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Customer segmentation and tomorrow's utility

The findings from a new Accenture study of consumer behavior and attitudes, featured yesterday in this space by my colleague, Kate Rowland, have implications for utilities, which is the topic for today.

Read Rowland's column here: "What Does Today's Electricity Consumer Want?"

(You may also wish to glance back at the column we ran last June when the first of these annual Accenture studies was released: "Consumer Behavior and Electricity Usage.")

Some good news: about half of 9,000 respondents in 18 countries said they would consider buying additional products and services from their utility. The bad news: That leaves the other half not so enthused over this basic value proposition.

Further, nearly three-quarters of Accenture's respondents would consider engaging with an alternative provider to their utility for products and services, particularly when those products/services are bundled.

The lesson here is that price alone—i.e., the modest savings from active energy management in a home—doesn't necessarily motivate persistent behavior. But price incentives bundled with other offerings can motivate persistent behavioral changes, Accenture found. Rewards programs used in other industries, for example, may work for utilities.

"If you really want to create value, you need to package [price] with something else," Guthridge said. "That something else can be convenience, loyalty points, a technology or some other variable that combined [with price] might be the right combination to drive higher levels of adoption upfront and over time."

That's an opportunity for utilities to partner with retailers, which in deregulated markets can increase stickiness and decrease churn, according to Greg Guthridge, global managing director for Accenture's retail and business services for utilities, who spoke with Intelligent Utility editors earlier this week.

Tech-savvy homeowners, perhaps ironically, not only favor a set-and-forget approach but are willing to pay a premium for a third-party to set up gear in their home, Accenture found.

As with last year's study, this year's underscored the new utility mantra that "one size doesn't fit all," in contrast to the industry's traditional focus on one policy for all residential ratepayers.

"Each of these customer segments requires a completely different value proposition," Guthridge said. "It's important for utilities, especially in the U.S., to understand that a single program or pricing structure won't appeal to the full breadth of your residential mass market. There are significant differences in what they want and what they value. The best utilities will be the ones that evolve to having a different approach for cost-sensitive customers, 'traditionalists' and 'tech-savvys.'

"In North America, particularly, the successful utility will differentiate its offerings, consider a set-and-forget offering and will pursue opportunities to partner," Guthridge added.

The way forward? Customer analytics will unlock value by matching products and services to specific customer segments, the analyst said.

In this country, as one might suspect, utilities on the West Coast and in Texas are "roaring ahead" with customer analytics.

"The way they're using data is getting better and better," Guthridge said. "That will drive more fact-driven investments."

Accenture also found that utilities can raise their performance by focusing on just 40 percent of their ratepayers, rather than struggling futilely with the other 60 percent.
 
Here's another twist: the most savvy customers want face-to-face interaction and it behooves utilities to drive high-value interactions to that high-touch, face-to-face environment, while keeping low-value interactions to automated interfaces.

Is there a shortcut to creating, growing or implanting customer-segmentation skills in utilities that traditionally have been somewhat tone deaf to such concerns?

Guthridge was reluctant to make any general declarations, due to the array of differences among utilities in terms of scale, service territory, geographic variations in customer base, legacy systems and regulatory frameworks. But he did say that utilities soon will have to choose among three or four business models that likely will dominate the industry.

At one end of the spectrum, some utilities will choose to be "standard providers," focusing solely on the provision of lowest-cost energy. Over time these utilities will allow third parties to assume the customer-facing role.

Deregulated utilities with the advantages of scale, on the other hand, will be desperate to reduce churn and increase stickiness among their customers. They will pursue a "full-service provider" model to accommodate all their customer segments.

Between those two ends of the business case spectrum, other utilities will assume the role of trusted advisor, blessing a list of vendor partners who provide the high-touch, high-value services that produce new revenue streams.

You probably recognize the argument here. Determine your utility's current and future identity and market role, develop a supporting business case, then bring technology to bear on that business case. Oh yeah, and actually listen to your customers.  

Phil Carson's picture

Thank Phil for the Post!

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