To understand why utilities (natural gas, electricity and water suppliers) are increasingly looking to harness positive word-of-mouth to gain new customers via referral marketing, we need to look at the challenges utilities marketers face.
First, as the name suggests, a ‘utility’ is something that’s seen as interchangeable commodity, and if you switch gas, electricity or water supplier you get exactly the same gas molecules, electrons and water flowing through your pipes and cables. And so, at least in developed countries, changing supplier doesn’t typically impact the nature or regularity of the supply of gas, electricity or water to your home or business. So it’s hard to compete on product, other than by offering some nice apps and IOT applications to monitor and control your usage. And being a regulated business means that there’s usually a whole heap of red tape that restricts the kind of marketing that can be done, and what can be included in product bundles.
While, in some countries, utility suppliers are limited to state-owned monopolies, in many markets – such as the United Kingdom and Germany – there has been a proliferation of consumer energy suppliers in recent years, all offering cheaper deals and / or green energy, in an attempt to gain market share. Many of these have been blitz-scaling, using their investors’ money to grow market share by selling below cost, which has increased price pressure for incumbents.
For utilities brands, customer acquisition costs (CAC) can be especially high (Arthur D Little reports that these can represent as much as 25-30% of total costs), and high fixed costs often mean that operating margins are slim – particularly for legacy operators. All of which means that competing on price alone can be a surefire recipe to generate a lot of red ink on the income statement.
Here’s another challenge: many markets have seen an increase in the number of price comparison sites such as Uswitch, MoneySupermarket, Powerswitch, Choose Energy, Selectra and SiCompare – all of which offer consumers or businesses the chance to compare offers and save by switching to a cheaper supplier. Inevitably, these price comparison sites further increase the cost of customer acquisition for utilities, by capturing potential consumers who might otherwise have made their way directly to the supplier by virtue of their large marketing budgets and the power of their search engine optimization. Those brands can and do get the customer in the end, but they have to a substantial affiliate fee first.
So, faced with high and increasing customer acquisition costs, it’s unsurprising that many leading utility companies have looked to referral marketing to acquire new and better customers more cost-effectively. Quite simply, when your product is difficult to differentiate, and you can’t survive on an ever-downward price spiral, you can look to emphasize USPs such as your superior customer service, or your green credentials, and leverage the credibility and reach of your existing customers, employees and partners more effectively, – and more convincingly – than any advertising campaign could hope to do.
If you’re thinking of setting up a referral program, or if you want to improve your existing program, here are a few examples from some of the world’s leading global utilities to inspire you.
1. British Gas
British Gas, part of Centrica plc, is a leading energy and home services provider in the United Kingdom. They currently offer a refer-a-friend program for their energy & homecare insurance products. Both the friend and referrer will receive an Amazon.co.uk Gift Card worth up to £100 for each successfully confirmed referral that leads the referred-in friend switching their energy supply contract to British Gas or taking out a HomeCare policy.
EDF Energy, founded in 2002, is a British energy company, owned by the French multinational Électricité de France S.A, that both generates electricity and sells natural gas and electricity to 5.7 million customer accounts across homes and businesses in the United Kingdom. EDF’s referral program offers a £50 account credit for both the referrer and the friend for each successful referral.
3. Scottish Power
Scottish Power, a subsidiary of Spanish utility firm Iberdrola, was founded in 1990 and is based in Glasgow, Scotland. Their current offer for referring friends shares up to £200 energy credit between the referrer and the referred-in friend.
4. Happ-e by Engie
Happ-e, created by French multinational utility company ENGIE in 2014, primarily targets young people looking for a fast and simple way to take out an energy contract for their home – including those sharing accommodation, where Happ-e offers the ability to split bills with housemates. Taking out a new contract simply requires a customer to choose the required option, input the address and upload a picture of the meter. To accelerate their growth across France, Happ-e’s referral program offers referrers and their friends a Fnac e-card worth up to €40 once the friend switches their energy supply.
5. Bord Gáis
Bord Gáis Energy, part of the global Centrica plc Group, is a utility company that supplies gas, electricity and boiler services to customers across the Republic of Ireland. The Bord Gáis refer-a-friend program offers both the referrer and their friend a €50 One4all e-gift card for each successfully confirmed referral. The referred-in friend also receives a 21% discount on gas and electricity.
ENMAX is a Canadian utility company that generates and distributes electricity, natural gas and renewable energy, as well as offering other value-added services. ENMAX’s referral program offers both the referrer and referred-in friend a C$50 bonus for each new sign up to its EasyMax service. Each referrer can receive up to a total of C$750 in bonuses.
PFP Energy was a not-for-profit energy supplier owned by the UK Housing Association, that provided affordable energy with transparent prices to tenants of the Association. However, in the third quarter of 20201 it ceased to trade. Before ceasing to trade, PFP had a referral program that would provide both the referrer and the referred-in friend £50 in energy credit for each successful referral.
8. Octopus Energy
Octopus Energy, a subsidiary of Octopus Group, is a United Kingdom-based supplier of sustainable electricity and gas that was established in 2015. The Octopus Energy referral program offers a £50 reward to the referrer and the friend for each referral.
Holaluz, owned by Clidom Energy SL, is a Spanish technology company that offers 100% renewable electricity and gas to more than 200,000 customers. Holaluz focuses on the idea of a chain effect to improve the environment and its referral program offers both the referrer and referred-in friend a €30 minimum reward.
10. ENCOR by EPCOR
Encor by EPCOR is an easy-to-manage energy plan for both homes and businesses. Although both Encor and Epcor are part of the same company, they provide different plans and energy rates.
They too understand the success a referral programme can bring – their refer-a-friend scheme gives a $25 Amazon gift card when a friend purchases one energy product and another $25 if they sign up for a second energy product.
Podo is a Spanish utilities company that provides electricity to consumers and businesses across Spain. For each friend introduced, both they and the referrer receive a €25 discount against their next bill. If the friend also chooses Podo for a second home, the rewards are doubled to €50.
Utilita Energy is an electricity and gas supplier operating across the United Kingdom since 2003. It specializes in Smart Pay As You Go Energy and is one of UK’s largest energy suppliers by market share. Under the terms of its referral program, the referrer receives £30 free energy credit for each successful referral, while the friend gets a £30 Amazon voucher.
13. ESB Energy
ESB Energy, Ireland’s state energy supplier, has been operating for over 90 years. More recently, they have also operated in the UK energy market where they currently run a referral program. The terms of the referral program offer £50 to both the friend and the referrer for each successful referral.
14. People’s Energy Company
People’s Energy was an energy supplier based in Scotland, created in 2017, which ceased to trade in the third quarter of 2021. Prior to closure, it had a total of 250,000 customers. Their refer-a-friend program offered £20-£40 to both the referrer and the friend, depending on whether they switched both their gas and electricity, or just their electricity.
Total Direct Énergie, formerly called Direct Énergie, is a French electric utility company owned by the multinational TotalEnergies SE, with 2.1 million customers. Their referral program currently offers €20 for both the friend and the referrer for any successful subscription to an electricity or gas offer. For every second friend, the reward pool grows by €10. A referrer can refer up to 20 friends over any 12-month period, earning up to a maximum of €400 annually.
As you can see, a referral program has become an indispensable part of the marketing mix for leading utilities. If you would like to set up a referral program, or if you want to learn what makes a good referral program, just get in touch and we’ll be happy to chat.