The Utility customer conundrum

It is estimated that almost 50 billion connected devices will be around in 2020, all of which require a power source. Consumers buy more and more appliances and devices which require electricity and electric and hybrid vehicles are quickly increasing their share of the market. Electricity is arguably one of the most important pillars of our society.

So why aren’t the utility companies burgeoning?

Utility companies have been hit by several waves of creative destruction at once. New technology for small scale energy generation and storage, digitalization, new players in the market, political pressure and energy efficiency are by themselves major challenges, together they coalesce to transform the foundations of the industry.

Traditionally utility companies have been monopolists and customer interaction has been limited to invoices and customer’s complaints.

Today’s hyperconnected customer is empowered and does not stand being treated worse by the utility company than by a retailer. Indeed, since there can be no difference in quality between supplier A and supplier B of electricity, the threshold for changing supplier is very low, thus customer churn is high.

Even the distribution company (who owns the power cable into your home), has been put under pressure recently as technology for small scale energy generation (e.g. solar panels or wind mills) and storage (battery) has become affordable and efficient.

There are two paths for the utility companies, either become a customer centric business with the customer in focus throughout the organization, or become a bare bones, low cost energy producer without direct customer interaction.

Many retailers and customer centric companies, would like to see the second scenario, where they can step in as middle-man. Few utility companies think this is a desirable scenario.

Thus, much effort is spent pondering how utility customers can become more loyal, this is the customer conundrum of the Utility industry. In theory it is not so complicated. People like to be seen as unique and important. If customers perceive that they are important and if the utility company try to help them in a personalized way, they become loyal (and profitable).

You might ask, “Why would I care who supply the energy to my iPad?”, well, why would you care where you fuel your car or who supply your broadband? Yet you do, at least to a larger extent than your energy supplier. We, as humans, like to relate to animals, things and companies as were they humans.

It is not easy to like someone who show up once a month to pick your wallet and then leaves without a word, similarly utility companies needs to engage their customers and speak to them as individuals, not just send a bill at the end of each month.

To succeed in engaging the utility customers, personalized communication and products are key. Even more so, an engaged and technology enabled customer service staff who have tools to proactively help, inform and support the customers. Utility companies are not constrained to selling only the electricity we use. As the Internet of Things gradually infuse our homes, smart meters are well positioned to be the central controlling unit. This is indeed Googles ambition with the Nest thermostat. If the utility companies seize the opportunity and transform, the future is bright. But a cultural as well as technological transformation is required, otherwise there will be a race to the bottom as customer centric middle-men take the margins available.

To be continued…

Read more about personalized communication in our blog.

Dela inlägget