During the pandemic energy and water suppliers did a fantastic job in reacting quickly to provide financial support and advice to low and moderate income (LMI) customers. With the current cost of living crisis many LMI customers are in serious financial dire straits. Utility suppliers are in a prime position to help, but it will require rethinking and redesigning their customer engagement strategies to meet their LMI customers’ actual needs.
We take a look at why water and energy suppliers must learn more about their customers’ unique needs and challenges and how they can modify their programmes and services to meet those needs.
But first let’s take a look at some of the challenges that LMI customers face.
1. They pay a higher proportion of their income towards utility bills
LMI customers pay a much higher proportion of their household income towards their utility bills. In the US for example, low-income customers spend, on average, over seven percent of their household income on energy. That’s compared to only two percent for households with median incomes. Uplight’s energy customer research found that in 2020-21, 32% of lower-income customers reported struggling to pay an electric bill. That’s three times the rate of higher-income customers.1
In the financial year ending in 2020, the poorest 10% of UK households spent more than half (54%) of their average weekly expenditure (£298.90) on essentials such as housing (including electricity and gas), food and transport. In comparison, those in the richest 10%, spent 42% of their average weekly spend (£1,073.20) on the same essentials.2
In 2019 more than a quarter (25.7%) of households were classed as having a low income, 52.2% of which were classed as fuel poor and 57.4% of which were classed as having low energy efficiency.
This data is also supported by new analysis from the Joseph Rowntree Foundation. It highlights that over 3 million low income families in the UK can’t afford to heat their homes and the average low-income family that’s in arrears owes over £1,600. According to the Foundation, there are currently over 4.3 million low-income households that are not able to afford day-to-day essentials and are behind on bills including energy and rent. 2.5 million (that’s a fifth of all low-income households) are going without food and heating. This rises to over a quarter for those on the bottom 20% of incomes.3
2. They live in rental properties or older, less energy efficient homes
The lower the income, the more likely the household is to live in older housing. There are two implications to this:
- Older housing tends to be less efficient. LMI households spend more per square foot on energy services than higher income households. This highlights the opportunity for efficiency measures that not only reduce energy consumption in LMI households, but also relieve financial stress.
- Older houses are more likely to need additional health, safety or structural work to be carried out before energy efficiency improvements can be made. Unfortunately these initial improvements are often ineligible for efficiency financing programs. If the program requires a customer to use their personal finances to help make the improvements, then it has serious limitations.
3. They don’t ask for help/support
Although most utilities offer a wide variety of programs that can help customers to reduce or pay their bills, customers continue to lack awareness of the programs available to them -and LMI customer are not reaching out to ask for help. Only 17% of LMI customers reached out to their utility about a high bill or to ask for assistance in paying.4
LMI customers also showed lower awareness than higher income customers of online audits, HERs, marketplace, EV support, Time of Use (ToU) and demand response programs. This gap was also reflected in efficient purchases – for example, 10% fewer LMI customers reported purchasing LED light bulbs in the last year and 13% fewer reported purchasing smart thermostats.4
This clearly demonstrates the need for more engagement from utilities to help LMI customers find and understand the support that would benefit them most.
What’s the solution?
Identify your LMI customers
Utilities have significant opportunities to better educate and engage their customers to help them reduce and pay their utility bills. Personalised promotions, tips and insights must be ramped up, and customers should be nudged to make helpful choices. Of course, this requires a utility company to identify its LMI customers, in order to target them with appropriate promotions and messages.
How do you do identify your LMI customers? It’s not just about looking at their income. Identification should be based on a much broader set of characteristics – such as billing and payment behaviours. Are they in arrears? Are they caring for an ill family member or dealing with unexpected costs related to an emergency or accident? Utilities need to reach out to their customers and ask for more information.
Working closely with other data providers specialising in vulnerable data, Advizzo is perfectly positioned to help utilities to identify and engage their vulnerable customers. We will use all data available to us, including data related to where customers live, whether they rent their accommodation, as well as their account information, to identify customers that are currently in debt or in danger of becoming in debt.
The more data that’s available to us, the more information we can glean. Sending a personalised survey to potentially vulnerable customers is a very proactive step in supporting customers. We can tailor our customer surveys specifically to help ascertain who is vulnerable.
Engage with your LMI customers better and more often
Utility companies must talk to their LMI customers on a regular basis – to not only provide them with the support they need, but to ensure that the support packages and programs they’re providing are effective.
Don’t make the mistake of assuming that your existing offerings will fix your LMI customers’ challenges. Have the tough conversations internally about whether a program is effective and if it’s not, ask why not and whether it needs to be scrapped or redesigned.
You need to come up with programs and solutions that help control energy and water consumption, whilst also settling debt, and be proactive in your support – empowering customers to make changes to reduce their bills.
Why not look at developing solutions in conjunction with your LMI customers. Designing solutions in partnership with LMI individuals or proactively getting their input during the design process will lead to far more successful offerings.
A behavioural science based customer engagement program is a powerful way of engaging with customers and empowering them to make beneficial changes, whether that’s to reduce their consumption or take up tariffs, schemes and programs that provide relief and assistance.
For more information on how we can help support vulnerable customers read our blog How Advizzo provides proactive support for vulnerable customers. Alternatively get in touch to find out more.