Guest blog post: Customers Have Changed — Have Utilities?
Since their inception, utilities have always employed brilliant people. We joke that often utilities are too smart for their own good. But you know what they say — "behind every joke there's a little bit of truth."
Often characterized today as 50-year-old engineers, these companies successfully operated in the traditional and long-lasting utility business of selling commodities. But the reality has changed. Customers are now digitally-savvy, seek additional services, and demand a different relationship with their suppliers, especially when communication channels are concerned. IDC Energy Insights predicts that by 2018, 20% of energy consumers will purchase new energy-related products and services from utilities and their affiliates, opening up new revenue streams. So, to what extent have utilities transformed their customer experience approaches? And is it enough?
Customer Engagement Improved but Still "Process-Centric"
Utilities have changed the way they perceive their customers, and continue to transform their approach to customer experience. Despite this, most utilities' customer operations are still strongly driven by an internal approach. Customer operations, for example, are often designed to fit utilities' processes and back-end systems, rather than the real needs of customers. This is more common in incumbent utilities, heavily burdened by transactional legacy systems and overbearing processes, than in new entrants that start from scratch when approaching customer experience. In fact, it was new entrants that rocked the boat, and raised the bar on customer experience, spurring energy suppliers to listen to customers and to pay attention to net promoter scores in the first place. In the U.K., for instance, due to strong dissatisfaction with customer service and high and often unclear energy bills, independent energy retailers were able to capture over 15% of the market. Incumbent suppliers have since followed suit in trying to improve their customer experience. Significant progress has been made in how utilities communicate and engage with their customers when it comes to selling energy — utilities' bread and butter.
Selling Commodities is No Longer Enough
Utilities' traditional energy market is changing, and exclusively relying on selling commodities is no longer a viable option. Utilities in fact should no longer be worrying about losing out on selling commodities — it's a very low margin business anyway. What they should be concerned about is losing out on selling more lucrative value-added services. Conventional business models are being swept aside and related revenues are being diluted in favor of new revenue streams. Utilities must fill this void with revenues from business models outside their comfort zone.
According to a recent IDC Energy Insights survey, European utilities believe that by 2020 only 61% of companies' revenues will come from their traditional core business, while 20% will come from value-added services that support the core business (i.e., home energy management) and a further 19% will come from new business models (i.e., distributed energy generation and residential energy storage management). These new revenue streams, of course, are not only appetizing to traditional utility companies — they have also piqued the interest of parties that have not previously directly competed with utility companies.
This is bad news for utilities. In addition to competing with their peers, utilities will increasingly face off against companies from other industries, such as tech companies and telcos, which historically have enjoyed higher customer trust and satisfaction levels. At the same time, they will be on a learning curve on how to best pursue new business models and revenue streams.
Springing Into the Transformation
So, have utilities transformed their customer experience approaches enough to succeed in this new market scenario? We believe utilities should take the opportunity that value-added services offer, as a natural extension of their commodity business, to prove to their clients that they have indeed upped their customer experience game. If they succeed, and if customers endorse them as (energy) services companies of choice, then yes, utilities will be able to reap the benefits. But this is easier said than done. Utilities need to think as customers, and provide valuable experiences that truly address clients' problems. They have to embrace the wave of digital technologies sweeping the business to transform both internally and externally the way they interact with the ecosystem. They need digital solutions and capabilities focused on customer experience and engagement in addition to transactional systems. Finally, utilities need to profoundly shift their mindset and avoid overcomplicating matters. After all, an effective and positive customer experience depends on simplifying, and not complicating, the customer journey.