Approaching smart retail more smartly

Smart meters in the domestic market are changing the supplier-customer relationship and utilities should snap up the opportunities these offer.
Published: Wed 02 Nov 2016

Smart tech is revolutionising our lives and at the same time, smart meters will impact a larger proportion of energy suppliers’ business strategy and how they choose to operate.

In the past, energy companies have been constrained by historical industry complexity and incumbent technology but this is changing quickly as the energy industry undergoes radical changes. This has resulted in a step change in the way suppliers interact with their customers, according to Sarah Smith, Manager of Energy Resources and Utilities at Baringa Partners.

Smarter energy industry processes  

By the 2020s, industry processes will be simplified with real-time sharing of accurate data. There will be more non-energy commodity products (microgeneration, electric vehicles, home security ), more data will exist on customer energy consumption and customers will want to use digital channels. These changes will enable suppliers to change their operating model, organising around the customer rather than exceptions, perhaps using a demographic segmentation, geographical or value segmentation for customers.

Whatever suppliers choose, will result in profound change for customer advisors.

Simplification of industry processes may result in fewer calls into contact centres, but more opportunities (and more time) for proactive calls out, explains Smith.  If a customer does need to get in touch with their supplier, most queries will be resolved first time.  In all cases, the advisors will be able to concentrate on the value add - providing energy efficiency advice or cross-selling non-energy products, subject to compliance for example. Availability of half-hourly energy usage data will allow advisors to be trusted energy experts, providing customers with detailed advice, but this will mean that data analysis must become a key skill, if advisors are to be credible.

Moving to this new smart world, will allow the supplier of the future to be proactive, customer-centric, a true energy expert and will help continue to rebuild trust. However, these are radical changes both to the operation and to employees. Suppliers will need a clear vision and roadmap, they must excite employees about the journey and career prospects, but ensure they have a plan for how to work with those who won’t come with them.

Using smart as a catalyst to change the way suppliers work will require investment, but it could provide real opportunities to delight customers, engage employees and grow the business if done properly, explains Smith.

Smart customers need smart utilities

While technology certainly does play a major role in a transition to all things smart, it is necessary to place the customer at the heart of these technological solutions, explains Anya Davis, Energy at Baringa Partners.

It is up to the supplier to highlight the real value of the smart meter for the customer. Smart for customers doesn’t have to be super clever and overly complicated. Davis points out that smart tech should focus on what is valuable to them i.e. an accurate bill based on actual consumption, deeper insight into their consumption behaviour so that bills can be reduced where possible, products which align costs to time of use (and the fixation on hardware) to the industry, and easy switching of suppliers.

As customers become better informed about their consumption and competition increases, suppliers will need to engage with their customers in new ways, provide a wider variety of products and be transparent on savings. They will need to provide innovative service offerings, which can benefit both the customer and the utility. While many of the above benefits may seem detrimental to a utility’s earnings, it is possible for these to be turned into opportunities.

George Lloyd, senior consultant in energy and resources at Baringa Partners lists three ways in which energy suppliers can serve their customers in a smart world. The first is communication. The transition from traditional to smart has led to a shift from traditional communication channels (Post/email/SMS) to more accessible and engaging channels (In-home displays IHD/Apps/Social Media). UK suppliers such as British Gas and First Utility are using these channels and using Apps to reach their customers. These Apps are achieving high ratings on the App store-an indication of its success. New Zealand suppliers have been quick to move to all things smart. In fact, smart meter rollouts started back in 2006 already. They use the Powershop’s app which enables customers to buy electricity, manage consumption and access invoices whilst providing a unique customer experience through impressive marketing. The result? Customers engage with Powershop more frequently and not just to check their bills.

The second is new pricing models, which are tailored to customers’ usage. In New Zealand, Flick Elec Co provides customers electricity at wholesale cost; 48 different prices per day, every day, at 30 minute intervals. Since starting up in 2014, they have increased from 589 customers (Jan 15) to 7,883 (Jan 16): a staggering 1,338 per cent rise[1] - which suggests that, at least for a niche segment, customers like to link their costs to the actual costs being incurred by suppliers. As time goes on and tech becomes even more advanced, the introduction of sophisticated tariffs will only grow.

Thirdly, customer data can help consumers save money. Suppliers need to be transparent and proactive about saving customers money on their bill. This is critical since switching has never been easier in some countries.

Utilities turning challenges into opportunities

The opportunities that smart tech offers is significant but suppliers need to ensure that they are properly resourced to deal with the workload associated with deploying new meters and the maintenance thereafter. There will be an increased demand for those with installation and logistics skills as suppliers look to build and plan their enduring workforce to cope with their peak rollout years and to really harness the benefits and opportunities that the new technology offers. It may even be necessary to contract the work out to third parties.  

It is true that smart tech, while it does offer many opportunities, can also create major challenges for the supplier. For instance, energy retailers are losing volumes to smaller suppliers creating a dip in market earnings, as well as the growing costs of compliancy to name a few. These are certainly creating the need for extra revenue and this is where product portfolio diversification comes into play.

Once utilities embrace these changes and realise the need for commercial flexibility and innovativeness, they will view the so-called “disruption” as beneficial to their new business plan. If suppliers refuse to step away from the commodity of power to a world of service orientated offerings, they may not be viable tomorrow.    

In conclusion, while smart meters provide significant levels of data, it can only be useful to the customer (and utility, for that matter) when harnessed correctly. Education and choice is instrumental when it comes to making changes in energy consumption.  

 

Related Webinar