Customer engagement in an era of energy transformation

22 March 2016

That much was true even before the Competition and Markets Authority (CMA) published its long-awaited provisional decision on remedies for the energy market. Whilst the CMA’s recommendations may not be the game-changers many had anticipated, we certainly expect them to further stimulate competition and choice. Rival firms could target millions of bill-payers by using the proposed database of disengaged customers, while the CMA also wants price comparison websites to negotiate more exclusive deals to encourage switching.  In addition, moves are afoot to simplify the switching processes and new business models are emerging to take the hassle out of switching (e.g Flipper).

But not only can consumers choose from more suppliers and shop around to get the lowest price, they are starting to expect a different kind of service in the digital era. As highlighted in our recent publication Customer engagement in an era of energy transformation, domestic customers are seeking greater choice, collaboration and convenience.

From smart appliances and thermostats to lower cost mass and micro-storage solutions, new technology is making it vital to have more regular contact with consumers to build trust. Power utilities must show they are no longer purely commodity suppliers and prove they are able and willing to be active partners in helping consumers lead smarter, more energy efficient lifestyles.

Whilst the intense focus on the industry in recent years has eroded some customer confidence, it has also led many people to become more engaged in their energy choices. Differentiation through innovation in areas like use of digital channels, a focus on helping consumers to reduce consumption, community energy and green tariffs is already proving vital in the competition for this group of consumers.

In the post CMA world, more and more consumers will be targeted by rival suppliers. How such consumers will react remains to be seen but their current suppliers will need new ways to convince them they should stay – either by moving them off a standard variable tariff and/or providing some other form of differentiation.

The connected home could be central to future conversations. In our recent series of blogs on the connected home, we have started to assess the likely response from consumers and the market opportunity, so look out for the forthcoming results of our Energy 2020 survey: the future of energy in your home for a valuable insight into consumer attitudes. Intelligent thermostats like Nest and Hive are already found in many homes and the UK connected home market could be worth an estimated £4.5bn by 2020. Energy retailers are starting to understand that this development represents both an opportunity and a serious threat.

Disruptive new entrants and technology players already see this as an attractive opportunity. Telecoms provider O2, for example, will soon launch a smart-home initiative to give consumers comprehensive remote monitoring and control of their homes and appliances through a single digital hub. Google, Samsung, Sony and Apple have all made moves into connected home solutions.

Responsive tariffs, which enable customers to benefit from peaks and troughs in demand, are likely to have a bigger role in future – and we are starting to see new entrants offer variable time of use tariffs to facilitate demand side management (such as Tempus Energy).

In an era of unprecedented change, we believe there is an opportunity for energy companies to take the lead in addressing changing customer expectations in this new world. Early and clear communication with customers about how they can benefit from connected homes could help energy suppliers position themselves as the first port of call for advice and support – and to start to provide much needed differentiation.

 

Steve Jennings | UK Power & Utilities Leader
Email | 44 (0)20 721 21449

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