The business case for serving the middle child of energy retail

Every energy supplier I talk to has a clear story about two of its three customer segments.

Industrial and commercial is where the sophistication is. We’re talking bespoke pricing, hedging conversations, half-hourly data and account managers who know the site by name. The commodity margin is thin, but the money is in what surrounds it: flexibility, submetering, reporting, decarbonisation advice, procurement.

Residential is the scale play. Millions of meters, standard products, a regulated framework that shapes most of the experience, and a cost-to-serve obsession that has funded a decade of apps and automation. When suppliers say ‘digital transformation’, they usually mean the residential book.

Then there's SME, small and medium-sized businesses, the neglected middle child. Big enough to matter commercially, too fragmented to industrialise the way you do households, too varied to treat as one thing. Often profitable. In plenty of supplier portfolios it’s more profitable per meter than residential. 

It’s also the last segment to get a product roadmap, a design sprint, or a decent app.

I don't think that's because anyone decided SMEs don't deserve the attention. The category is just hard to serve.

The problem is variance

Residential customers vary in behaviour, but the shape of their problems is known and can be split into categories: occupancy, heating type, EV or no EV, tariff.

SME covers everything from a bakery to a dental practice, self-storage units, a hair salon, a village pub, a small manufacturer, a daycare and a two-person accountancy firm. Their load shapes have nothing in common, and their energy intensity varies widely. Advice that fits one rarely fits the next.

So the first thing a good SME experience needs is to know what kind of business it’s serving. I don’t mean the SIC code. You need to know the actual way the place runs. 

Most of that you can figure out from consumption data: whether the load is refrigeration or ovens, compressors or laptops, how often the site runs and whether a machine is new or just broken.

What every SME does have in common

The good news is that for all that variance, a few things that are common across the whole segment.

Cost, obviously. But specifically predictability of cost. Small businesses don't fear a high bill nearly as much as they fear an unexpected one.

Cash flow. SMEs deal with quarterly VAT, reclaim positions, and the energy bill arriving in the same week as payroll. Energy suppliers need to help business owners see what's coming and when. 

Attention, or rather lack of it. Business owners will engage (more so the higher their energy cost base) but they'll never engage for long. The window is small and it closes fast, so your messaging has to be useful and arrive at the right time.

Contact is not the same as engagement

Cost-to-serve logic says: reduce contact. Part of that is true: inbound contact in this segment is expensive, and a lot of it is also avoidable. But somewhere between strategy and operation "reduce contact" becomes "reduce communication’’.

Plenty of contact with business owners isn’t worth having. Things like confused calls about bills they can't read, complaints about unexpected bills, or the retention call after they've anyway already decided to leave. These are problems that occurred weeks earlier and surface later, as a phone call. 

The way to remove those calls is to get there first.

In the research I've seen across supplier SME bases, the pattern is strikingly consistent. Owners don’t need more data and want to be just what to do. 

Some were copy-pasting their own bills into ChatGPT to get a plain-language explanation their supplier could have given them for free.

One owner running a childcare business admitted when talking to an Eliq researcher that she had no idea how to interpret her bill at all, and had never asked. And when owners were asked what would build trust, the answer was almost always some version of the same thing: if you're about to send me a much higher bill, prepare me.

Warning someone about a bill is the cheapest retention and cost-to-serve intervention available, because it replaces a five-minute complaint call with a fifteen-second notification.

SME customers are barely served on the channels they live in. A small business owner runs their supplier relationships, their bookings and half their staff comms through WhatsApp. Adoption of it as a served customer channel in energy retail is close to zero. 

There are good reasons (verification, compliance, cost per message) but the gap between where these customers are and where suppliers are willing to meet them is one of the widest I've seen in any segment.

What all of this this is worth to you

The first metric improved is cost-to-serve. A live service call runs about a euro a minute, and support is one of the largest controllable costs of serving a customer. An owner who calls twice a year because the bill makes no sense is paying for a problem a notification would have solved. Ten minutes a call, twice a year, is twenty-odd euros an account. Not a trivial number at all across fifty thousand of them.

The second is churn. By the usual benchmark, keeping a customer costs at least five times less than winning one. The businesses that don't understand their bill, or get surprised by it, are the ones who leave at renewal. Move SME churn a point or two with clear, well-timed messages, and the margin you keep (plus the acquisition cost you never spend) is worth far more than the messages cost.

The third is cross-sell. The services that make I&C worth the trouble exist in the market, but almost nobody offers them to the smallest SMEs. The ones a bit bigger usually have a broker who owns that relationship. The catch is that each account spends little, so hand-selling doesn't pay. It has to be a served, mostly automated proposition.