Powering the future: Building meaningful customer relationships in the retail power industry

Energy companies are looking for ways to build closer relationships with their customers by not only selling electricity but also advising and assisting with resiliency planning, usage monitoring and risk management.

Beginning in the 1990s, the deregulation of electricity in the United States allowed independent producers to compete and consumers to freely choose among providers. The market has evolved over time, creating opportunities for energy marketers to provide increased value and differentiated services to their consumers.

The increasing frequency and intensity of natural disasters are disrupting supply, driving massive swings in power prices. Escalating demand for electricity is straining the grid, necessitating new solutions to manage and balance supply and demand effectively. These challenges are opening doors for nontraditional companies to enter the sector and sparking a wave of innovation as new players bring fresh perspectives and technologies.

As competition in retail power intensifies, technology is accelerating shifts in buying behaviors, with customers expecting more from their service providers. Executives we speak with in the retail power industry continue to look for ways to differentiate themselves from their competitors and create lasting relationships with their customers.

Here’s how B2B and B2C leaders are addressing these challenges, along with strategies retail electricity providers (REPs) can employ to build resilient businesses that can gain market share.

Become an energy advisor and develop lasting relationships with C&I customers

Commercial and industrial (C&I) customers are looking to energy retailers to help them simplify the complexities of the market and to power experts to advise them on how to boost the value of their energy procurement and usage program. Access to accurate data and effectively using it to drive advisory-focused customer interactions can improve the power purchasing relationship. And assisting customers as they navigate a complex energy ecosystem can drive additional value for both the consumer and the provider, and lead to improved retention and customer lifetime value (CLV). CLV is a measure of how much profit a customer will contribute to a company over the course of their relationship.

For example, helping customers understand index purchasing strategies and potential future outcomes based on usage trends and historic market volatility creates relationship stickiness.This can create a meaningfully different and lasting experience for buyers, particularly when coupled with accurate market price analysis and push alerts when buying opportunities align with a customer’s budget and objectives.

Make it easier to do business

Leading companies leverage user data to tailor solutions to specific customer segments. They understand which segments require high-touch service, which are most profitable, and which drive their largest volumes. Further, diligence required in pricing many sites is very challenging for customers without dedicated procurement teams or energy buyers.
Leading REPs tailor their sales engagement models and support processes to align with different buyer profiles and customer needs.

On the sales side, lead generation and opportunity qualification can be a veiled process with customers struggling to kick off exploratory purchasing discussions with prospective suppliers — often deferring to industry insiders and brokers to fill this void. Segment-tailored lead generation strategies can help REPs offer products and purchasing strategies most applicable to the client’s persona.

From a service perspective, customers expect engagements to be relevant, effective and transparent. Leading companies equip agents with data to better anticipate customer needs, address issues before they become problems, provide personalized solutions and maintain open lines of communication to enhance the overall experience. We see leading companies integrating their front- and middle-office systems to help drive higher quoting accuracy, accelerate the sales cycle and improve conversion.

Customer portals have become table stakes in retail power. On the B2B side, portal quality and functionality can be a material differentiator in helping to alleviate pricing pressure by driving quality and functionality that competitors may struggle to match. These digital platforms provide self-service options to customers who want to manage bills and make payments, view usage and modify their energy plan or self-manage demand response.

In addition to portals, digitizing engagement across channels enables customers to engage in two-way communication with REPs through a variety of platforms — such as interactive voice response (IVR) systems, mobile apps, social media and chatbots — allowing them to access information, receive support and provide feedback in a manner that suits their preferences. Further, leading companies are able to proactively monitor usage data and contract records to drive new, renewal and upsell engagements with customers.

Standardize product catalog to enable scale

A well-structured and adaptable product catalog plays a vital role in the retail energy market by serving as the foundation for meeting customer needs, navigating regulatory changes and achieving sustainable pricing strategies. It’s crucial for the catalog to not only cater to diverse customer requirements but also to align with market-specific demands and support productive pricing strategies. Paying meticulous attention to detail during the catalog's development is essential to avoid financial loss and prevent margin erosion.

To allow flexibility to accommodate unique customer requests and minor regulation changes effectively, consider standardizing the catalog at a component level. This approach allows for the necessary level of detail, enabling seamless integration without disrupting downstream processes or system integrations. By avoiding one-off scenarios, scalability is enhanced, facilitating the smooth assimilation of new books and acquisitions. This becomes particularly important in an industry driven by growth through acquisitions, as successful integration without disrupting existing operations is crucial for achieving synergy targets.

Efficient integration of downstream systems in line with the product catalog design helps reduce manual intervention and rework. One effective strategy is to align contracting and billing capabilities at a component level, enabling transparent billing that remains consistent with contract terms. This transparency enhances customer trust, especially in highly volatile markets, where price fluctuations during contracting can inspire skepticism among customers, particularly high-volume C&I clients who communicate with their energy managers.

Taking this approach not only improves price transparency but also increases purchase clarity, helping prospects make better-informed decisions. Ultimately, this approach allows businesses to establish a competitive advantage in the retail energy market.

Increase the power of your data to make better decisions

Design your customer data model to connect contract and billing data to business accounts, providing 360-degree customer visibility and enabling data-driven customer segmentation.

Consolidating the right data from disparate systems drives a unified view of the customer for sales, contracting, service and billing agents. Service agents can work more efficiently and effectively if they have all the right details within a single pane. This allows for quick resolution of customer queries, extending trust in the relationship to drive CLV. Access to data also helps to safeguard against margin erosion, provided information is shared both internally and externally in an easy-to-consume manner.

Data is often messy and requires effective master data management and some upfront cleanup to provide accurate opportunity, customer, contract and billing information back to the business. Previously, we mentioned the importance of customer portals; clean data is the lifeblood of a digital ecosystem. Data quality is even more important than data volume. We recommend clients take a use case-based approach to data cleanup and management to improve the accuracy of their most valuable data, allowing for better decision-making in the organization.

Historically, power companies have struggled to mark their books-to-market as a customer moves through the various risk stage gates of their life cycle. We recommend that companies design automated workflows to capture trades, refresh open positions and accommodate various engagement scenarios (e.g., renewals, ETFs). Further, leading companies have established audit trails to enable ongoing mark-to-market and customer or deal margin analysis. This practice helps companies make better decisions around which customer segments are most valuable to the growth and profitability of their enterprise.

Expand growth in residential power through innovation and customer service

US residential electric sales growth has outpaced C&I sales over the last decade, and unit margins are generally stronger in the B2C domain — boding well for REPs operating in this segment. However, in the B2C business, digital platforms, such as Power2Switch or PowerToChoose, make it easier to compare energy prices and change providers. As a result, customer churn is typically higher than in the C&I space, with some books churning upwards of 30% of customers annually. Sustaining profitable growth in this market centers on establishing an innovative offering set (i.e., beyond energy procurement) and providing a consistent and memorable customer experience.

The benefits of generative AI: Boosting productivity and lowering cost to serve

As with other industries, both B2B and B2C segments are considering how generative AI (GenAI) can transform the way they do business.

To grow profitably, REPs should provide their teams with GenAI-powered tools that enable personalized marketing outreach and customized sales scripts. Contracting teams can now automate contracts based on the data gathered during a sales cycle, allowing providers to get to contract faster and, more importantly, to lock in rates more quickly, potentially reducing margin impacts during volatile seasons.

On the customer support side, adding conversational AI bots within the interactive voice response (IVR) or your portal can allow customers to self-serve basic tasks, freeing up service agents for more complex and higher-value cases. When engaging with customers, bots can proactively search knowledge repositories and present appropriate support actions, accelerating agent handling and boosting overall support quality. In other industries, such as telco and pharma, we’re also seeing GenAI assistants providing real-time coaching to help agents better manage customer inquiries and reduce after-call workloads.

Here’s more on how GenAI can help energy companies.

The retail power industry will continue to evolve with advancements in technology, clean power, smart metering and integrated energy solutions. Providers should prioritize customer-centric strategies and build sustainable business capabilities to differentiate themselves from the competition. Embracing these opportunities to evolve as energy advisors, simplify customer interactions and enhance operational efficiency can help position REPs to thrive in this dynamic and evolving marketplace.