Holding Onto Small & Medium Enterprises

The need to improve the relationship with the SME should be an essential part of the utility business.
Published: Tue 06 Jan 2015

Small and medium enterprise (SME) customers are one of the most important segments for European utilities. As competition grows in the European energy sector, churn in the SME customer base is six times that of residential customers in some markets. And as SME customers account for half of commercial sector electric use and – on average – consume five times more energy than their residential counterparts, this issue cannot be overlooked.

Engerati explored the issue further in its webinar, Takin’ Care of Business – The SME Engagement Opportunity for EU Energy Suppliers which was presented by Alisdair McDougall, Energy Practice Analyst, Verdantix, and Iian Frank, SME Solutions Lead, Opower.

Power suppliers’ approach to SMEs

During the webinar, Engerati asked those who were watching the webinar what their firm’s approach is to its SME customers. The results were as follows:

  • 47% were unsure

  • 25% segment SME customers into a wide range of different categories and target each one separately

  • 25% have a single engagement strategy covering the entire SME customer segment

  • 8.33% do not have a defined engagement strategy specifically targeted at the SME customer segment

According to McDougall, these figures are very representative of what his firm sees. Frank adds that the figures are a good indication of the fact that energy suppliers are struggling with the SME market.

Factors impacting the SME and utility relationship

McDougall points to six of the main factors that impact the relationship between SMEs and their utilities in Europe:

1. Smart meter deployment- this will open the eyes of the SMEs. Using smart meter data, they will be able to manage their energy consumption better. SMEs will become more knowledgeable about their consumption and how much they pay for it.

2. Rising energy bills -SMEs pay more for their energy than anyone else in the market from a non-residential perspective and energy prices continue to rise across European member states. SMEs generally suffer more during economic downturns so these increases would not be welcome.

3.Market competition-SMEs continue to have more choice when it comes to utility suppliers due to the liberalization of retail markets in Europe. They therefore have more control over their energy spend. Customers will look for the best possible deal so incumbent suppliers could start losing customers to smaller new retailers in the market

4.Technology innovation- The smart grid will continue to change how SMEs use and view energy consumption as well as interact with their utility.

5.Customer requirements - Customer service and data availability expectations have changed. They want more personal interaction, better value-added services and convenience. SMEs regularly use the internet to search for better deals

6.Role of energy services-Utilities risk losing the customer relationship to energy services firms

Turning risks into opportunities

McDougall points out that while utilities face a number of risks and challenges, these can also be viewed as opportunities. He says that the above factors can be turned into successes.

He lists the opportunities as follows:

  • Smart meter deployments-Give customers better insight into usage

  • Rising energy bills-Provide targeted tariffs and improved breakdown of the bill to help them manage their energy better

  • Market competition- Increase customer base through targeted communications

  • Technology innovation- Optimise supply and demand

  • Customer requirements- Better engage customers while reducing costs

  • Growth of energy – Develop new revenue streams through value add services.

He explains that utilities that act now can mitigate significant risks and will benefit from significant opportunities because they already have existing customer relationships and historical consumer data which will create a level of trust from day one.