Customer loyalty in the energy industry
"The deregulation of the energy market has led to a serious increase of cancellation rates. Using the pragmatic consultancy concept devised by SMP, we were able to hold onto significantly more customers and even win back migrated consumers."
Director, regional energy supplier
"Given the increasing competition in the energy utilities market, immense efforts are now required to attract new customers. Therefore, churn management has become a must for all energy utilities."
Peter Funke, Partner at SMP AG
In the electricity and gas markets, competition is cut-throat. Increasing numbers of customers are now willing to change their energy supplier. The churn rate, i.e. the annual rate of changers, is approaching the 10% mark. Many energy suppliers are losing market share and thus several million euros in revenue to innovative, online-driven suppliers.
The retention of customers has become a strategic competitive factor - for corporations and for public utilities alike. This is where strategic churn management comes in.
This term sums up all those SMP marketing strategies designed to enhance customer loyalty. Here SMP's consultants can rely on experience gained with churn mechanisms in the telecommunications, financial services and mail order sectors.
For the energy industry, SMP has developed a best-practice approach that combines the nine areas of activity relevant to any customer retention strategy. The project approach includes strategic alignment based on customer value, organisation and CRM processes and its implementation within the contact channels. This approach allows aggregating about 80 % of all cancellations to 6 reasons or customer strategies. The churn concepts that address these reasons for cancellation integrate both online and offline activities.
SMP has established churn management for energy utilities of various sizes. Using the churn approach, it has proved possible to retain or recover up to 25% of customers who were ready to change supplier or who had already migrated elsewhere.
