Smart Meter Marketing
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Let's face it. Most consumers really don't care about electricity per se, except those of us who work in the industry. Just like most consumers really don't care about hand tools, except serious do-it-yourselfers and people who work in the industry. What people do care about is that the TV turns on so they can be entertained. That the light bulb works so they can read a book. Or that the microwave oven does its thing so they can feed their family.
Much of the smart meter discussion and marketing efforts to date has been classic early stage technology messaging -- discussions of features, functionality, perhaps something about long-term cost savings mostly driven by the engineers who built the product and distributed by industry insiders who care a lot about electricity. But from Maine to California, consumers aren't buying it. To the contrary, many are demanding that regulators force utilities to offer an opt-in/out option or stop the programs all together. When the benefits seem so obvious, why?
Because consumers are asking themselves a question that is more fundamental to the things they do care about, and one that the industry has not yet answered compellingly. The question consumers are asking is 'Why should I? Other than a long-term financial benefit that might translate into a few bucks off of my monthly electricity bill (oh sure rates are going up so I might save more in 5 years but you guys always say that and I can't control rate hikes anyway), what does a smart meter do for me that my current electricity service doesn't already do? Will my TV not work, lights not turn on, or microwave not cook my food if I don't put one of these things on my house? So there is marginal upside, possible financial downside, and none of my neighbors have one -- let the next guy be the guinea pig.'
A similar situation was faced by door to door TV salesmen, cable installers, and PC manufacturers. Virtually every technological innovation introduced to the mass market has gone through phases of adoption so similar that the well documented parallels have become marketing paradigms.
Starting With The Joneses
Televisions were first introduced to the market in the late 1940's. Some readers may remember their grandparents telling them of inviting neighbors over to watch the baseball game on their new high tech gadget. In time, prices came down due to maturing supply and demand economics, and more entertainment content became available, broadening the appeal and widening the perceived value of the unit, more and more people wanted to keep up with the Joneses. But they didn't want to buy a TV, they wanted to watch the ball game, Jackie Gleeson, or I Love Lucy. The same process occurred with Cable service. Field sales reps went door to door selling many channels of entertainment and when they got enough people in a town to agree to pay the monthly fee the economics worked, the infrastructure was installed, and kids started pestering their parents about the Joneses next door who have cable and can watch special movies not available on regular TV -- so the market for cable TV expanded cost effectively, through customer-driven 'pull' rather than company-driven 'push'.
The same happened with the PC, the internet, transistor radios, and Smart Phones. A small segment of early adopters, people with disposable income (ability) and the desire to stay ahead of the curve (willingness), bought early high-priced versions of various products new to the market. They became the market 'reference accounts' that helped convince many more people with perhaps a little less money, perhaps a little less willingness to buy a first generation product to feel more comfortable that the product indeed worked as advertised, that it delivered the promised value, and that it now had matured to include all of the desired features. On every street, in every apartment building, in every office in America there are a few Joneses, and many more who are just as happy letting the Joneses go first. A key necessary element that must be in place before the appeal of a product can 'cross the chasm' to willing (not forced) mass market adoption is establishing those early adopter 'reference accounts'.
Smart meters are now at the early adopter phase. Top down, forced approaches have clearly not worked. Even though energy is a commodity and the utility industry quite mature, these new devices require a consumer marketing approach. Smart meter marketing efforts need to focus on finding and communicating to Mr. & Mrs. Jones a compelling reason to buy, because these products are not unaffected by adoption cycles. Without first securing the buy-in of the Joneses any further investment in mass market promotions or efforts to force adoption will result in continued regulatory resistance and mounting legal bills, but that will not result in the millions of happy customers pleased with their new smart meter that utilities need to pave the way for cost-effective mass market adoption.
Hiring A Product To Do A Job
'People don't want to buy a quarter-inch drill. They want a quarter-inch hole.'1 Likewise, people don't want to buy electricity, they want the TV to turn on so they can be entertained. The light to turn on so they can read. The microwave oven to cook dinner. Aligning smart meters with various electronic products consumers hire to perform every-day tasks moves the discussion away from the meter itself and onto the product that does the job consumers want done.
Utilities can hark back to the days when they were an integral part of the home electric equipment supply chain for such items as clothes washers/dryers and toasters. Were these items marketed as a way to expand the use of electricity? Of course not, they were sold as conveniences for the modern home or time savers for busy people. No one bought a new GE clothes washer so they could increase their electric bill. The electric utility provided the necessary power at a reasonable rate to enable them to automate clothes washing at home saving time and money. They installed electric baseboard heaters because it was (at the time) cheaper that oil for keeping their family warm. Electricity was an essential element to facilitating the completion of the job, but it was silent, hidden, taken for granted (until it didn't work, of course).
Even early adopters won't buy a smart meter just so they can change their rate plan from fixed to tiered pricing. But they will hire a smart meter and time of use pricing so they can buy that cool new electric car to get to and from work every day in style, and also save money compared to refilling their tired old car with gasoline every week. They will hire a smart meter if they can buy the latest smart appliance that helps them automate grocery shopping and clothes washing, and save money by running these tasks at night. And they will hire a smart meter to help them better integrate a solar panel on their roof or a battery in their basement so they can be green and go mostly off-grid, but still have access to sufficient, reliable power just in case.
The meter itself is much like the Internet modem or cable box, it's a black box about which consumers understand little but it is essential to facilitating the job people hire other products to do.
Pricing Models Must Be Simple
Some readers may be old enough to remember our parents making us wait until 5:01pm before we called our grandmother to wish her happy birthday because the nighttime rates were far lower. Anyone who lived through the 1970's remembers when turning off the lights upon exiting a room became a reflex and not a considered action. Consumers absolutely have it in them to change behavior or act in a new or different way when presented with a simple, clear and material financial benefit; one that doesn't take regular checking of an online calculator to understand, especially when the dollar value is around $10 per month because it's just not worth the time. Phone companies learned this early on, and some smart meter programs are following a similar model.
Just as the power industry was built to meet peak demand, telecommunications companies built capacity for the busy business hours when they could charge a premium, but knew they had extra capacity at night they wanted to fill to improve their economics and accelerate return on capital investment. So they offered lowered pricing to encourage people to use their phones at home at night. They balanced their 'load' with a simple tiered pricing model. Increased night-time use meant increased revenue for the telephone companies, but the value driver used to market the program was the chance for mom to talk with her sister in Florida once a week or organize a play date for their kids -- 'jobs' the telephone facilitated at a cost consumers were willing to pay. And the rate structures, approved by regulators, were simple, before 5pm and after 5pm, local vs. long distance -- anyone could make that rough calculation.
Mass market adoption demands simple pricing models. Time of use pricing should have easy to understand pricing: Day time pricing and night time pricing based on demand models and economic analysis to determine the most effective balance between maintaining sufficient reliable supply while earning a fair profit for the utility. But to the consumer, it's one price at 5:00pm and another at 5:01pm -- that simple, virtually transparent.
Smart Meter Marketing: An Integrated, Cross-Industry Marketing Program
Early adopters of electric powered products that will showcase the benefits of a smart meter such as plug in electric vehicles (PEVs), residential solar panels, etc. are the reference customers' utilities and their smart meter vendors need to reach and please first, before attempting to put a meter on every home. How can a utility put together a marketing & adoption plan for smart meters in their territory?
First, it's not about the meter -- write that on the blackboard 1000 times so you stop thinking about the meter (obviously some feature/function information needs to be included but the point is that the meter itself is not the value driver). It's about the job people want to hire a product to perform.
Second, find the Joneses and learn what version 1.0 electronic products they have or are likely to buy that will yield greater value if also attached to a smart meter. To find the Joneses and what products they buy let's use Boston as an example, NSTAR territory. The town of Weston, MA about 15 miles west of the city is one of the wealthiest in the country. It's populated by senior corporate executives, venture capitalists, and investment bankers who drive to work in the latest model import or SUV, cloth their children in this year's fashion, and are often the first in their office to have the latest i-whatever from Apple. These people are early adopters with the demonstrated willingness and ability to pay a premium price to be the first on their block with a Chevy Volt or Tesla, they are highly educated and wired so can go online and work through a not-100% perfected user interface to set up time of use pricing to make sure they get the best deal to re-charge their new electric car, and they are trend setters who will be followed by their cousin two towns over envious of the lifestyle.
In some cases, like the cable companies in the early adopter phase of installing cable modems, utilities may need a certain density of early adopters in a specific geographic region before the economics of installing smart meters makes sense. But as a cautionary tale, not all early adopter markets are alike. Early on, cable companies could not reach sufficient adopter density in the town of Concord, MA, even though Concord had all of the characteristics of early adopters, plenty of disposable income, highly education population, etc. But it was not until the demand for Internet service grew that the cable company could finally secure enough customers willing and able to hire a cable modem to send email and get online that the investment in infrastructure became sensible. Why did Concordians take so long to adopt this specific new technology? Follow up market research revealed that at the time residents of this historic town were largely writers and professors who did not see the value in cable TV because most people in town preferred to read.
Third, measure the impact of adding a smart meter to the purchase of an advance electric product (much of this has already been done but not necessarily integrated into smart meter marketing communications). Cost savings of a PEV compared to gasoline powered car, annual, 3-year, 5-year and what additional financial benefit if a smart meter enabled tiered pricing and consumers re-charged at night? Solar panels or energy storage? Energy and water efficient IP-enabled washer/dryer? The addition of a third battery powered cell phone or PC to the home network router connected to the cable modem and printer and the impact of increased use of home offices during business hours -- could the installation of a smart meter with tiered pricing enable a wired telecommuter to add MORE power using, time saving, productivity enhancing devices to increase their productivity at home while cutting their monthly electric bill?
Fourth, partner with manufacturers and distributors of those electric products whose products can increase in value if integrated with a smart meter. Back to Boston, in partnership with the local Chevy dealer, NSTAR could include a marketing package offering 25% off of a smart meter with three months of tiered service at half off for every customer who buys a Volt. Chevy could share customer data with NSTAR so they could follow up with a phone call or email to deliver a simple but compelling message -- you could save money re-charging your new Volt if you allow our licensed electrician to install this NSTAR smart meter on your home and move to time of use pricing. The cost savings if you re-charge after 5pm would be about $500 per year compared to refills with traditional gasoline. And you could use this Smart Phone app to track your savings. After 3 months, if you are not completely satisfied you could go online and switch your account settings back to standard pricing.
Chevrolet would, in turn, focus its Volt marketing on the town of Weston, MA with Saturday test drives at the local CostCo complete with a tabletop smart meter display staffed by an NSTAR marketing agent. Because of the geographically focused marketing effort GM could ship a few more Volts to the Boston area so they have plenty of product on-hand to support the joint campaign. And both companies could pay a team of Harvard Business School MBA students to monitor the progress of the overall program as their Masters thesis to be published in the Harvard Business Review to be used as an independent reference for future mass media press coverage.
Of the approximately 3,700 households in Weston, MA earning an average $153,000 per year, let's say just 10% or 370 homes buy a Volt and install a smart meter with tiered pricing. Each one of those early adopters would show off their new car to friends and neighbors initiating true viral marketing for GM (5 -- 10X the number of adopters). They would show off their Smart Phone energy and cost savings App to fellow office workers who live in nearby towns and are also likely early adopters or fast followers by nature of their professional association, initiating in-bound inquiries to NSTAR about smart meters and tiered pricing (another 10-15X the number of adopters). And these customers will start changing the time of day when they hire other existing or new products (clothes dryer, dish washer, etc.) to do other jobs in their house to increase their overall cost savings and demand profile.
Meanwhile, NSTAR could also negotiate a joint marketing effort with GE and other purveyors of electric powered equipment for the home, sharing the message and the cost of marketing a smart home appliance with a smart meter to help consumers be more efficient at home, and save money.
The Impact? Pleasing Early Adopters Moves The Whole Value Chain
What then happens in a few years in Weston, MA? These early adopters will be happy because they get to buy the hot new thing with an integrated device that reduces their total cost of ownership. Regulators should be sanguine because consumers have opted into a program that potentially lowers their bill while it helps the utilities meet energy conservation (and possibly RPS) mandates. GM will benefit because they are selling more cars in a prime geographic region, which helps drive down the cost of future model editions allowing GM to target a broader market. Smart meter vendors will be happy because they are shipping more units, and consumers aren't complaining to regulators about their product. And NSTAR will have a successful smart meter pilot that can be replicated throughout their territory and/or will spread to other towns through a positive, consumer-initiated message encouraging other NSTAR customers to ask if they too can hire this smart meter thing to help them cut their electric bill and buy a Volt like the woman at their office who lives in Weston.
Pretty soon, the local press will start writing articles about the Joneses on Main Street in Weston who bought a Volt, installed a smart meter, opted in to time of use pricing, and now save $500 per year and burn hundreds fewer gallons of imported gasoline. They also use an efficient smart washer/dryer from GE to wash their clothes at night saving water and money. The article will include a picture of their 16 year old daughter who just got her license behind the wheel of the new Volt, which she will upload to her Facebook account, prompting her friends to ask their mom & dad if they can have an electric car for their 16th birthday. And the reporter will cite the HBS case study detailing the business case and innovative integrated marketing and product delivery program engaged in through a partnership between NSTAR, GM, and GE.
... Ring Ring ... 'Good afternoon NStar. You want information about our smart meter program? Are you from the state public utility commission?' ... 'No, this is John Smith. I live next to the Joneses on Main Street in Weston. I just bought a new Chevy Volt and want to use this discount coupon I got from NStar to schedule a smart meter installation.'
References & Recommended Reading 1. What Customers Want from Your Products, Prof. Clayton Christensen et al, Harvard Business School Press 2006 Crossing the Chasm, Geoffrey Moore, HarperBusiness, 1991 The Innovator's Dilemma, Clayton Christensen, HarperBusiness, 1997
1. What Customers Want from Your Products, Prof. Clayton Christensen et al, Harvard Business School Press 2006
Crossing the Chasm, Geoffrey Moore, HarperBusiness, 1991
The Innovator's Dilemma, Clayton Christensen, HarperBusiness, 1997size="1">