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.
And finally, we’ve seen the effect of the energy crisis in the past couple of years that has forced some utilities to close and has seen others pause their referral programs, at least while gas and electricity prices kept rising.
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.
2. EDF
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. When updating his blog, we noticed that their offer for referring friends is no longer available but previously it offered to share 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. Naturgy
Naturgy, Spain’s multinational natural gas and electrical energy utilities brand, operates in 20 countries around the world. A leader in the supply of conventional gas, its focus is the energy transition towards renewable energies, including developing renewable gas (hydrogen and bio-methane), to stimulate energy efficiency and the circular economy. Through their referral program, their customers receive €20 for each referral – and the referred-in friends are rewarded too.
In March 2023, Naturgy expanded its program to include Solar Panels. If a friend installs solar panels, both the referrer and the friend receive €150.
6. Nedgia
Nedgia is the leading natural gas distributor in Spain and part of the Naturgy Group. Already supplying 70% of the natural gas used by Spanish homeowners, it is present across 11 autonomous communities in Spain. The company has 5.4 million distribution points across the Peninsula (across consumers, SMBs, and industrial clients) connected to its 53,800 km distribution network, linking 1,150 municipalities.
Nedgia followed the example of its sister company Naturgy in launching a referral program. Their customers receive 50€ for successfully referring a friend or family member. The friend will receive 50€ for a hot water contract, and if they get out heating with Nedgia as well, this is increased to 100€.
7. Ohm Énergie
Ohm Énergie is a fast-growing eco-friendly energy supplier in France that offers green energy and additional services to optimize energy use in the home. Its green energy is produced in France by independent producers. And each month, Ohm lets its customers know where its energy has come from due to its guaranteed certificates of origin from the Ministry of Ecological Transition.
Their referral program rewards referring customers with a 20€ Amazon voucher for a successful referral and up to 400€ total. Their friend also benefits from a 20€ Amazon voucher.
8. PFP
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 2021 it ceased to trade due to the effects of the energy crisis. 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.
9. 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.
10. Holaluz
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.
11. Podo
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.
12. Utilita
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. Currently at the time of updating this blog, it appears that the refer a friend program is not active, but previously it offered the referrer £30 free energy credit for each successful referral, while the friend got 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 used to run a referral program. The program does not appear available at the moment, but it offered £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 previously offered £20-£40 to both the referrer and the friend, depending on whether they switched both their gas and electricity, or just their electricity.
15. TotalEnergies
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.
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