Customer-centric strategies can increase value for both providers and customers
In most industries, putting customers first is a near-religious pursuit. In the energy sector, though, things have been more complicated. Many energy providers, such as regulated utilities, haven’t operated in competitive markets. That’s made the fulfillment of customer needs — beyond keeping the lights on and sending an accurate monthly bill — less of a priority.
But times are changing fast.
Consumers today expect Amazon-like experiences from the companies they do business with. That includes their energy providers. Consumers want more information, easier access, and greater agency. They’re pushing for decarbonization, and want more sustainable power options. In both regulated and deregulated markets, they want to be able to choose companies that understand their needs and deliver tailored solutions.
And increasingly, they have more market power, whether it’s to produce and sell their own energy or to choose new entrants that are disrupting the industry through digital technologies.
Turning customer data into actionable insights
To accelerate energy suppliers’ transformation into this more competitive future, we need a new approach.
Fortunately, there is a solution. The advent of Advanced Metering Infrastructure (AMI) has produced an influx of readily available customer data. Machine learning and artificial intelligence (AI) tools are helping energy suppliers of all categories turn that customer and demand data into clearer and more actionable insights into their customers’ needs. Customer segmentation and disaggregation is possible down to the meter level, giving energy providers the ability to adopt truly customer-centric strategies that allow them to optimize and expand services, increase value for customers — and increase their own margins and revenue streams along the way.
At Innowatts, we have seen firsthand how AI and machine learning maximize data insights. Our technologies can reduce forecasting MAPE (Mean Absolute Percent Error) by between 20 percent and 40 percent. Such improvements lead directly to lower energy purchasing and hedging costs, which mean savings for customers and better operating margins for providers.
The benefits of better analytics go beyond load forecasting. Providers that embrace AI analytics gain insights into what’s driving specific customer consumption patterns, transforming not just energy delivery but also targeted sales strategies, product development, customer service and outreach. With carbon footprint reduction being at the center stage, customer-centric analytics can also be used to identify clean energy solutions, promote greater sustainability, and drive the long-term transformation of the energy sector.
Intelligent pricing, smarter products
With deeper insights into customer behavior, you can improve people’s lives with products and programs that meet or exceed their needs — even delight them. Prices can be reconfigured more fluidly and responsively and matched with customer communications that eliminate surprises when the bill arrives. Consumption patterns can also be shared across the provider’s organization to drive smarter customer acquisition and retention.
The results of such efforts can be eye-opening. At Innowatts, we’ve seen smart engagement technologies help providers reduce operating costs by $10 per meter per year, increasing the lifetime value of customers while reducing customer churn by 25 percent. Our clients have also found that smarter product management, including product suitability analysis and customer-focused product design, yields an average of $500,000 in additional revenue per season.
Smarter pricing management also enables more intelligent customer service, ensuring customers get the right services at the right price. In one instance, we saw intelligent pricing reduce prices for 75 percent of a municipal utility’s ratepayers, while gross margins remained entirely unchanged. Clearly, that’s a win for everyone, with happier customers paying lower prices, and providers making more money along the way.
Customer-centric strategies produce results
What does a customer-centric strategy look like in practice? The answer differs for every provider. It depends on the specific needs of their unique blend of customers. For Direct Energy, a retailer of energy and energy services with more than four million customers in North America, customer-centric product development is opening the door to smarter sales strategies, connecting individual customers with services that match their specific lifestyles and usage patterns.
Direct Energy’s customers can opt into alerts that prompt them to switch to better-suited plans or get automatic notices when consumption patterns indicate that it’s time to get their HVAC systems serviced. “Our customers’ energy demand is continuously evolving due to weather and their unique residential environment,” says Bruce Stewart, president of Direct Energy. “We’re able to help our customers stay ahead of the curve by providing them with creative, reliable and cost-effective services –– and most importantly, peace of mind.”
In South America, meanwhile, Colombian utility Celsia is leveraging AI-powered load forecasts to proactively engage customers in real-time, ahead of periods of high usage, limited bandwidth or extreme weather conditions. “That lets us serve our customers better, and helps us make smarter decisions around customer engagement and strategic growth,” says Juan Alzate, Celsia’s chief innovation officer.
Data analytics drive the energy transformation
As global energy markets grow more competitive, new technologies and entrants disrupt the status quo, and consumers and regulators grow more service- and price-conscious, companies that get this right will be more likely to succeed and stay profitable. Crucially, they’ll also be better equipped to deliver the kind of transformative innovation needed to build the sustainable and resilient energy systems of tomorrow.
The time when energy companies can view their customers as a faceless class of ratepayers is long gone. It’s time to get customer-centric. The customer data is there. Fully leveraging the power of that data makes all the difference.