Effective defending against aggressive competitors

The brief

For a period of several years, the United Kingdom saw successive year on year increases in the cost of energy, both for gas and electricity.  As the market leader British Gas became particularly vulnerable to competitors taking advantage of rising prices to win customers away from British Gas.

As competitors became more effective at winning customers, British Gas needed to find propositions and offers which could give customers reasons to stay.

Strategy

Some customers were much more valuable than others, with differences in energy consumption between households making some customers five times more profitable than others.  We also found that some customers were more likely to leave than others, and we learnt how to identify customers more at risk of being lost.

So our strategy became to target offers and promotions designed to keep customers at higher value segments, and at customer groups more likely to leave.

Actions

We built models which split our 12 million customer base into deciles by £ value and by risk of leaving.  Then we picked out the customer groups to target retention offers to.  In the graphic ‘segment 3’ became the highest priority as the segment with high value + high risk of leaving.

We devised and tested retention offers including long term fixed price offers to give customers who were worried about rising prices peace of mind and certainty over the price they would be paying for their energy.  We developed energy saving offers to encourage customers to use less of the product we were selling to them – great positioning from a responsible market leader in energy.

In promoting our carefully designed offers to carefully selected customer groups, we worked out ways to cost effectively promote and fulfil our offers at scale.

The big difference

Our retention offers were targeted to selected customers through several promotions over a two year period.  Average net conversion to the offers was consistently in a range of 14% to 24%, with over 1.6m customers taking up the offers designed to keep them at British Gas.

Customer churn amongst customers taking up the offers reduced by between 40% and 50% versus the average churn rate.  So overall we know that we kept over 100,000 customers who would otherwise have left British Gas – worth over £20m in retained value to the business.

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