Energy Retail – “Know Your Customers” to increase client retention and profitability

Discover how improving your customer knowledge is a first step to increase client retention and profitability.

The problem

The UK energy retail market is very competitive. Customer acquisition channels are dominated by comparison websites for domestic households and brokers for SMEs. The cost of acquiring new customers increased significantly over the last years and it is quite common for retailers to onboard new customers at no-profit or loss during the first year.

OFGEM new domestic price cap introduced in January 2019 will probably have two impacts on client acquisition and customers switching energy provider:

  • Client acquisition costs will be more difficult to pay back for energy retailer who will see their margin cut.
  • Domestic customers on standard variable tariff will be less incentivised to change energy provider as their potential bill saving will be reduced.

It is difficult to predict in the long-term the domestic price cap impact on the energy retail market. But in the short-term, there is no doubt that companies will focus on retaining their existing customers and upselling them additional services to increase profitability.

In this context and as part of its turnaround programme, an energy retailer needed to improve its customer insight in order to support the design of a client retention programme.

The approach

Under my supervision, the Management Information team designed and developed a customer knowledge model.

The model was enriched with information sourced from our CRM system, in particular:

  • Energy consumption, contract type, duration and tariffs.
  • Previous energy provider and eventually who they switched to when leaving us.
  • Client localisation and demographics.
  • Historical points of contacts with our company, in particular complaints recorded.
  • Other socio-demographic information available at the postcode level.

The model was built on a SQL server and access to the information was provided through a PowerBI graphical interface, with the possibility to query and display instantly the information graphically or geographically on a map.

Outcomes

The model was available within 3 weeks. In the short-term, it helped the marketing team to develop customer persona. It was a first step towards designing a customer journey to improve the client retention.

It delivered strategic customer insight to the management team to make business-critical decisions.

Bruno Vinel

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Bruno Vinel