September 19, 2016

Three trends that the energy industry needs to figure out—with their customers

Carl Lidholm

Head of Strategy and New Business, Energy Utilities, Tieto

My last blog post described the energy retail trends that will shake up your business. In this blog I will detail three more important trends: e-mobility, smart homes and sustainable energy. Each of these trends demands deep insight into consumer behaviours and their ways of thinking.

Though many industries have begun employing customer-centric approaches, the energy industry hasn’t been a forerunner in this tactic—but there is plenty of potential. These three key trends are changing how consumers think of and engage with energy companies:

  1. e-mobility
  2. smart homes
  3. sustainable energy

With a focus on these trends, energy companies can prosper in the digital world by making consumers more receptive to their offerings.

1. E-mobility

Throughout the Nordics, new electric car charging stations are being built faster than ever. This presents a new series of challenges associated with the pay-for-charging market. Both Vattenfall and Fortum have chosen a pay-per-minute charging model as the pricing model for this service. But how will car owners react? And what limitations does this model have?

Consider this: if you teach the consumer that a type of service is free (i.e. Napster), you will need to develop an especially refined service to entice the consumer to pay eventually (i.e. Spotify). This is why requiring payment to charge an electric car is the best approach.

However, the pay-per-minute model has some significant problems. First, electricity is usually purchased by the kilowatt hour, so introducing a new metric adds a layer of complexity. Second, the performance and efficiency of the charge depends on factors beyond the car owner’s control (e.g. multiple cars charging at the same station and grid performance).

There is also a challenge in figuring out how to connect the charging station brand value to the energy company brand value through means other than brand recognition. One approach is to simply connect the car charging costs to customers and their household energy bills. This type of bundling allows energy retailers to offer a pricing model that seamlessly incorporates car charging into the normal electricity bill.

2. Smart homes

We continuously see new smart city projects emerge, and several initiatives have even looked into how smart homes can be utilized to reduce energy consumption. But an unexpected challenge emerges from the low energy prices in the Nordics. Because household electricity costs are small compared to heating costs, consumers have relatively little ability to affect their total energy bill. Thus, nonmonetary incentives become important.

Gamification is one new method that has been tried by a handful of energy retailers, while others chose a more sustainability-focused approach. Some have even employed a local production angle. Simply put, there is no one-size-fits-all solution. Consumer behaviour is highly individualized, and the ability to change behaviours depends on connecting individual triggers to the best approach for a given group of consumers. In brief, segmentation is once again the key.

3. Sustainable energy

All self-respecting energy companies offer a green product or contract option. But that is not enough—not even close.

To be perceived as a truly sustainable energy partner you need to do more. For example, one approach to advance your position in this area is to conspicuously utilize renewable energy production facilities. Because renewable energy can be produced all around us, you can use solar panels or wind farms to clearly state your marketing message in a very direct way.  For example, solar panels donated to local schools ensures that your logo will be seen by all the parents picking up their kids on a daily basis.

Understanding today’s energy consumer

The common thread running through e-mobility, smart homes and sustainable energy is the consumer—their preferences, behaviours and ways of thinking. By figuring out how consumers understand their energy consumption, whether through charging their electric vehicles or powering their smart homes, energy companies can both attract new consumer segments and provide more value to current segments. The trick is understanding the customer at a deeper level.

Check out also my previous blog post where I focus on energy retail trends for this autumn: how can digitalisation and automation be utilised to overcome the obstacles that are currently holding retailers back?

 

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