Last time, we covered the three biggest challenges utilities are facing as they transition to what I’ve dubbed the energy management ecosystem: a Home Area Network that makes energy management easy and accessible to consumers via online sites and mobile apps, while enabling home appliances, lights and cars to use the right amount of energy when it’s the cheapest. This strategy will empower consumers for a new era of energy efficiency. But we’re a long way from this utopia.
The first challenge we must overcome is creating effective marketing efforts that drive action and engagement over time. Utilities, and vendors helping utilities with energy efficiency programs, need to cultivate a greater understanding of the cost of finding customers to participate in energy efficiency programs, how different marketing tactics compare to each other across different programs and consumer segments, and the lifetime savings value to a customer. These basic tactics are the key to more effectively marketing to consumers and increasing engagement and adoption.
The big question is: what do we currently know about customers and how they like to engage, and how can utilities leverage that knowledge to build successful energy efficiency programs? There are three important insights utilities need to know:
1. Utilities across the US have conducted exhaustive customer segmentation research and the results are all similar: customers do not want to be wasteful and they have a growing interest and concern about energy prices, economic stress and climate change. That said, as the former VP of marketing and energy efficiency at Duke Energy, I saw the results of a lot of this customer research and it was clear that most residential and commercial customers are not interested in energy efficiency programs. Many customers are very busy and the last thing they want is to make energy top of mind and put another item on their “to do list”. They want easy solutions that do not compromise their lifestyle and require minimal investment of time and money with a quick return. Research has also shown that consumers are confused by all the options in the market and are looking for a single source of information for everything related to their energy consumption.
2. Utilities need to have a firm grasp on their customer segmentation and behaviors to be able to differentiate their marketing and services. This may come across as counter-intuitive to most utilities that are required by regulation to provide all customers within a given class of service access to the same services. This is often misinterpreted as utilities must treat all customers the same. Utilities must recognize the customer differences in order to effectively serve them. If all customers are treated the same, then by definition the utility is under serving and over serving most customers. In order for utilities to successfully segment customers, they need to ask questions like: How likely are utility customers to adopt new technology or products? How motivated are they to make behavioral changes? What percentage will respond to small savings opportunities? Understanding customer segmentation is critical for understanding how, when and where to contact customers.
3. Customers demand personalization. Homeowners typically don’t focus on energy during their daily lives, so they need specific recommendations on which they can take action. Here is a simple budget bill example for a cost conscience segment. A generic marketing campaign promoting budget billing gets little response, but a personalized promotion that has the customer’s budget bill quote included so they compare it to their current bill and make an immediate decision gets a much better response. Utilities need to close the gap between energy information and energy efficiency action, and providing the next level of personalized solutions is part of the answer.
What do these three insights mean for effective marketing? It breaks down into three simple steps: customer segmentation, program testing and cross-promotion.
Step one: Understand your customers’ propensity to adopt. By correlating program participation with demographic, home and customer usage variables, utilities can determine which type of customers are more prone to sign up for which programs. Most utilities use some high-level usage characteristics to identify people they would like to participate to maximize savings per customer; however, this needs to be turned on its head. Starting with the customer and identifying those who are most likely to sign up, then identifying the savings potential to each of them allows a utility to maximize savings more effectively and lower the cost of marketing/outreach for each participant. Different vendors offer some version of this analysis as a service. However, if a utility does gain insights into higher propensity to adopt customers, it is rarely put into practice.
Step two: To effectively utilize the segmentation, a utility should then test and collect data through multiple communication channels to confirm their targeting hypothesis and refine. AB testing is becoming more common in utility programs, as is digital communication; however, we still have a long way to go to get on par with other industries. Testing different messages and offers to customer segments provides the most valuable information a utility can obtain when trying to figure out how best to get customers to adopt energy efficiency. To help, there are ways to manage all the different communication channels and determine which efforts are most effective. Other industries have used customer relationship management (CRM) and marketing automation tools for decades, and there are reasonably priced solutions that can fit the needs of efficiency programs. Some solutions even offer a CRM solution for a particular program type.
Step three: Leverage test results across efficiency programs and begin estimating lifetime savings value. Participants in one program are the best bet for finding participants for other programs. Cross-promoting programs dependent on an individual’s needs helps demystify energy efficiency for customers and increases the probability of adoption. As more repeat participation occurs, utilities are then in the position to begin estimating a lifetime savings value of customers, recognizing that while understanding the propensity to adopt a program is good, understanding all the different programs a customer is likely to adopt, and the savings associated is even better.
To get started down the smart grid path, increasing our sophistication with existing program data and how we use it to perform our marketing and outreach is a terrific first step. Taking the steps above puts us in a position as an industry to take advantage of more sophisticated technology and data analytics as they become available.
For example, utility customers – whether residential or commercial – are not going to make energy top of mind, and automated solutions will be the breakthrough for optimizing energy use and eliminating waste. An automated solution makes efficient energy usage easy and only presents exceptions for a decision to help personalize a customer’s environment. Customers must have choice and always be in control of their environment with a very simple application from their perspective.
Next month, I’ll be diving deep into how we give customers more control of their energy consumption: providing accurate and personalized recommendations.
The opinions expressed in this article are solely those of the author Ted Schultz, Senior Vice President of Strategy and Innovation at Ecova. Ted leads the Ecova Utility Solutions team in strategic business development, cultivating innovative, end-to-end products and solutions for utilities to better serve their customers.