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30 August 2013

Smart Series: The Smart way to attract and retain energy customers (Part 2 of 2)

In the first part of this mini-series, we outlined the reasons why it was important for utilities to invest efforts as soon as possible in developing new propositions to attract and retain their customers.  In this blog, we'll offer some thoughts on the approaches that can be taken to develop engaging propositions.

The Government's business case for Smart meters is predicated in energy and carbon reduction.  But installing a smart meter in itself won't reduce energy or carbon (in fact quite the opposite if the lifecycle emissions associated with its manufacturing and transportation, and the disposal of old meters are considered) – the customer needs to act on information provided to deliver the reductions, requiring a behaviour change.  The smart-meter is an enabler for a suite of propositions which should unlock this potential and help deliver the UK's Smart business case. 

So, in which areas are there opportunities for developing compelling propositions for customers?  Here are some ideas, themes or challenges:

  • Smart-meter solutions will provide periodic, raw energy data back to the supplier, as well as some simple information to the consumer, via the In-Home Display (IHD).  If the technology works well, it should mean the end to estimated bills.  However, as this is the regulatory minimum, none of this will provide a competitive differentiator.  Moreover, customers are familiar with itemised bills from other industries (think of a bank statement, or mobile phone bill) – why shouldn't they expect the same from their utility?  So, what would it take to provide a breakdown of energy usage in the home (at least for the big, discrete uses) – and how much would customers be willing to pay for this?
  • As well as providing useful information, a customer needs the knowledge to act on the information. This requires education.  A lot of people have a secret (or not so secret!) competitive streak and behaviour change scientists often rely on 'gaming' to help nudge a different behaviour.  For example, could providing interactive games for children to use on their set-top box, using live smart-meter data, work to not only educate, but also instil life-long habits?  This is less likely to work for gas usage, but is very applicable to electricity where there are lots of small, discrete uses of energy.
  • As well as using less energy, carbon reductions will be delivered through 'shifting the peak', encouraging customers to use less energy when the grid intensity is high (there is usually weekday peak between 4pm and 9pm), minimising the use of expensive, carbon-intensive forms of generation.  Equally, 'critical peak pricing' may have a role to play – providing customers with benefits like a lower standard tariff, but in exchange, they accept to pay a significant premium at short-notice, if there's a strain on the grid, for a small number of occasions in any year. There is, of course, an education gap here to help explain the sustainability potential to customers.  However, accompanied by clear 'Time of Use' (ToU) tariffs and innovation in payment mechanisms which exploit immediacy, there's a simple financial reward mechanism that can encourage change. 
  • 'Demand management', for example where a utility controls appliance usage remotely, is probably more appropriate in countries where domestic air conditioning is prevalent. There are ways utilities can provide additional 'win-win' energy services.  For example, renting out A+ dishwashers and washing machines with simple 'delay start' functionality (when accompanied with ToU tariffs), could empower customers to act, and provide a new revenue stream for a utility.
  • Although regulation can incentivise utilities to offer energy efficiency (e.g. insulation) and micro-generation propositions, utilities could enhance concepts like the Green Deal by rewarding loyal homeowners with cashback if they stay with the same supplier after undertaking measures
  • Social media is a ready-made platform for creating virtual communities of people where energy reduction can be shared, both in terms of tips, but with smart meters, actual energy usage.  Accompanied with genuine intent to build trust, it can also help position a utility as an 'energy partner', rather than anonymous supplier.

The above points are by no means exhaustive, but they touch on some of the key aspects of behaviour change – empowering customers to make informed choices, offering gaming, rewards, creating habits, community and recognition.

This ends our mini-series where we've hopefully outlined not only some thoughts on what new customer propositions might look like, but also that there's a 'burning platform' to commence this now.

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