13 Jun It’s Time to Start Adding Value
By Ty Benefiel
The retail energy industry has a value problem. Most retail energy providers don’t add value. And this is the reason the industry is in the state it’s in today – high customer attrition rates, low customer satisfaction, and increased scrutiny by government agencies and consumer advocacy groups. So now is the time to decide whether to add value for your customers or start preparing for the end.
The stat that first drew me to the retail energy industry was the fact that consumers spent less than seven minutes per year engaging with their energy provider. I saw this as a crippling problem that required an immediate solution. What I didn’t realize was that the lack of customer engagement was intentional! Most retail energy providers don’t want an engaged customer base, because they don’t want their customers to realize the lack of value they provide. If energy providers actually provided value to their customers, they’d want to communicate that value on a regular basis.
Instead, the wide-held industry belief is that “sleeping” customers should be left alone, because they are content with automatically renewing year to year without ever thinking about their energy provider. But if this were true, retail energy providers wouldn’t lose half of their customers each year as they switch providers or move back to their utility. “Sleeping” customers will eventually wake up when they are offered something of value, and when they realize they’ve been with a retail provider adding no value, they’ll switch at their first chance.
Too many retail energy providers look at value as a zero-sum game – the more value I give my customers, the less value there is for me. But the exact opposite is true. In fact, by engaging their customers with a valuable digital customer experience that didn’t focus on price or billing, but instead on empowering customers with knowledge, our clients have seen their attrition rates drop by an average of 30%. Engaged customers even decrease their price sensitivity -they are actually willing to pay a higher rate, on average, than customers that are not engaged. Engaged customers also are less likely to switch providers when they experience a rate increase. Engagement even adds 50% higher lifetime value to each customer.
While the results above come directly from our programs, this idea holds true in all industries. In a 2018 study, PricewaterhouseCoopers found that consumers across a wide variety of industries would pay an average of 16% more for a product or service if they perceived it offered a better customer experience.
Keep in mind the flip side – if your customers don’t see value in your service, they will switch as soon as you raise rates. As rates inevitably increase this summer, especially in Texas, it is an imperative to create more value for your customers – or they’ll be gone.
By creating more value for your customers, you can create more value for your company as well – the overall size of the pie increases. Digital customer experiences should not be viewed as a cost that eats away margins, but rather an investment that will create incredible returns in the form of stickier customers, the ability to charge higher rates, and the ability to sell additional products and services. Companies that understand what their customers value and provide it will thrive, while those that focus only on commodity margins will inevitably die. Which one will your company be?
Ty Benefiel is the CEO of Meter Genius