Connecting with customers continues

Continuing to grow our customer bases

We continue to attract more people to our brands through the service and support we offer and the values our brands represent.

In competitive markets like Australia and New Zealand, where there’s little organic growth to rely on, our ability to gain and retain customers is critical to the successful growth of our business. A significant amount of our success in FY20 can be credited to the growth we achieved in our retail market share, which bolstered our underlying performance in both countries. In FY21 our focus on growth will continue as we seek to rebalance our customer book by increasing the size of our retail and wholesale customer base in response to NZAS terminating its contract.

Healthy gains in New Zealand

In FY20 we saw healthy growth in all our key customer segments compared to the same period in the previous year: residential, agriculture, SMEs, corporate and industrial. Focusing on better execution helped our sales teams, particularly in the industrial and corporate markets. In residential, competitive pricing for Powershop products and a stable Meridian customer base saw the number of customers we serve grow, and good growth in the profitability of all our customer businesses.

Our New Zealand retail customer base continued to grow. Having passed the 300,000 customer connections threshold in New Zealand for the first time in FY19, we reached 324,000, up 7%, through very strong gains in both brands. This was helped by Meridian evolving the look and feel of our brand, which gave us even more appeal with our target market of conscious consumers. Overall our New Zealand retail sales volumes were 18% higher than in FY19.

Customer retention rates also improved, and this was a significant driver of the overall growth we experienced in our retail businesses during the year. The Meridian brand has the best retention rate in the market and there were also large improvements in Powershop’s retention rate in FY20. This is important because high customer switching rates require more investment to just maintain a customer business let alone grow it. Overall, switching rates for both brands in New Zealand decreased from 20.1% to 17.0% this year.

Switching rates* FY17 FY18** FY19** FY20
Powershop NZ 33.9% 33.7% 30.3% 25.0%
Meridian 19.1% 17.6% 16.9% 14.2%
NZ combined 22.3% 21.2% 20.1% 17.0%
NZ industry 20.4% 21.0% 20.6% 18.9%

* data from the Electricity Authority (emi.ea.govt.nz) and Meridian analysis. Switching rates are not published by the market operator in Australia.
** data restated based on final figures from EA.

We note that information about switching rates is not available for the electricity industry in Australia. In this market we again experienced a significant increase in customer numbers, with strong growth in residential and also a lift in SME sales. Our electricity customer connections in Australia increased by 24% to 136,000 in FY20.

Customer connections (ICPs)*

Customer connections chart
Meridian - Corporate Powershop NZ Meridian - Res, Agri, SME
Customer connections chart
Meridian - Corporate Powershop NZ Meridian - Res, Agri, SME

* excludes the Tīwai Point Aluminium smelter; < 10 of the above ICPs are connected to the transmission network; around 4700 customer connections have distributed generation metering.
** Also 37,878 gas customer connections in Victoria, Australia with total of 1,491TJ in volume.
*** Powershop AU FY18 figure restated to correct value of 97,241.

Customer sales volume (GWh)*

Retail Sales Volume chart
Powershop NZ Meridian - Corporate Meridian - Res, Agri, SME
Retail Sales Volume chart
Powershop NZ Meridian - Corporate Meridian - Res, Agri, SME

* Electricity energy volumes only, and excludes the Tīwai Point Aluminium smelter

Connecting with our customers

Through our brands we look to connect and engage with defined customer segments and maximise our performance. In FY20, through our integrated marketing strategies and campaigns, we successfully grew awareness, consideration and business performance in our entire portfolio of brands. In addition to our campaign activity, we invested in partnerships that enhanced our respective brands, including our cornerstone partnerships with the Department of Conservation for the Kākāpō Recovery Programme, and KidsCan. Across our portfolio of brands we spent $21 million on marketing activities.

Customer Satisfaction

Net Promoter Scope (NPS *) FY17 FY18 FY19 FY20
Powershop Australia ** 45 53 53 57
Australian industry average *** -14 -18 N/A
Powershop New Zealand 48 55 61**** 64
Meridian***** 28 30
New Zealand industry average *** 14 18 N/A

* Calculated from a survey asking customers using a 0-10 scale "How likely is it that you would recommend Meridian/Powershop to a friend or colleague?" and then substracting the percentage of detractors from the percentage of promoters. A positive value indicates that more customers are promoters versus detractors and (vice versa). All results are a 12 months moving average from July to June each financial year.

** FY17 data not a full year.

*** Perceptive Group Limited: New Zealand & Australia NPS Industry Benchmarks. FY20 data currently unavailable.

**** Powershop New Zealand figure for FY19 has been restated with the correct figure of 61.

***** Meridian commenced reporting a 12 month moving average in FY20 to align with Powershop NZ and AU when sufficient historical data became available. Previous reports showed Meridian's June score for each financial year.

We also continued to pursue the digitisation of our customer experience, with the majority of Meridian customers now serviced extensively through digital channels. Powershop also saw strong continued performance in digital channels.

We continually assess our relationships with our customers through ongoing Net Promoter Score measurements and increasingly also customer satisfaction surveys. These globally respected measures of customer loyalty enable us to stay closely connected to how customers are responding to our messaging and service offering. If for any reason our customers feel we’re not meeting their needs they’re able to provide feedback and complaints through a variety of channels, including contacting us directly or by speaking with Utilities Disputes Limited – a free and independent dispute-resolution service.

With more and more being done online we know that privacy is an important issue for many of our customers. Meridian is committed to keeping our customer data secure and protecting customer privacy. Meridian has a comprehensive privacy policy and a robust policy framework that’s regularly reviewed. The oversight of and compliance with our privacy obligations lies with our Privacy Officer, who reports directly to the Board on our compliance with the Privacy Act 1993 and the effectiveness of the Meridian Group’s efforts. In FY20 Meridian received no formal complaints regarding breaches of customer privacy from regulatory bodies or third parties.

Customer migration to the Flux platform

Our customer experience is also increasingly digitally enabled. In FY19 we achieved more than 300,000 customer connections on our Flux platform globally, and in FY20 we passed the 500,000 mark. The platform was originally developed to support our Powershop brands, but in 2018 we launched a project to migrate the Meridian customer base onto the platform as part of a broader strategy to be able to sell the software as a service to any electricity retailer.

As we move Meridian customers onto the Flux Federation software platform, we’re able to enhance our engagement with those customers in ways that our Powershop brands have enjoyed for several years. The objective of the Meridian migration project is to improve the quality of the customer experience for our Meridian customers and to reduce costs by rationalising legacy customer service platforms. By the end of FY20, we successfully migrated more than 100,000 Meridian customers. At this point the Meridian platform migration programme is running nine months behind schedule and is due for completion in September 2021. The business case for the migration is still very positive, and we’re confident it will deliver the cost-to-serve savings we’re looking for.