There are many who consider utility retail to be a slow change, low growth business that has nothing to do with the modern utility business. But that is changing in response to emerging trends in developed markets, in technology and society as a whole.
Extensive analytics to gain insights into customers and products, smart technology to elevate connected homes, new players arriving onto the utility arena and a wave of renewable energy sources are all impacting the utility retail business.
Utility retail mindset for the future
Utilities the world over are approaching these challenge in different ways. But new research from Ericsson on hundreds of utility retailers has found that the most successful, which perform better than their peers, exhibit certain common traits, or ‘keys of excellence’.
Specifically, the ‘Frontrunners’ exhibit a more consistent approach towards these keys than other retailers. In addition, they exhibit two fundamental attributes. First, utility retailers must be open to change. And second, the frontrunners exhibit a combined focus both on their core business as well as extended services to monetise on their customer base.
The study identifies the Frontrunner retailers as exhibiting at least 5% annual sales growth over the years 2012-2014 and healthy profit margins with no decline in profits. In other words, they have achieved higher growth than their peers and not only driving top-line revenue but doing so profitably without trading sales growth for shrinking margins.
The Frontrunners identified in North America, Europe and Australia include both market leading, multinational companies and local challengers. Some target only a specific customer segment, while others have a very broad target group.
“It is not so much the size that matters but the proactivity, vividness and bluntness to make a move,” states the report.
Utility retail core business
According to the report, the Frontrunners constantly seek new ways of challenging industry conventions to make sustainable, smart energy more relevant to people, business and society.Yet while recognising the endless opportunities that arise from new technology and changing market conditions, Frontrunners realise that core operations are not just important in terms of revenue but they are also essential to building a customer trust platform that may be utilised for additional products and services.
For example, pricing is one area where numerous different approaches and ideas are seen, often enabled by highly developed analytics functions. Frontrunners realise that depending on buying quantity, risk aversion and financial situation, customers must be segmented and targeted with adapted offerings. Most of all, customers want to feel that they are not tricked into an overly expensive deal when there are better options around or that the bills are too confusing to fully grasp.
Frontrunners are also always looking one or two steps ahead. Some focus on delivering new products and services, while some choose to build new partnerships. Some decide to take the lead in establishing a platform for smarter homes, whereas others take part in activities based on building sustainability and trust. Then, there are some that will do everything at the same time.
Utility retail ‘keys of excellence’
The six utility retail keys of excellence identified in the study outline multiple approaches to success and growth.
Re-thinking retail business models
Users are becoming prosumers, producing their own energy to consume, but also to feed into the grid or store, with unprecedented ease and efficiency. New technology changes not only how utility retailers operate, but what they do and where they do it.
Frontrunners have understood that business model innovation is necessary to cope with the disruptive technology development that affects the energy sector. They re-think and re-organize to act on long-term trends right now.
Staying on top in electric retailing requires teamwork, both across the organisation and also with key partners. New innovative partnerships enable retail companies to get a deeper relationship with the customer and increase loyalty. These partnerships become more important when supplier switching becomes easier.
Customers of today expect no less of an energy-related app than any other app or website on the market. Frontrunners realise that and incorporate smart services and support functions that customers expect.
But not everything has to be online or high-tech. As long as analysis has been done to understand the expectations and needs, the customer experience may be delivered in several ways, depending on who the customer is and what the purpose of the communication is.
Connected homes is an area of massive competition, with entrants from outside the energy business emerge every day. Frontrunners are taking a step forward, connecting security, heat, electricity, power storage and many other services to gain revenue, loyalty and customer insight. The alternative, staying as a core utility provider, does not appeal to many Frontrunners.
Customers are not interested in old-fashioned, efficient yet anonymous utility providers. Frontrunners speak with their customers and advise them on how to reduce their energy use, let external parties control and certify them. The aim is to engage customers, investors and employees.
Unboxing to demand
One size does not fit all, be it consumers or business customers. Frontrunners endeavour to rebuild cleverly segmented offerings that increase revenue and loyalty over time, creating a whole new way of treating a customer as unique, each with their own energy agenda.
But slicing the customer database into finer segments should not mean adding complexity, which will only confuse customers. So what is the answer? Well, whatever makes the most sense for your customers!