According to the University of Scranton, Journal of Clinical Psychology, approximately 45% of Americans make annual New Year’s resolutions.
At the top of the list for 2014 are obvious choices - such as “Spending Less and Saving More,” “Getting Organized” and the ever popular “Losing Weight” (HA!! excuse me as I have one last Christmas cookie!).
As we turn our attention from ourselves to our business, more specifically the Retail Energy business, weight loss and getting organized, though important, will not help us much in reaching our organizational growth goals for the year. However, a concentrated focus on customer retention will! So, on behalf of Baby New Year, I suggest that all REP Executives make a resolution to commit to customer retention this coming year.
"Wait, no Customer Acquisition?"
Yes, of course acquisition will be a key component for growth in 2014, but you also need to pay close attention to retaining the customers you have worked so hard to acquire in 2013. In fact, according to DNV GL (formally KEMA), REP’s experience an annual customer churn rate of anywhere between 10 – 35%. My educated guess is it is on the higher side of that range. Add to this, the fact that according to the DNV GL Landscape Report, since 2010, over 60 new REP’s have entered the market - almost doubling its size. Acquisition is going to be more challenging going forward, which is all the more reason you need to work hard to retain your current customers.
In case you still haven’t bought into focusing on customer retention for 2014, here are some stats that may convince you otherwise:
A 5% increase in customer retention can increase profitability by 75%. (Bain & Co)
The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20%. (Marketing Metrics)
It costs five times more to acquire a customer than it does to keep current ones.(Forrester Research)
80% of your company’s revenue will come from just 20% of your existing customers.(Gartner)
A 10% increase in customer retention levels results in a 30% increase in the value of the company. (Bain & Co)
So, what can you do now to make a difference in your Customer Retention for 2014?
One of the main challenges REP’s have is that you need to create a voice for your brand, as your company name (which is new to many customers) is buried within the monthly utility bill. So how do we do that?
You need to create and allocate some of your marketing budget to customer retention. First, do an analysis of the markets you’re currently calling, mailing and visiting via door to door. Next, stop soliciting the neighborhoods or carrier routs that are not responding. It is a reality that some people have made a commitment with other service providers, and after a few communications without a favorable response, you should back off and spend that money where it is more apt to get positive results. Voilà – you now have budget!
And here are a few suggestions to get you started on realizing the best return on your marketing investment that you’ve ever made:
Send out welcome and thank you communications. But make sure they are personalized and relevant. Make your new customer feel important and that they have made the right decision.
Build a trusting relationship on the channels of your customers’ preference. Asking them their preference is a great beginning step to engagement and retention.
Deliver relevant content on energy issues that positions you as a trusted advisor and someone they rely on.
Create products that build upon your existing relationship, such as “Another fuel,” warrantee services, incentives/rewards, or discounts on generators for areas that experience power outages. The options are limitless as long as you have performed some data analytics on your current customers to understand what is valuable to them.
Offer incentives and special offers to renew if their fixed rate is set to expire. But don’t come out of the blue 11 months later. Build up to this.
Send birthday cards or customer anniversary cards with coupons or discounts. Or just a “Thank You” note!
Create a frequent buyer program that builds up equity over time. It could be points to be redeemed or build up wattage to be redeemed for free electricity.
Offer refer-a-friend programs. “Refer-a-Friend and get free nights for a month!”
To succeed in the competitive world of Retail Energy you need to look beyond acquisition as a stand-alone marketing communications strategy. Don’t let 2014 be a repeat of the customers you lost in 2013, and certainly don’t join the 86% of Americans who do not fulfill their New Year’s Resolution. Invest in customer retention and have a Happy New Year!
A 20 year Direct Marketing veteran, Craig builds successfuland strong, long lasting relationships as SourceLinks Director of New Business Development. A frequent speaker atindustry events and contributor to the SourceLink blog, Craig continues to share his direct marketing insights in a fun andhumorous way. Livingsouth of Boston with his wife, 2 boys and 2 dogs, Craig enjoys spending time with his family coaching baseball, mountain biking and skiing. You can connect with Craig on LinkedIn or on Twitter at @craigblake.