- Published: June 2010
- Region: Great Britain, United Kingdom
Segmentation Strategies in Europe's Residential Energy Markets
- Published: June 2011
- Region: Europe
- 49 pages
Triggered by the ongoing liberalization of Europe's energy market, incumbent suppliers and new market entrants are competing for the most valuable customers. Customer segmentation is a key marketing strategy which is used to identify particular customer groups, allowing providers to serve these groups with the greatest profit margin. The aim is to attract loyal customers and to retain them.
Features and benefits
- A discussion of the need for and the benefits of customer segmentation as part of utilities' efforts to attract and retain their customers.
- A comprehensive list of key segmentation strategies divided by demographics, behaviors, attitudes, and complex needs.
- An in-depth analysis of customer responses to a European survey on energy switching behavior using demographic segmentation.
- An examination of the key characteristics of energy products offered by utilities with respect to the underlying customer segments being targeted.
Customer segmentation forms part of a virtuous cycle of utilities' operational processes designed to attract and retain high-value customers. Moreover, it is a core strategy towards consistently delivering superior value for the business. This counts as much for already fully liberalized markets as for developing energy markets.
There are four types of segmentation strategies - demographics, behaviors, attitudes, and complex needs - which are increasing in complexity. Survey results suggest that whether consumers switch their suppliers using an online price comparison website or through other means may depend on their gender, age, and residential and marital status.
European utilities offer a range of energy products, most of which target specific demographics only. There are also a number of special products that target specific geographic regions, or explicitly rural or urban customers. Rarely do we find evidence for products specializing in customers' behaviors, attitudes, or even complex needs.
Your key questions answered
- What is customer segmentation and why should I consider it for my utility? What role does it play towards increasing customer retention?
- What different types of customer segmentation strategies exist and how can I apply them? Which segments are European utilities already targeting?
- Does customer (online) switching behavior vary between different demographic segments? What conclusions can I draw from that for my company?
- What caveats must I consider when applying customer segmentation to my marketing strategy? SHOW LESS READ MORE >
The challenges for utilities' marketing departments
The acquisition-development-retention cycle
Demographic segmentation strategies across Europe in action
Which segments are utilities currently targeting?
Attracting new customers
Differentiating a homogenized product
Retaining existing customers
Switching vs retention rates
Encouraging consumers to use the product more efficiently
THE ACQUISITION-DEVELOPMENT-RETENTION CYCLE
What is customer segmentation?
Segmenting existing and potential customers
The role of segmentation as part of customer relationship management
Targeting and attracting new customers in the utilities sector
Building a sustainable customer portfolio
Customer retention as part of building competitive advantage
Retain, grow, or divest?
Effectiveness of win-back and save strategies
Auxiliary products and services
Payment history and behavior
Meter readings provided by the customer
Customer attitudes and other characteristics
Consumer lifecycle stage
Other connections/data sources
DEMOGRAPHIC SEGMENTATION STRATEGIES IN EUROPE
Switching energy supplier
In some countries, different genders are slightly more likely to switch their energy supplier
Switching rates vary by country and marital status
Switching rates vary by country and residential status
Switching energy supplier via online price comparison websites
Women across Europe are on average slightly more likely to switch their energy suppliers online
Online switching is not confined to a particular age range
Marital relationships among online switchers across Europe tend to vary
Residential status among online switchers varies across Europe
Adding a second fuel to the same supplier
Switching to dual fuel with the same supplier is relatively variable in terms of gender across Europe
No age group stands out as having a greater likelihood of adding dual fuel contracts
Marital status varies among customers who add a second fuel to their energy contract
Residential status may provide clues as to whether customers are likely to add a second fuel
WHICH SEGMENTS ARE UTILITIES CURRENTLY TARGETING?
European utilities predominantly offer electricity contracts
Utilities aim to lock their customers into fixed or capped long-term contracts to aid retention
The majority of product offerings target both new and existing customers
Utilities most commonly offer monthly billing frequencies
Direct debit and Internet banking dominate the payment terms offered by utilities
Utilities must utilize all customer information to maximize segmentation strategies
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