British Gas shifts from acquisition to retention marketing to know the value of keeping the right customers
Customer acquisition may be vital to all businesses but it doesn’t let a marketer see who their customers are, which is why British Gas is pinning its push for more personalised campaigns on a strategy predicated on retention.
The country’s largest utilities provider knows it can’t rely on tariffs and price cuts to woo new customers if its existing ones are going to leave. It’s tantamount to a never-ending game of whack-a-mole, where for every few hundred thousand customers it recruits in a year, more will leave (like the some 409,000 who quit the brand last year). People need more of a reason to stay with British Gas, hence why it’s redoubling efforts to become a service provider in the connected home.
As farfetched as it sounds, the business is adamant that its size (it supplies energy to 11.5 million households nationwide) leave it in the best position to “democratize smart home technology”. Whether its smart meters that allow people to monitor their energy usage in real-time or a smart thermostat that can be remotely controlled from a mobile device, the utilities firm sees its future beyond gas and electricity.
How this manifests itself is still taking shape, though British Gas says services for connected homes will be the focal point of its above-the-line advertising, while bread and butter products like gas and electricity will be promoted through its direct marketing channels. The rationale being that people are more likely to feel some warmth to a brand that lets them remotely control the lights in their home and make them more secure as they come home at the end of the day, than a utilities firm that only has cheap prices going for it.
“Our big focus is what I call customer value management and how we shift the emphasis from acquisition to retention of our customers, which means personalized campaigns,” says Margaret Jobling, director of brand marketing at British Gas.
Retention, more often than not, leads to acquisition when loyalty from existing customers inspires new recruits through word of mouth. However, it’s slower to yield more measurable results. Accepting that dynamic sits at the crux of how Jobling and her team are trying to take into account the potential value of a customer over time; focusing on their behavior and spending habits rather than solely the results of one transaction. Consequently, the effectiveness of British Gas’ marketing will take longer to measure than just counting one-off sales. Hence why the business will introduce a £100m loyalty scheme next month, offering discounted energy and services alongside entertainment packages in partnership with Sky.
“From the day someone joins us we’re looking at how we we start a data-led strategy that deepens engagement over time because it costs us more to acquire customers than it does to retain them and we need to flip that as a business,” continues Jobling. “We need to move people on from just supplying their energy to us being their service provider to help them run their home.”
Doing this at scale, so that the business can create and target audiences based on a mix of its own first-party data and third-party data, requires a centralized store. Consequently, British Gas is “looking at whether we need a data management platform (DMP),” says Jobling. And yet, the final decision is as much about the “people and processes” wrapped around the adtech as it is about whether it go with a big player such as Adobe and Oracle – both of which it currently uses – or a smaller one.
The “challenge you have is you need a pretty good return and confident that you can get a better return from personalized marketing,” she muses in reference to her time in the FMCG industry where businesses have a relatively low customer acquisition cost.
The move is emblematic of the perennial quandary senior marketers like Jobling face as to how much marketing should they ingest versus what they should brief out. Indeed, a recent report from Pivotal found that more advertisers are seeking to take more of their media buying in-house, though it did conclude media agencies still have a crucial role to play particularly to those advertisers that prioritise planning, data management and analytics.
“My view is if you [agencies] start thinking like the client you’re dead; we pay agencies to add value to our thinking and pay for intellectual properly,” adds Jobling. Much of that value hinges on careful assessment of the contract between agency and client, she continues, referring to one instance where only after bringing in a consultant to scrutinize a deal - that she initially had deemed good - was it revealed to be a wrong move.
“What’s interesting in the media world is how the landscape evolves because it’s very commercially driven and transactional. The value in future will come from planning, data management and analytics software and how you get the best of that thinking. It becomes about paying for a service and the buying becomes just the transaction. It will be much more transparent and everything will end up programmatic in some form or another.”
Jobling’s observations on the current state of media are in part informed by the wider furor around transparency in the market. British Gas was one of those advertisers to inadvertently appear against extremist content on YouTube and has subsequently paused spend on the channel. Prior to the revelations, Jobling spoke at great length about the role of agencies and marketers can play in tackling these issues, pointing out that while “media agencies have a duty to care for brands”, marketers must ask the right questions – “you get out of your agencies what you ask of them,” she opines.
It’s why British Gas picked Mediacom last September after going to market for the first time in 10 years for a new media agency. While the energy provider wants to internalize as much social, content, search and programmatic advertising as it can – whether through recruitment or more investment - having a media agency is crucial when it comes to brand safety, viewability and ad fraud.
On the issue with Google, British Gas subsequently paused activity on the YouTube but Jobling is confident the issue will be resolved, citing the “sophisticated systems” Mediacom has in place.
Retention, data management and connected living and the key strands of the energy firm’s marketing to come to a head in its latest ad campaign. Featuring the penguin Wilbur from previous ads, the ‘Smarter Homes For All’ campaign promotes the real-life benefits of British Gas’ smart technology in households. It starts with the intrepid penguin at St Pancras station, who hands an army of other penguins British Gas products such as smart meters and Hives, which they then deliver to homes up and down the country.
“We’re passionate about the idea of democratizing the smart connected home….irrespective of how technologically savvy people are,” added Miriam Jordan Keane, head of marketing at British Gas.
“The challenge in the utilities space is how do you differentiate from the other supplier as in recent years its become a race to the bottom on cost….I think over the next 18 months to two years you should expect the bulk of our [marketing] investment to go behind the message of smart homes and connected lifestyles when it comes to the broadcast narrative, and then those conversations around the foundations of our business [gas and electricity tariffs] will happen more directly as we launch our loyalty scheme.”
Beyond TV, British Gas has geo-fenced St Pancras station to target commuters with ads as they walk past other six sheets on the platforms. Radio, DRTV and PR will back the push, making it hard to miss the animated penguin over the next few weeks. Initially, activity will trumpet the benefits of smart meters before introducing other products.
The campaign was created by CHI&Partners alongside Nexus Studios and directors Smith & Foulkes.