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Electricity Plan Switching Incentives

If you live in a state where you can shop for electricity rates , you probably see quite a few marketing messages encouraging you to switch providers.  Television and radio ads, billboards, direct mail, telemarketing, and door-to-door sales are all part of the mix.  Getting your attention and earning your business can be a challenge for electricity providers.

Low electricity rates are enough to convince many customers to switch providers. Some customers, however, prefer the bonuses and incentives commonly found with other retail services.  Incentives encouraging customers to change electricity providers are ethical as long as all of the terms and details are clearly explained.

Cash to Switch

Electricity providers may offer a cash incentive for customers who switch their service. This approach is reminiscent of long distance carrier marketing campaigns in the 1990s.  The idea is to entice highly qualified customers to enroll in the hope that they will remain a customer well beyond the initial contract term.  A recent direct mail campaign from a Texas electricity provider offered consumers prepaid gift cards for switching their electricity service.  The offer required a two-year agreement and issued the customer a substantial prepaid gift card at the beginning of each year.

Cancellation Fee Credits

Timing is one of the biggest challenges in reaching residential customers. A telemarketing call is not very effective if you are currently locked into an electricity agreement.  As a result, some electricity providers are offering to pay the early termination fees from your current electricity provider.  Providers offering this incentive usually credit your bill for the amount of the cancellation penalty.  Cell phone carriers also commonly use this strategy.

The problem is that only the largest electricity providers can afford this type of incentive. While poaching customers may be attractive in the short term, it can ultimately result in fewer choices for consumers.  Smaller providers are often the scrappiest when it comes to delivering basic service at low rates.  Low-rate, no-frills plans fulfill a necessary need in the market.  Consequently, this type of marketing incentive will only result in higher electricity rates and fewer providers from which to choose.

Cash Back Loyalty Rewards

It seems that almost every business has some sort of loyalty program. These programs range from credit card and travel reward programs to punch cards at frozen yogurt shops.  Electricity providers are no different.  Direct Energy, for example, is part of the Plenti rewards program.  Other providers offer cash back in the form of prepaid credit cards or bill credits.  Incentives that encourage loyalty and prompt payment benefit both consumers and electricity companies.

Guaranteed Satisfaction

To reduce your reluctance to take chance on a new provider, some electricity companies have guaranteed satisfaction programs. These programs typically allow customers to switch to a different plan or, in some cases, switch to a different provider without penalty.  The window for making this decision is typically limited to within the first 45 or 60 days of service.  While this is relatively short period of time, it allows you to give the provider a short test drive to see if they deliver on what they promised.

No Free Rides

Profit margins on residential electricity service are not normally high enough to support expensive incentive programs. A recent direct mail campaign from a Texas electricity company, however, offered all of the freebies described above.  Something important was missing from the marketing letter – the rate.  These incentives are very enticing; however, customers have to call the company to find out what the electricity rate would be.

The rate or average price, as it turns out, is extremely high. You would need to do some research to see if the incentives outweigh the higher rate.  For some customers, this might still be a good deal.  This particular electricity provider also offers lower rates but you have to give up some of the goodies.  When shopping for electricity plans, be sure to do your homework and choose the plan that is right for you.

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