Energy has traditionally been a low interest / low engagement commodity purchase. But now, new online and digital tools are making switching easier.
How can it be a win-win situation for the customers and the utility companies at the same time?
UP TO NOW
ONE
It was always like this.
The traditional energy utility companies have always been able to rely on significant level of customer inertia in liberalized markets. The key was the relatively low level of customer engagement. In the UK, for example, where markets have been open for a long time, a recent study found that switching rates have shown a falling trend since 2008, despite persistent price differentials and potential savings from switching.
TWO
In the past, only large industrial customers were likely to develop their own energy solutions. Residential and SME customers didn’t have much choice, they were tied to their traditional utility companies.
AS OF TODAY
ONE
Because of the decreasing cost level, the ability to develop their own energy solutions is extending to many more customers by means of self-generation and energy storage. Having their own energy soluton is improving the customers’ position, increasing the level of independence.
The upcoming trend is the change of the customers’ behavior, customers are having less need of traditional utility companies for their power.
TWO
New online and digital tools are making switching between the energy service providers easier. Combined with the heightened energy awareness that comes from self-generation (PV and wind) and smart home devices, this means that customer churn could increase.
THREE
The online experiences of the customers in areas such as retailing, travel and media are setting a new norm, raising the standards expected for baseline aspects of a utility’s operations such as metering, billing, payment and outages. Customer expectations are driven by benchmarks of Google, Uber, Airbnb and so on. Expectation of good customer service is becoming much higher because utility customers are having good customer service experiences with many other companies. They can order almost anything online and have it delivered practically the next day, they can receive call backs when someone is ready to assist them rather than waiting on hold, and they can text their order to a restaurant before they even arrive. Customers expect the same level of service from their utility.
IN THE NEAR FUTURE
ONE
In this new environment, power utilities have to successfully shift customers’ perceptions so that they are seen as active partners and providers of services and solutions, not just as commodity energy suppliers.
Large customers want to get the benefit of better solutions for energy control / energy efficiency and communications. And everywhere this is reinforced and amplified by the development of ‘beyond-the-meter’ technology and the ‘internet of things’.
Residential and SME customers are seeking choice, collaboration and convenience.
TWO
It is not that simple that the smart devices themselves are the key.
Here is an example:
Some smart consumer technology can seem like a solution in search of a problem that doesn’t really exist. Will that many consumers really care that they can shave a fraction off their energy bills by using a new home automation gadget? Or that their internet fridge can alert them as supplies run short? And, crucially for players in this space, how can this smart home and building technology be monetized?
Back in 2000, LG launched the world’s first digital, web-enabled fridge. The advantages, and crucially the price point, failed to fire the imagination of consumers. Eleven years later, LG thought the smart phone era might make the time right for an updated model. This time it came with, among other features, the ability to manage the appliance’s power consumption with late night saving, ‘preferable time’ saving and smart grid-ready modes. But, as we move closer to 2020 than 2010, the internet fridge remains largely hype rather than reality.
THREE
There is a ‘soft’ side of customer empowerment. That means that the new norm of customer experience is opening new horizons in
- flexibility of products’ configuration made by the customers themselves online,
- full online control of contracts, tariffs and invoices,
- flexible self-configuration of account handlings.
FOUR
Are there any successful business models to use for the utility companies in this transition? Nothing fits 100% but in my opinion the fintech approach can be a good basis to start with.
Let’s see who will be the first utility that enchants the customers with a full flexible IT supported personal service.
/partly based on PwC published documents/
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