The Better Way: Why Retailers Are Moving Beyond Price

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By Malcolm Smith, DR2 Solutions

Successful energy retailers rely less and less on having the lowest price—and the data contain some surprising revelations about their motivations.

Competing on the price of energy alone just gets harder and harder. Indeed, many retailers are moving away from price alone for a variety of reasons:

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Margin compression. Cheap gas and low volatility make it difficult to get below the default rate. When it can be done, margins are increasingly shrinking. Simply put, winning on price is a losing strategy.

Better retention. Winning customers with low prices results in high churn; 35% is the industry norm. In contrast, retailers that quickly move the conversation beyond price have reduced their churn by 6-20 points.

Differentiation. When the conversation is no longer about price, it should be about other sources of value. Retailers can bring those values into the acquisition conversation. This makes them stand out—and yields higher conversion rates.

Cranky regulators. Amplifying consumer concerns, regulators are upset about unreal price claims. Yet even the stoutest regulators cite “value-adds” as a justification for higher prices. The best way to move regulators beyond price is for retailers to move beyond price.

Customer satisfaction. Low prices matter to consumers, yet data suggest that other things are more important. We’ll delve into the details in future columns, but Accenture aptly summarizes the situation in their 2016 New Energy Consumer study: “The time of energy as a commodity is over. It is now about knowing and engaging the whole consumer.  Consumers expect providers to know and care about their individual values and needs.”

Digital platforms. To move beyond price it’s important to treat customers as individuals. But how can that be done at scale? The call center can’t talk to every customer twice a month… Technology solutions—better software platforms—enable inexpensive digital communications including personalized data. With better digital platforms, conversations beyond price yield impressive improvements in retention and margin.

It works. Price aside, customers engaged digitally are simply better customers. According to Accenture and DR2’s independent research, these customers are: 35% more trusting, 16% more satisfied, 74% more likely to buy energy-related solutions,

106% more sharing of their personal information, and 567% more likely to recommend your brand. Aren’t those the customers every retailer would like to have?

It’s clearly time to move beyond price. Next month we’ll talk about how some energy retailers are doing it, and why many still struggle to get started.

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Malcolm Smith is CEO of DR2 Solutions, which provides energy retailers with the iMPACT platform for increasing retention and cross-selling energy solutions.