Can loyalty programs be effective in promoting integrated energy services? Evidence from Slovenian electricity consumers

Abstract

The transition of residential energy markets following liberalisation has enhanced the development of new marketing strategies in order to increase consumers’ activity in the market, as well as to satisfy current climate change policies. This work explores the relationship between consumer preferences for energy services and participation in loyalty programs as a new marketing strategy in competitive energy markets. A conceptual framework of membership in loyalty program options is developed and empirically tested. In addition to consumer preferences for energy services extracted by principal component analysis, explanatory variables in the multinomial regression model also include other control variables. An empirical analysis is conducted on a sample of residential electricity consumers of the largest energy supplier in Slovenia, a new entrant in the electricity market. This research suggests three main findings. First, consumer preferences defining consumer types significantly differ across the loyalty program consumer groups, which calls for tailoring the supply offer to respond to different consumer segments. Second, members of the regular loyalty program option prefer a good relationship with the supplier, while for members of the advanced loyalty program option, integrated energy services play a bigger role. Third, loyalty programs could be effectively used to target the advanced segment of consumers with an offer of integrated energy services, including energy efficiency and green energy, thereby contributing to the mandatory energy savings imposed on energy suppliers and the national environmental sustainability targets.