Why Data Predictive Analytics is Key to Supplier Success

by Amy Gasca

Market experience and Econometric modeling is the perfect match.

Energy retailers are now powered to take advantage of the potential of data technologies, smart meters, the internet of things and a connected energy data eco-system. The future of energy can now be determined by advanced digital technologies that harness and analyze big data to better manage the demands of a changing industry.  Managing peaks and valleys of demand through data mining is subject to another discussion, today we will focus on using data to drive your business decisions.

There is no margin for waste in the business model of the future, and the power of predictive energy analytics needs to be harnessed.  High quality data on consumer behavior patterns that indicate churn probability can quickly focus the business to minimize churn and take fast preventative action. 

You can gain a competitive edge on customer churn through modelling data around:

  • Which consumer behavior patterns indicate higher churn probability?
  • Which product segments have the highest churn rate and why?
  • Which price list has the lowest churn rate and why?
  • Which customer segment has the highest return?

Through analytics you can develop unique risk scores by segment, targeting customer support and marketing teams in the right places eg with proactive care calls or specific retention offers.  The upsides are significant.  Here’s a worked example

If a supplier experiences attrition of 1000 customers per month with an average profit of $10 per month with 18 months remaining on their contract, their margin impact is $180,000. Through predictive analytics minimizing this attrition is all upside.  Combined with better knowledge on the kinds of clients that are more profitable and sticky will also enable the business to attract the right customers in the first place.

The metrics suggest that it’s at least 5 times more expensive to acquire a new customer than retaining an existing one.  With the work around the Net Promoter Score also suggesting that an increase in customer retention rate by 5% can increase profits upwards of 25%*,  there is no doubt that delving into the data of your existing customers is a profitable activity. 

Finally, our people and our customers are valuable assets. Having our people work on the “right work” enables them to become much more effective.  Our customers become more valuable when they stay with us for a long time, our costs to serve them are lowered and they promote us as a great provider.  Data analytics can help drive our actions in each of these areas.  And that data is right at our fingertips. 

* Reference Harvard Business Review, The Value of Keeping the Right Customers

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Amy Gasca, Executive Client Relations, Hansen Technologies