Here’s the truth about a free-market economy: buyers have a choice and will exercise it. So, how to make them your captive audience? Understand them as individuals, not as a mass entity choosing your products/services. The energy sector is no exception to this rule. Everything it offers is a choice for a buyer; some factors drive them to pick you over others, and the most crucial is personalization. When an energy company creates user/buyer/customer data and uses it to understand individual preference patterns, it evolves in step with the current markets.
The energy sector worldwide is facing a challenging environment with the influx of new players who are rewriting the rules of engagement. The options are more than ever; check websites such as Verivox in Germany, Power2Switch in the United States, and iSelect in Australia, and you will see how fluid the market has become. Personalization for energy customers is the alchemy to gain an edge in winning, managing, and retaining customers.
Customer attrition due to the choice-driven market is a significant concern, and getting new customers is costly and uncertain.
Answer this question: as an energy company, would you invest more in chasing new customers as the old ones go elsewhere or retain customers and broaden your base for new ones? How can you make the latter easy? By personalization. Adopting algorithms tailored to appeal to individual customers based on their behavior allows companies to manage their customer base more effectively.
Some energy companies have launched 101 classes in personalization. One example is splitting their customer base into two groups and delivering different price-adjustment messages to know which works better. It is a practical personalization approach. Unfortunately, most energy companies are still stuck in the era of sending out mass messages to their customers, which as one research shows, puts them off. According to Forbes and McKinsey, 74 percent of customers find mass marketing frustrating. Many companies experience a steep decline in customer traction if they use bland and mass-appeal-driven newsletters, birthday mailings, and similar campaigns.
We have left that era behind.
Energy companies must devise a solid strategy to scale personalization. It may seem a daunting prospect at first thought, but as they say, the first step makes the rest easy. According to a report from Harvard Business Review companies offering effective personalized content increase sales by 10 percent or more and improve return on marketing investment five- to eightfold.
Are you listening to your customers?
Paying attention to customers’ needs and desires is the oldest marketing discipline, but the era of quick returns and rapid expansion has nearly obscured it from view. It’s the ultimate irony in the age of personal devices. However, the irony is a reminder of how conducive these times are to reaching out to customers through personalization.
A McKinsey & Company report titled ‘Next in Personalization 2021’ reiterated the ubiquitous fact that companies who demonstrate close connections to their customers grow their revenue faster than competitors. A company’s gains increase as it gets closer to the consumer.
Below are some takeaways from the report:
- Personalized experiences are more important than ever, thanks to the pandemic and the growth of digital behaviors. The pandemic made three-quarters of consumers switch shopping locations, products, and buying methods.
- Seventy-one percent of consumers expect personalized interactions from companies. Seventy-six percent of them get frustrated when this doesn’t happen.
- Compared to slower-growing companies, companies that grow faster generate 40 percent more revenue from personalization.
- By shifting to top-quartile performance in personalization, US industries will generate over $1 trillion in value.
- Personalization leaders tailor their offerings and outreach to the right individuals at the right time and experiences to achieve results.
Personalization: Board the bus now or miss it
There is no other bus that will trundle down to help you. Now is the chance, and energy companies must seize it. Look at it this way: it is an investment that guarantees results. Over time, personalization drives repeat engagement and loyalty, which creates more data. Energy brands can use the data to design more relevant experiences for their customers – leading to a flywheel effect that boosts customer lifetime value and loyalty. It’s the classic win-win at work.
The survey reported that more than three-quarters of consumers (76 percent) said receiving personalized communications influenced their brand decision, and 78 percent said they were more likely to repurchase a product if they received such content. That means building a dedicated content team to craft personalized content at scale is imperative for every energy company today.
According to research, personalization drives a revenue lift of between 10 and 15 percent (with company-specific lifts ranging between five and 25 percent) — a company’s ability to apply data to grow customer intimacy and knowledge yields more significant returns. For digitally native companies that forge a data-backed, direct-to-consumer model, personalization isn’t just about what they offer; it’s about how they operate.
Boldly go where others are headed
Personalization was the brainchild of the retail and consumer goods sector, and it needs no over-explanation. Customer preferences and psychology are the most powerful indicators of product longevity or death. The retail industry relentlessly tracked and analyzed customer behavior, attitudes, and willingness to pay online and offline platforms for years till it got it right.
Understandably, the energy sector is a different ball game, and its offerings are limited, but that does not negate the value of the personalization approach. Energy providers often have years of contractual relationships and behavior data on energy consumption; they often have a clearer picture of their customers than retailers, an asset with far-reaching advantages.
So, why are they waiting? Are they hesitant to take on personalization due to concerns about upsetting customers or lacking data or expertise? Industry observers believe the key to success is introducing new IT solutions and technical knowledge and acquiring the mindset to adapt and prosper. It will help break the most significant barrier to winning: the fear of change.
What every change has taught us is to prepare or perish. The evolution of the species, and our survival, are based on this lesson.
It is no different for companies who must march with the times.