Building customer loyalty... The 'next industry challenge'?

Last week's Utility Week Customer Conference revealed challenging times lie ahead for utilities. We saw that, whilst customer satisfaction is improving, the industry faces a challenging and changing environment and should be looking to develop customer loyalty through better experiences.

Unipart Expert Practices were recently in attendance at the two-day Utility Week Customer Conference held in Birmingham, an event that attracts attendees from across the Water and Energy Industries. The event delivered a diverse line-up, focusing on topics from the customer's digital experience, to academics challenging whether the industry is truly measuring the right outcomes and results.

It‘s testament to the organisations involved that independent bodies, The Institute of Customer Services & Ofwat, announced that complaints have reduced by 60% and that the utilities industry is no longer bottom of the overall league table*. This is a significant achievement and marks a turning point in industry performance, but there are still big challenges to overcome - How will organisations shore-up financial performance in the face of significant change?

Improve customer loyalty in utilities

"On the brink of radical change"

Utilities markets face significant pressure with commentators describing them as being ‘on the brink’, but the event made it clear that organisations with highly loyal customer bases consistently have stronger bottom lines. Therefore, there are two factors to consider:

Achieving customer loyalty - when the basics are sometimes missed?

Only the most satisfied customers are loyal. Data from the Institute of Customer Service shows that, whilst satisfaction scores of 8/10 and 9/10 may only be one point apart, they can equate to a staggering difference in loyalty in your customer base.

How will organisations improve financial performance through an exceptional customer experience?

Just meeting the needs of customers is not enough to engender customer loyalty - how can organisations achieve the highest levels of customer satisfaction.

These are particularly pertinent issues for an industry which has had to change and transform its organisations quickly. Achievements so far cannot be underestimated, however, there was an understanding by delegates that this was a first step towards changing public perceptions of utilities; from a ‘necessary-evil’ to a ‘force-for-good’.

Also welcome at the event was a reminder that the process of customer service is a continuous journey rather than a destination and this seems to have been accepted by an audience who have made significant strides and are keen to do more. Discussions clearly showed that the question is now turning to how utility organisations can leverage customer service and loyalty in order to achieve better financial performance.

Engendering customer loyalty

Customer loyalty is an important challenge for the utilities industry as it moves the challenge from putting ‘basics-in’-place’ to delighting the customer. True 'affective' loyalty has been noticeably absent in the utilities industry and the false behavioural loyalty we have seen - a result of opaque markets and the effort required to shop around and switch - is hearing it’s death-knell. Price comparison sites and the advent of switching are some of the factors that have pushed price to the top of customer influencing factors, but social-media and press coverage of poor customer service means that it’s not the only significant factor in the consumer’s buying decision.

Engendering true affective loyalty will require greater strides and efforts across the whole organisation, not just in the ‘customer services department’, to ensure that every touch point results in a great customer experience. Only then will organisations be able to achieve competitive advantage and longer-term financial rewards. The Institute of Customer Services recent research highlights a strong positive correlation between customer service levels and overall revenue growth. In addition, this research also showed that excellent customer service drives customer loyalty, with 96% of customers intending to stay as a customer if they gave a score of 9/10 in customer satisfaction surveys. A small drop in performance hits these loyalty figures dramatically, with only 65% declaring their intent to remain where customer satisfaction drops to between 8 and 8.9 out of 10!

The two challenges of the customer experience and financial performance are inextricably intertwined - simply meeting the needs of your customer is just the start of a journey towards customer loyalty - utility organisations need to ensure the basics remain in place, that all the hard work already completed continuously improves, whilst further improvements are made to fulfil the needs of the customer better than anyone else. The attainment of a loyal customer base will provide organisations with lower customer churn and price sensitivity - subsequently making them cheaper to manage. This will help to create a stronger bottom line; crucial to ensuring asset-investment and security of supply are delivered.

This then raises the question, how will the utilities industry achieve the goal? Will it be by technology? Through even greater customer engagement? Or is it something more straightforward?

*UKCSI Scores - Utilities now rank 12th, with telecomms bottom of the overall list.

James Bishop

Posted by James Bishop

Business Analyst, Utilities at Unipart Expert Practices

The Unipart Way: performance improvement that sustains.

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