Following the winter we all experienced, personally or from a business perspective, there was a lot to discuss and share. However, probably the most enlightening takeaway I had was when a polling question was asked on Wednesday morning on “What was the MOST important path to meeting growth targets in the next 6 to 12 months?” And with confidence, the best and brightest of the retail energy industry answered:
A - Controlling Costs 13%
B - Finding Niche Plays 17%
C - Right People Resources 8%
D - Proactive Customer Engagement 48%
E - Strategic Market Information 14%
As a marketer, this puts a huge smile on my face because the retail energy industry is evolving and realizing that they, like many other industries before them, need to be customer focused. You cannot simply get a customer on flow and forget about them.
Customer engagement is a key component for success. I actually wrote a blog on customer retention back in January and it focused completely on engagement strategies. We don’t need to look too far to see the value of engagement strategies. Just take a look at retail banking, an industry that has a lot of parallels to retail energy, for some direction. According to Forrester Research, retail banks spend 70% of their budget on acquisition and approximately 30% on customer engagement and retention activities. They do this because they know that if they do not engage their customers, they will switch banks within the first 12 months, and in many cases lose the investment they spent to acquire you. As the old adage says, and as confirmed by our friends at Forrester Research, it costs five times more to acquire a customer than it does to keep a current one. Additionally, Marketing Metrics states that the probability of selling an existing customer a new product is 60% - 75% where the probability of selling a new customer is 5% - 20%. And this all starts with engagement. Why do you think banks are so hot to build a relationship with you? Because they know if you buy another product, you will be a customer for 2.5 to 3.5 years at a minimum and that goes up to 7 years if you have a third product with them.
But customer engagement is not all about selling another product, though that does create the stickiest relationship. At its core, engagement is about being proactive and setting the framework and tone for your relationship. It’s all about distinguishing your company from a provider of a commodity to something more - something that has a perceived value. Perceived value is different by customer segment and that mystery can be solved with data analytics.
So to wrap things up, here are a few ideas of engagement that will get you going in the right direction. And yes, customer engagement does cost money and margins are thin, but remember we are looking extend customer lifetime value which in turn will.
- Welcome communications that allow you to gather data points and stet the stage for the relationship.
- Develop a customer nurture campaign that delivers a series of value based communications to the customers via their preferred channel.
- Simple things like birthday notifications, customer anniversary communications or a thank you. When was the last time you thanked your customer?
Thanks to the folks at DNV for putting together a wonderful conference, and hopefully this refreshed focused on customer nurturing will lead to a better experience for the energy retailers and customers alike.
A 20 year Direct Marketing veteran, Craig builds successful and strong, long lasting relationships as SourceLinks Director of New Business Development. A frequent speaker at industry events and contributor to the SourceLink blog, Craig continues to share his direct marketing insights in a fun and humorous way. Living south 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.