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There’s an interesting phenomenon that occurs in the wake of major technology disruption – a divide between those who seemingly take the effects in stride, naturally adapting to the changing dynamics and realising the opportunities leveraged by the change; and those who lag behind, or never catch up at all.

Twenty years ago, the utility business model was a stable one as billing was a largely one-sided affair, based on tariffs and billed according to consumption, but those times have changed – indeed, they haven’t stopped changing yet, and aren’t likely to settle anytime soon.

This article was originally published in Smart Energy International 5-2019. Read the full digimag here or subscribe to receive a print copy here.

To qualify that, let’s consider the advent of smart metering, bringing rich, customer-specific insights to the modern utility, such as household-for-household consumption patterns including time-of-use, thereby allowing for better demand management.

Add rooftop solar and household storage, neither of which are new technologies, but are now being widely adopted, as consumers look for greener, self-sustaining energy options, and independence from a central grid authority.

The consumer market in the energy space is a multi-segmented one, regardless of geography, with variables such as age, income, and education level in an electricity market that’s trying to offer something for everyone, especially in privatised power markets such as the UK, and sections of the US. Here energy retailers jostle for market share, outdoing each other in tariff structures and added services such as mobile connectivity or home automation technologies like Alexa and Google Nest.

Considering then that the competitive environment in almost every industry is being shaped by consumer-demand, and marketing models have shifted to become almost completely customer-centric – from advertising to the content “selected especially for you” online – and one may be left wondering where to start addressing the myriad of complexities involved in effectively reaching, engaging, and retaining this market so much more sophisticated than in years gone by.

Profiling – not a generalisation when the data backs up the term.

Customer profiling or segmentation may have been less important in the energy sector than others, but utilities globally are increasingly improving customer profiling, noting customer attitudes and preferences.

The Smart Energy Consumer Collaborative (SECC) research, based on psychographics – as well as other established metrics such as age, gender, income, and location – has revealed four basic customer segments.

The Segment Favorability Continuum

The continuum demonstrates consumer preferences and dispositions, but you’ll note that age, gender, and location don’t feature. The reality is that willingness to engage in new technologies and behaviours is more closely linked to education and financial capacity than age.

The potentially most receptive consumers, the early-adopters, or Green Innovators, comprise 20% of the US population. This segment is considerate of environmental issues, society, and are financially able to pay for new technologies and services.

They live a digitally-enabled lifestyle, reliant on power, and are likely to already have engaged with their utility in terms of tariffs, new services. They think about their energy use and how it affects the environment and society. They lead the way in energy conservation. Their finances – the highest among the four segments – enable a willingness to pay for new technology and services. They tend to live a self-acknowledged digital lifestyle that depends on reliable, quality power. They do not see barriers to utility engagement and are likely to be in contact with their energy provider. They are likely to already have selected alternative rate structures.

Demographically, they typically are younger, higher-income individuals.

According to the new SECC segmentation study, 70% of Green Innovators are interested in incentivisation; for example, being credited or rewarded for participating in programmes to reduce peak energy use. This market is ideal to trial new services in, utilise for ‘first-peek’ insights into new technologies and draw on for surveys to identify attractive trends and refined offerings.

Tech-savvy Protégés represent roughly a quarter of the US market and, like Green Innovators, are concerned with environmental factors, but their primary motivation in being more energy efficient is the potential for financial savings.

Interestingly, they’re less likely than their more green-conscious neighbours to have incorporated new technologies into their management of household energy use, but may do so in the future, or participate in demand-management programmes, seeing technology as a means to create more comfort in their lives, but not much else. In the main, Tech-savvy Protégés are the most likely segment to own a home, and have the highest electricity bills, yet are slightly younger than average. These factors, says the SECC, present several opportunities to engage with this segment, but programmes and marketing should feature minimal upfront costs, and demonstrate benefit to both themselves, and others.

The largest market segment, at almost 30%, consists of those consumers who are neither tuned-out, nor fully-engaged in their home energy use, and present several opportunities for engagement.

Whilst this Movable Middle isn’t defined by attitudes towards energy use, it has some concern for the environment, and those who use smart home technologies are happy with them, but the use of technology to manage energy use holds little interest. This segment typically consists of older-than-average consumers, less likely to move homes, less likely to have a strong interest in energy efficiency or technology offers, and tend to lag behind the general population in terms of interest in these. However, simple, clear offers that encourage energy savings may motivate this segment into greater efficiency awareness and participation.

The most difficult segment of the market to engage are also the oldest. Roughly 26% of the market falls into this category, where energy-related matters are of little concern, and the least likely to respond positively to engagement – often generating concerns around increasing costs and new complexities. New technology is of little interest as retirement and reduced incomes make this segment more cost-conscious, and may require engagement via paper, with simple energy tips and helpful advice.

One area that may offer uptake is in peak demand use, as this largely-retired segment are less bound by time-strict routines.

Mapping the buyer journey

Based on the above segments, it’s clear that a one-size-fits-all approach would be an unsophisticated one. Engagement with each segment needs to heed the preferences and attributes of that segment and this should be based relative to age, level of technology-engagement and willingness in the past to participate in new programmes, billing structures or tariffs.

Whereas green-conscious consumers may be likely to engage in related topics or have interest sparked more easily than those purely seeking a lower bill, it’s critical in partially-deregulated and privatised markets to remain in meaningful contact in a rapidly-evolving environment.

Age plays a role, but not a defining one You may have heard the terms “Baby Boomer” or “Gen X”, or in the case of our parents, perhaps even the “Greatest Generation” relative to socio-economics in a broader sense, but they have application in the energy space, as part of a much larger context. There’s no denying that the “energy indifferent” segment may be less likely to have engaged with new technologies, but this isn’t an “end-all”.

Marketing messaging and engagement should be attuned to the communication preferences of each segment, and this can be given some definition.

Meeting the Millennials: Interestingly, Millennials, aged 19 to 37, are not the most digitally-engaged audience – with just over 80% of the US market engaging with digital communications, slightly more than Baby Boomers, and interestingly just slightly below that of Gen-Xers. Telephone-use is also lower in this category than Gen-X, at just 45%, but this market also favours in-person contact the most, with close to 30%
of this market indicating it as the preferred method of engagement.

Gen-X pips the rest: This segment, aged between 38 and 54, is the most digitally-engaged generation – with more than 80% of the market using digital and telephonic communications. In-person contact is less preferred, though still more popular than with

Baby Boomers, or the Greatest Generation.

Baby Boomers: This generation, aged 55 to 74, is tech-engaged, and the use of digital communications is common, with 75% of this market communicating digitally via home, work, or mobile-based technology.

Telephonic communication also ranks favourably, but in-person contact is less preferred compared to both Millennials and Gen-Xers.

The Greatest Generation (aged 74 and older): Research shows that this is the most difficult generation to engage with – with digital device and telephone use being the lowest of all segments. Whilst approximately 40% of this age-group use digital communication channels, telephonic contact is slightly less-preferred.

This segment is arguably the one most in need of careful attention in the future, as age-related conditions are most likely to lead to a lack of independence and mobility. A trial is currently underway between the UK national healthcare provider, the NHS’ Mersey Care NHS Foundation Trust and Liverpool John Moores University, providing advanced energy use monitoring services to dementia patients.

“This research involves monitoring patients’ wellbeing through electricity usage in their home by identifying the individual devices being used,” Mersey Care NHS Foundation Trust said. “The system works with the householder’s smart meter and will enable automated round-the-clock monitoring to promote safe independent living and preventative care with little cost to the NHS and social services.”

Lauren Jones, an expert in smart energy contracts at Pinsent Masons, one of the top 100 legal law firms worldwide, said the initiative shows potential opportunities for energy suppliers.

“The NHS trial is a great example of how smart metering technology and the data generated by smart meters can be usefully applied beyond simply measuring energy consumption for billing purposes,” Jones said. “This supports the view that wider societal benefits can be obtained from smart meters, in addition to helping individuals reduce their energy consumption.”

It all boils down to the data

The SECC’s research indicates that consumer engagement with a utility is directly related to customer satisfaction, and increases retention and that utilities should engage their customers with service options and value propositions designed for the market segment.

The utility customer experience is shifting – competitiveness is no longer based on branding and pricing, and customer acquisition and retention are increasingly reliant on being agile enough to respond to and predict customer preferences.

Data-driven insights are the future for product development, but by adding detail to customer profiling and careful engagement, those nimble enough are set to thrive in a market where less guesswork and more homework will make the difference. SEI