All energy markets, both regulated and competitive, are placing more focus on consumer engagement and aiming to build brand loyalty in the face of the new challenges the sector is facing. This is according to John Webster, Vice President of Marketing and Strategy, EMEA, Opower, who conducted a presentation on Engerati’s recent webinar, How Energy Consumer Engagement Builds Competitive Advantage.
Focusing on the European region, Webster says that the utility market is undergoing a major change and is therefore faced with a fundamental challenge: to change its traditional business models.
Many utilities’ executives are talking about a “societal tri-lemma”, explains Webster. The three challenges, making up this “tri-lemma”, are:
Reducing carbon emissions and evolving the energy mix accordingly by adding more renewable energy
Affordability for both the residential and industrial consumer
Security of energy supply in very uncertain geopolitical times
The factors which affect commercial models are the new market pressures such as:
- Price scrutiny
Rising competition from recognised and traditional companies and innovative new entrants. Energy switching sites that help consumers to look for the power provider (generally a list of the most recognised) which offers the most competitive electricity rates.
Stagnating demand for energy-especially in developed markets
Utilities are also forced to grapples with new policies such as:
Smart Grid initiatives
Energy efficiency schemes
These challenges are only intensifying and there is a lot more pressure on utilities today, says Webster. The utilities are under consumer and political scrutiny and the sector often finds itself on the front page of the newspaper.
Points of pressure for Europe’s utilities
Webster points out the major points of pressure for European utilities today and how to overcome them:
- Smart meter roll-outs in Europe-The region is aiming for an 80% deployment by 2020 and many consumers are resisting the new technology. Utilities need to explain the benefits of the technology to the consumer ahead of the roll-out because if this is not done, the utility will be faced with a major consumer back lash. “It is critical to educate and empower the consumer.”
Renewable subsidies-Photovoltaics are seeing significant growth due to lower prices of solar systems, as well as adoption and popularity of micro-generation. Utilities having to balance the grid with the integration of renewables which have an intermittent nature. Installation figures are expected to grow further so utilities must aim to maintain the relationship with customer and also become a significant part of this renewable growth. “Utilities should not lose out on being a primary power provider.”
Demand is falling and prices are stagnating-There is a projected decline in both energy usage and price through 2020. This is mostly applicable to developed economies and is due to advancements in appliances and also more efficient energy consumption. There are also wholesale price pressures that the utility faces today.
This is what makes up the so-called death spiral that utilities talk about-the reduction in demand and whole sale prices, as well as a growing uncertainty of investors to invest in the energy market.
According to Webster, utilities are aware of the challenges ahead and are already asking how they can lower churn and attract and retain high value customers in order to survive, decrease “cost to service” customers to survive, provide other market value beyond the meter to thrive and integrate renewables and comply with European Union goals to thrive.
They want to know how they can emerge from the commodity war and become a true, proactive energy service provider, explains Webster
Getting the customer to care
Utilities realise that in order to meet goals and thrive, they need to place the consumer at the heart of its strategies
According to Webster, the good news is that customers are calling for increased engagement and information from utilities. Navigant Consulting has revealed in a 2013 study that 84% customers prefer their utility as an energy management service provider.
Says Webster, “The utility is lucky to own this relationship with the customer right now and should take this opportunity to build trust.”
But how do you make the customer care more about energy consumption and energy efficiency strategies and goals? Currently, Accenture research shows that only 10% of customers really care about utility engagement. On average, customers think about energy and their utility seven to nine minutes a year on average.
Webster recommends that utilities revert to tried and tested customer engagement programmes which have found the following:
Address the right person to take action-Choose customers who have the greatest ability or propensity to take action
Send the right message-What service/offer provides these customers with the greatest motivation?
Send the information at the right time-What messaging and channels will trigger different customers to sign up?
Webster says that utilities can do this successfully through Opower’s consumer engagement platform, a US$100 million investment by Opower, which has been developed over the years and has drawn experience from almost 100 engagement projects. Within this platform, there are three key layers which will help utilities analyse, automate and deliver customer data effectively and accurately. “The system will ensure that the utility provides very personal and granular data to the consumer which can be acted on. It ensures that the right message is delivered to the right person at the right time and through the right channel.”
Opower also suggests an integrated multi- channel platform to reach customer effectively. These include:
Home energy reporting which is engaging and personalized
Extensible web portal (AMI analytics and usage alerts) which offers an online experience and can provide useful applications like proactive alerts, for instance high consumption levels
Integrated customer service tools so that utility staff and customers have the same information and tools. This helps call centre staff, for instance, to be more helpful since they have access to key data
Targeted customer marketing which helps with cross-selling and up-selling. The real needs of the customer are recognised.
Loyalty points and rewards can be offered
Home energy management tools to help customers manage their consumption more effectively and lower bills
“These platforms really drive engagement and aim for broad value through customer engagement,” says Webster.
Challenges into opportunities
Opower is confident in the utilities’ ability to ride out these risks. “By deploying various strategies, utilities can turn these challenges into opportunities,” explains Webster.
He points out that there is a definite awareness amongst utilities that old core business models must change-and they are changing. “Inaction is not an option since old cash cows are going away. This old source of revenue is under pressure and is therefore reducing.”
The growth opportunity lies in retail components such as new services like insurance packages and connected home offerings. “Leading utilities should adopt these service offerings in the retail sector in order to not only survive, but to also prosper.”