A Strategic Rewards Program: A Powerful Engagement Tool for Marketers in Both Regulated and Deregulated Markets

By Jim Techtmann

Rewards can keep utility customers satisfied and engaged with your brand in both regulated and deregulated markets. They can also persuade customers to save energy — and money — in the process.

Reducing energy consumption is a huge goal in both types of markets. According to McKinsey & Company, utility providers stood to save more than $1 trillion by reducing energy consumption by 20 percent over a seven-year span.

One of the biggest challenges in influencing consumption habits lies in the diversity of customers.  McKinsey & Company found that 20 percent of the population is willing to reduce consumption for environmental concerns, but they’re offset by 20 percent of the population that simply doesn’t care about saving energy. Sixty percent of the population falls in between those two extremes.

The key is in identifying rewards that are relevant to each customer segment to help achieve your goals.

Regulated markets: Rewards improve customer engagement

In a regulated energy market, a rewards program should be directed toward deepening and strengthening customer relationships. An effective program can encourage conservation, upsell a warranty, or drive adoption of a service program.

According to Cogent Energy Reports’ study of residential utility trust and engagement, an energy company’s customer-engagement score is a valuable aspect of the business. When an energy provider ranks highly in terms of customer engagement, it’s very positive for the organization’s public image. That, in turn, builds customer trust.

With that in mind, implementing a rewards program for your customers achieves two very important goals. Of course, it can incentivize customers to reduce energy consumption each month. But it can also boost the image of the energy company, which can push customer-engagement scores higher.

It may seem hard to identify a single relevant reward for so many types of people, but there’s a tried-and-true universal fact: Everyone likes to save money. One of the more effective approaches has been the use of relevant discounts and savings opportunities in the form of high-value coupon booklets or online savings. These rewards can include discounts for travel, shopping, events, activities, and entertainment as a reward for saving on energy consumption or signing up for additional services.

Deregulated markets: Rewards improve customer retention

There’s another, much different problem to solve in a deregulated market: Namely, customers will opt for another provider if they aren’t satisfied with their service. According to energy consultant Sanjivrao Katakam in Customer Churn in Utilities, up to 35 percent of customers in deregulated US markets switch to another utility company.

Customer churn is especially costly. It costs utilities providers up to seven times as much to acquire a new customer as it does to keep one on board for the long haul.

Creating a rewards program that coincides with high-risk points in the customer lifecycle is a great way to retain your customers. For example, to combat churn, try targeting a relevant reward for customers nearing the end of their contract terms. Consider a reward that will make every customer happy. A discount-type retention strategy can provide engaging, added-value savings over time, which could offset some of their annual energy costs. It can also improve communications and strengthen customer relationships while differentiating your offerings from those of competitors.

An annual savings program provides high-value benefits to consumers and keeps your brand top of mind, but short-term rewards can also curb churn. If you’re looking for a way to retain customers during high-risk churn periods, consider a surprise-and-delight strategy using a promotional gift card as the reward.  A gift card that saves money while dining out would appeal to all audiences. Sixty percent of Americans dine out on a weekly basis, so offering dining discounts can be a feel-good reward that can go a long way in retaining customers. 

Whether you are in a regulated or deregulated energy market, rewards can be a valuable piece of the marketing mix. They can be used as short-term incentives or year-long motivators to stay engaged with your brand. Looking at the bigger picture, all roads ahead lead to more energy consumption in the future. Reducing consumption and conserving power are in everyone’s best interest and a well-designed rewards program has proven results


Jim Techtmann is the VP of National Sales – Corporate Marketing Solutions at Entertainment.