Energy deregulation is leading a growing number of consumers to switch their electricity suppliers. In fact, 6 percent of residential retail electricity customers across eight states have switched providers over the past year. Among those customers who elected to switch, 64 percent cite price as the primary reason they selected a new provider.
In some states such as New Jersey, defection rates are even higher – 16 percent of the more than 3.3 million residential electricity customers in the Garden State have switched to third-party providers, according to the J.D. Power 2013 Retail Electric Provider Satisfaction Study.
While price sensitivity is a key consideration for utility executives looking to prevent or reduce customer churn, identifying the customers a utility wants to retain should be a critical component of any retention strategy. The top 20 percent of a utility’s customers generate 80 percent of its net profit. Moreover, the bottom 30 percent of customers eat up 50 percent of the profits that other customers generate, according to Accenture.
Visual data discovery tools and predictive analytics can help utility leaders identify the most profitable customers the company wants to retain as well as the most costly customers that the company shouldn’t devote valuable resources to keep.
Analytics can also help utility executives take a deeper dive on customer data to determine unprofitable or less profitable customers that are trending toward becoming more valuable to the company. This can help prevent business leaders from overlooking the customers who are on the cusp of increasing their energy consumption based on such things as the ages of children in the family who are beginning to use more electronic devices.
Meanwhile, as competition becomes more intense in deregulated states, utility leaders can also use analytics to identify the prices that are most likely to lure away the company’s most valuable customers as well as the types of counter offers the company can make to retain them.
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