Reducing Churn by Engaging More with the Customer

By putting the power back into the hands of the customer, Mercury Energy is reducing customer churn.
Published: Fri 01 Aug 2014

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The growing level of customer churn in a competitive energy market is one of the biggest challenges our industry faces, says Ben Harvey-Lovell, Head of Marketing, Mercury Energy, New Zealand, who spoke in our recent Engerati webinar How Energy Consumer Engagement Build Competitive Advantage.

On average, energy providers in New Zealand have a customer churn of 21%. Mercury Energy has managed to bring this down to 19%. This has been largely due to the Good Energy Monitor programme (GEM) which was launched in March 2013 powered by OPower.

The programme has helped Mercury Energy to reduce churn and gain more customers. “It has given us a competitive advantage. We give customers a credible reason to make contact with us through the ‘service my account’ portal on the GEM site,” he explains.

Before, Mercury Energy addressed churn by getting customers to commit to a fixed contract. “But, this is a blunt approach and it’s not how we want to resolve the churn issue. GEM has shown us that if you offer customers something useful and relevant to their needs (and deliver it timeously), you can get them heavily engaged.”

Other challenges

But customer churn is not the only challenge that Mercury Energy (and other utilities, for that matter) are faced with. Key challenges are:

 

  • A highly competitive market-The switching rate is high at 20-25% in New Zealand and this is as a result of market deregulation.

  • Decreasing residential demand-Utilities must develop a more efficient business in order to survive and thrive in the market

  • Increasing cost to acquire and retain customers-This includes discounting and incentives to get people to sign up. Mercury Energy’s cost to attain a new customer is NZ$400 per customer. “This is very high if you consider that churn is on average 20%.”


In order to meet these challenges, Mercury Energy recognised the need to :

  • Decrease the cost to serve by increasing self-service capabilities for customers
  • Reduce churn by creating a superior customer experience

 

Mercury Energy chose the GEM to address these issues.

Communicating with the customer

About 70% of Mercury Energy’s customers already have smart meters so AMI data is obtained from this already.” This customer data is fed through Opower’s platform and is used by both the energy supplier and customer.

Mercury Energy emails this personalized and granular data to customers which is highly useful. Their email penetration is 70% currently so the utility is able to engage with clients frequently and cost effectively. Harvey-Lovell says that the most effective communication channel is the AMI emails as this has changed how consumers view the utility and their own consumption. He says that this medium has proven to be the most successful as a way to increase their customer base, as well as lower churn.

Unusual usage alerts are also emailed to customers. This helps customers to manage and track their consumption more effectively and allows them to track usage. This “tracking application” helps consumers avoid significantly high energy bills. Customers receive a summary of weekly consumption and costs. They are able to compare their usage to previous weeks. “This gives consumers the opportunity to curb spending.”

The very successful Opower platform enables consumers to view their consumption on a more granular level. “This platform helps to conduct home energy surveys. It gives us more insight into what customers need. We can then make our communication more personalized,” explains Harvey-Lovell. He adds that it is essential that programmes are easy to access and use.

The marketing programme

Mercury Energy wanted customers to know that their aim is to help them curb energy via the programme. The energy supplier chose television as a medium to showcase how the programme can save customers money.

Three families, with different demographics, were chosen as case studies for the programme. Mercury Energy followed their story over a four month period and revealed how the programme helped them curb consumption habits, thereby lowering their bill. This progress was televised as part of their campaign.

“This was a rich and integrated marketing campaign. We enjoyed the jump on competition with this approach,” said Harvey-Lovell.

Mercury Energy insisted that the entire business had to be on-board. “It was important that everyone at Mercury Energy understood the programme and how it would affect everyone’s roles within the business. Everyone had to know about GEM and its benefits.”

As a result of the programme, website traffic has increased by 50%. Ongoing campaigns and news articles, for instance, further increase this. There has also been a major growth in “my account” registrations. “Customers now have a credible reason to go online. It’s not only about paying your bills on-line anymore. Now, customers can actually track and manage their consumption. Customers also have access to energy saving tips,” explains Harvey-Lovell.

Win-win situation

Year on year, call volumes are down almost 10% since the launch of the programme and churn has reduced. Customers are saving on average 3% to 6% on energy consumption when compared to the previous year.

The energy supplier also wins since the savings from cost-to-serve and cost of recruiting and maintaining consumers are offsetting the reduction in revenue.

Figures show that customers view Mercury Energy as more innovative, easier to deal with, and more caring, amongst other positive attributes.

John Webster, Vice President of Marketing and Strategy, EMEA, Opower, says that the Opower consumer engagement platform is able to assist with so much more in order to help utilities remain competitive. In addition to a reduction in churn and increased acquisition, it also helps to lower cost to serve, increased sales of other products and services provided by the utility, and enhances demand optimization.

Says Webster, “Utilities that adopt the platform are taking a passive consumer and transforming them into a more active and engaged consumer. This will build trust and loyalty. Ultimately, this trust can then be used by the utility to develop other services in the future.”