How energy suppliers can stand out in today’s evolving marketplace
According to a recent report published by consulting company Arthur D. Little, energy retail profitability is at its lowest in years, while customer-churn levels and new-entrant numbers are at their highest. Traditional energy suppliers are facing competition from new, disruptive players across the energy value chain, fueled by the need for consumer personalization, data and insights, decentralization, and emerging technologies.
Coupled with the European Commission’s (EC) recent communication encouraging its member states to promote consumers’ rights to switch energy suppliers, utility companies that want to retain their customers need to adapt to the fast-evolving energy market.
As Arthur D. Little’s report highlights, in some EU markets, household switching rates for electricity are at 10 – 20%. Switching rates for commercial consumers is also increasing. In Italy, for example, the switching rate for non-residential electricity customers increased from 12 to 17% between 2010 and 2018. In the UK, renegotiated electricity contracts increased from 70 to 73% between 2015 and 2018 and from 70 to 76% for gas contracts.
This increase in switching rates marks the beginning of consumers’ desires to be in control of their energy consumption. They want more control over what energy they’re using, where their energy comes from, and how much they’re paying.
Let’s take a closer look at how energy suppliers can stand out in today’s evolving marketplace:
Delivering exceptional customer experience
In today’s interconnected world, consumers across all industries expect near-instant communication with brands, and the energy sector is no different. Consumers have high service expectations and expect a positive experience to be built-in to their communications with companies.
In the energy sector, customer service standards offered by other utility companies are no longer the benchmark. The bar has been set by companies across a wide range of customer-facing industries like retail, fitness, and banking.
With the rise in popularity of energy comparison websites, consumers can easily find better energy deals online, faster and easier than ever before. Nowadays, switching energy suppliers doesn’t even require consumers to contact suppliers directly – everything can be arranged at the click of a button.
Energy providers that don’t have customer experience at the top of their agenda will lose out to new players in the market, who are bringing with them, high standards from other industries. According to Statista, 232 electricity suppliers are operating in Spain alone, followed by 146 in Poland, and 99 in Norway.
In the coming years, successful energy companies will be those with a strong focus on customer service and personalization, using data to provide consumers with clarity, convenience, and speed.
Essentially, the way that consumers interact with energy companies has changed. Even as far back as 2014, Accenture’s New Energy Consumer report revealed that 41% of millennials interact most frequently with their energy supplier using social media. In today’s digitized landscape, few consumers tolerate long waiting times for energy supplier call centers. Providers need to provide fast communication channels through social media, live chats, and instant messaging.
Providing consumers with energy insights based on hard data
As more energy providers seek to connect with consumers on a personal level, providing insights based on data will become an essential practice. Not only does data allow for personalized service experiences, but it enables suppliers to add value through active customer engagement.
According to energy researchers Delta-EE, by 2020, more than 70% of energy providers in Europe allowed consumers to track their energy consumption from a mobile app. Enabling consumers to self-serve in this way can help energy companies reduce their cost-to-serve, improving profitability.
Energy suppliers may not have the same amount of data as other industries like retail, but a lot can be done with existing datasets. Combining personal information like age and location with behavioral information like energy consumption, contact history, can provide suppliers with detailed customer profiles. This information can be used to predict churn rates and provide consumers with offers at the right time, to encourage loyalty.
Customer debt is also an important criteria, in this case, this information can be used to identify customers that the company does not want to offer or to whom it is better not to build loyalty.
For example, at triPica, we’ve been working with a German energy company, Enercity for the last 3 years, building a completely new digital sales platform. We helped them achieve their goal of having the most comfortable digital sales capabilities in comparison with their competition. We reduced their cost-to-acquire by 50%, reduced their churn rate by 67%, and reduced their cost-to-serve by 60%.
Decentralizing energy supplies
According to KPMG, in 2010, 15% of electricity generation in Europe came from decentralized supplies. By 2030, this percentage will increase to 39%. Energy consumers nowadays are more environmentally-aware than ever before.
As such, the market for decentralized energy is growing. Energy companies that strategically position themselves in this market will have a competitive advantage in the coming years.
Not only is decentralized energy kinder to the environment, but it also provides a more efficient and resilient energy network, that can be more affordable with more competition and provide consumers with more control over their energy consumption.
As an increasing number of consumers seek to disconnect themselves from rising energy prices, many are turning to their own decentralized generating plants, making use of renewables like solar PV, and heat pumps. As a result, these customers are able to access the benefits of continued supply, enhanced resilience, reduced costs, and even revenue generation.
Supporting the energy grid as a consumer in this way is known as a demand-side response. When the grid is unable to meet the demand for energy, consumers can cut their energy use and sell their reduced consumption back to the grid.
According to Centrica, the global demand for demand-side response is expected to reach € 7 billion by 2025. Undoubtedly, there’s a growing trend in the energy market of customers seeking their supply from one source that can handle the planning, delivery, and operation of all energy services.
Accordingly, many large energy suppliers are evolving their business model to offer customers personalized energy services. Centrica, for example, offers energy, home services, and smart home solutions in the residential sector. After having acquired several smaller companies, the organization is able to handle the logistics of decentralized energy on the behalf of consumers.
Embracing the latest technology
The principal driving force behind the global energy transition is technology. This new wave of emerging tech presents energy suppliers with the opportunity to be early adopters in the shift from traditional fossil fuels to renewable energy sources and to stand out in the marketplace.
Artificial Intelligence (AI), for example, is being used in the sector to coordinate the generation, transmission, and use of energy. It can help utility companies identify patterns in data and develop insights that can improve system performance over the long term. The technology is already being used to drive measurable improvements in areas such as grid operations and optimization, renewable energy forecasting, and demand-side management.
Blockchain is another emerging technology that’s being used to provide consumers with more control over their energy sources. In its simplest form, a blockchain is a public ledger that records transactions. It has the capability to make transactions faster and cut costs by eliminating the need for traditional intermediaries.
The technology can be used in a number of ways, including to provide consumers with real-time updates of their energy usage. According to Ernst & Young, over 100 blockchain use cases have been identified in the energy sector, including microgrids, solar systems, e-mobility, and electric vehicle charging.
One technology that will play a key role in the evolution of the energy sector in the immediate future is the Internet of Things (IoT). By enabling the wireless connectivity of any internet-enabled device, IoT can be used in the context of ‘smart’ technology in the energy sector. According to IOT Analytics, there will be 27 billion IoT devices by the end of 2025, which presents many opportunities for suppliers looking to develop new products and deliver a personalized consumer experience.
IoT also presents energy companies with the opportunity to be involved in the electric vehicle market. Connected ‘smart’ vehicles are already on our roads with Level 3 autonomous vehiclesexpected to be in circulation in the near future. According to the European Environment Agency (EEA), the uptake of electric cars in Europe significantly increased in 2020. Electric car registrations for the year were close to 1,325,000 units, up from 550,000 units in 2019.
The growth in the number of connected devices in recent years highlights the potential for energy suppliers to provide consumers with unique insights into their energy use and to partner with companies and service providers outside the traditional utilities sector.
How triPica can help energy suppliers stand out in today’s marketplace
At triPica, we help energy suppliers reinvent their business model through our customer-centric SaaS platform. It’s the perfect option for utility companies that are looking to differentiate themselves by offering a better customer experience while reducing costs.
As the only cloud-native “grid-to-cash” software on the market, triPica enables energy suppliers to:
• Reduce operational costs with fully automated market communication with the DSO grid
• Reduce the cost-to-serve thanks to a powerful agent tool and front-end SDK
• Leverage smart meters to handle dynamic pricing thanks to our real-time micro-service architected platform
• Manage bad debt with an advanced dunning process and scoring KPIs
Find out more about how triPica can help your company be more customer-centric with our ERP platform technology.
triPica, a rewarded innovation leader, enables our service providers worldwide in the Telco and the Utility industries to launch their digital strategy with the agility of a startup. Benefiting from our digital and secure SaaS BSS solution - from self-care online subscription to product and customer management - the customers are able to give autonomy and transparency to their users that the market today demands. triPica was established in 2016 and today serves customers globally in the Telecom and the Utility industries.