clean energy production, making it more challenging for traditional fossil fuel-based companies to compete on price.
Transition to Value-Added Services
To mitigate the impact of rising customer churn and shrinking profit margins, energy suppliers are shifting their focus from simply selling energy to providing value-added services. These services may include energy management solutions, home automation technologies, or renewable energy subscriptions. However, navigating this transition requires significant investment in infrastructure, technology, and customer education.
Elusive Differentiation
Despite efforts to diversify their service offerings, energy suppliers are struggling to differentiate themselves in an increasingly crowded marketplace. With numerous players fighting for consumers’ attention, standing out from the competition requires more than competitive pricing. Especially when costs are so unstable, and less in your control.
So, consumer behaviour in the energy industry is influenced by a variety of factors, outside of the suppliers’ control.
In order to foster a positive brand perception, first look to actions within your control.
Understanding your customers
Like any industry, segmenting your audience is crucial in order to communicate effectively, with the right messaging. Segments may include residential vs. commercial customers, urban vs. rural demographics, or environmentally conscious consumers vs. cost-conscious ones. This is the first step in influencing consumer behaviour.
Major factors that may influence customer sentiment are:
Cost Consciousness
Consumers are often price-sensitive when it comes to their energy bills. They seek affordable energy options and value-saving opportunities such as discounts, rebates, and energy-efficient appliances. Cost-conscious consumers are likely to shop around for the best energy deals and may be more receptive to energy-saving initiatives that help them lower their utility expenses, or ease the cost of everyday life.
This is why services like MoneySuperMarket, Compare the Market, and USwitch are popular. 25% of customers switched energy supplier from 2022-2023. Value for money is important to these consumers.
See our ongoing Days Out campaign with MoneySuperMarket.
Environmental Consciousness
Many consumers are increasingly environmentally conscious and seek energy solutions that align with their values and beliefs. They prefer renewable energy sources such as solar and wind power, and they prioritize energy efficiency and conservation to reduce their carbon footprint. Environmental consciousness influences consumer decisions regarding energy providers, products, and services, driving demand for green energy options and sustainability initiatives.
Ovo Energy
Ovo Energy is a good example of an environmentally-conscious provider. Their Beyond programme generates discounts to help its customers go greener such as green tech, EV miles and solar panels, as well as having partnerships with smol and Uber Green.
Their focus is really on being transparent and offsetting its environmental impact.
Octopus Energy
Octopus Energy also have green incentives. Its Octoplus members are rewarded for using their smart meters and even giving free energy at the ‘greenest’ time of da, as well as getting rewarded for not using energy when the grid is dirtiest.
Convenience and Ease of Use
Consumers value convenience and ease of use when it comes to managing their energy consumption and bills. They prefer energy providers that offer seamless digital experiences, including online account management, mobile apps, and automated billing. Consumers also appreciate flexible payment options, hassle-free customer service, and user-friendly energy-saving technologies that make it easy to monitor and control their energy usage.
Octopus Energy
Octoplus also has a loyalty app, with a seamless user experience where users can manage their account, view their balance, access their Octopoints and take part in spin to win prize draws. Through this, members can track the green and dirty sessions and opt in for points.
Transparency and Trustworthiness
Transparency and trustworthiness are essential factors influencing consumer trust and loyalty in the energy sector. Consumers want clear and transparent pricing, billing, and contract terms from their energy providers. They expect honest and reliable information about the source and environmental impact of their energy supply. Energy companies that prioritise transparency, honesty, and ethical business practices are more likely to earn the trust and loyalty of their customers.
Personalisation and Customisation
Consumers desire personalised energy solutions and experiences, tailored to their individual preferences, behaviours, and needs. They seek energy plans, pricing options, and rewards programmes that align with their lifestyle, budget, and values. Consumers also appreciate personalised recommendations, energy-saving tips, and targeted promotions based on their consumption patterns and preferences.
