Disrupt or be disrupted

Energy Source and Distribution talks with Ann Burns from international management consulting company Accenture to discuss the results of The New Energy Consumer; a report detailing the unprecedented uptake of digital communication and a distinct consumer preference for clear, functional and valuable interaction with the energy industry.

For years, energy consumers have only engaged with utilities and retailers out of necessity – when they move house, when a bill is due or when there is a problem. Rapidly evolving technologies, however, along with an increasing need to conserve energy, has led to a new type of energy consumer.

It’s the needs and wants of this value-orientated consumer that Accenture has worked to re-define in The New Energy Consumer. Several aspects of the data from the last 12 months have surprised analysts, with managing director and Asia Pacific Lead for Accenture’s Utilities Industry Group Ann Burns saying the Australian energy industry has a real opportunity to engage with consumers in a different and meaningful way.

“The pace of change in the utilities market has really accelerated in the last two to three years. We now see a very different retail market place emerging and there are signs of convergence, particularly around the connected home,” Ann says.

“Telecommunications, banking, health, education, entertainment and now energy are all beginning to converge and we are seeing a very clear trend around the adoption of digital channels.”

While analysts within the energy industry have been saying this for some time now, Ann’s comments are far from hearsay. The exceptionally comprehensive report surveyed 40,000 consumers across 21 countries and interviewed around 20 utilities executives to study market trends.

This is the fourth Accenture report exploring energy consumer behaviour in as many years. After scrutinising consumer preferences in energy efficiency and revealing the values of the new energy consumer, the 2013 report focuses on developing actionable insights to address key consumer “dissatisfiers” and the expectations and needs of residential and small-medium business consumers.

The economics of dissatisfaction

Most business people know getting the basics right is essential for growth. However, Ann says executives involved in power supply and distribution may be surprised at just how many consumers want an improved level of interaction with their energy provider.

“We found, on average, customers have only nine minutes a year of interaction with essential services, particularly gas and electricity. If you think of this in the context of today’s consumers, who are connected and social 24 hours a day, seven days a week, it’s quite a stark contrast,” she says.

“What’s more, 70 per cent of interactions are considered negative. This is why the level of trust in essential services has drastically declined in the last four years and now, only around 24 per cent of customers say they have a trusted relationship with their provider.”

Indeed, the report suggests as much as 30 per cent of utilities’ controllable customer operating costs are tied to managing dissatisfies across customer operation.

For Ann, focusing on the economics of dissatisfaction would go a long way to enhancing consumer interaction with energy providers, which in return, would lead to customer retention and profitable growth.

“This is where we looked at the ‘less is more’ ideology. Industry wide, the simplest and lowest-cost energy providers often have the highest customer satisfaction and loyalty,” Ann says.

“Consumers really are influenced by the perception of bill accuracy, price volatility and first contact ‘one-and-done’ resolution. The layers and layers of complexity we have seen regarding billing, meter reading and so on, has created fractured experiences for consumers and is becoming a bigger and bigger inhibitor to the cost/satisfaction advantage.”

Bridging the digital divide

Consumers are increasingly social, mobile and connected – and they expect the same from their energy providers, according to the report.

In fact, for 70 per cent of all interactions, consumers said they prefer self-service, with half specifically preferring mobile/web interaction above all other channels.

“We certainly weren’t expecting such high preferences for self-service. Traditionally, the interaction breakdown in the essential services is about 30 per cent online with the rest via traditional channels – through call centres, face-to-face and so on. But now the preference has clearly shifted,” Ann says.

With the mainstreaming of smartphones and tablets, this preference for digital goes beyond paperless billing; consumers want mobile interaction with essential services.

“Mobility is displacing traditional desktop web usage across all consumer segments and people are now using their phones, particularly for things like energy usage notifications. We’re also seeing mobile is preferred for online education regarding energy usage, peer comparisons for usage and the ability to control heating and cooling. And this trend is definitely going to pick up in pace,” Ann says.

“What’s more, 30 per cent of consumers want to use social media as their means of communication with energy providers. Social media platforms, including Facebook, Twitter and Google, are now two-way contact channels, especially for information regarding outages and bill alerts.”

Engaging the consumer ecosystem

The report also suggests tailored consumer engagement that extends beyond the bill payer is increasingly important to achieve satisfaction, revenue and conservation objectives.

Interestingly, more than 50 per cent of all energy decisions in the home are influenced by other members of the household, with teenagers and children holding a disproportionate impact on energy use patterns.

“I can see this happening in my own house. I have teenagers and I can tell you 50 per cent of the decisions made around electricity – turning lights off, what Xbox to use and so on – are made by my children,” Ann says.

“The research actually shows 58 per cent of influence on decisions around energy consumption in the home are made by teenagers, with under-12s responsible for about 50 per cent.”

Amongst these dynamics, it should come as no surprise essential services around the world are focusing on the emergence of what Ann calls ‘gamification’ – introducing gaming elements to energy efficiency programs as a way to engage consumers and influence behaviour.

“A number of major companies around the world are doing this very successfully. We’re seeing websites that allow you to play games, keep food diaries and connect with friends – an experiential vent around energy,” Ann says.

“For example, nPower in the UK have done this very smartly. Through nPower Fanpower Stadium initiative, the company has set up a football stadium online where people can follow and discuss the sport via Facebook. In exchange for the enablement of notifications via Facebook, nPower is able to insert their brand into the discussion. This has not only developed a whole new series of ways for nPower to communicate with customers, but it’s also created a new association of nPower and the brand identity.

“In the past, essential services brands have been very traditional, but this is challenging all of that.”

Reinventing the definition of consumer value

The research team quickly discovered consumer needs are no longer what they were 10 or even two years ago. As such, the report recommends the need to reinvent the definition of consumer need in an effort to help energy providers better engage with and satisfy those who pay them.

“Consumers today want simplified products and services – clearer and fairer products and services. Some are interested in saving time, some in saving money and some in saving the environment. Others just want a fair price,” Ann says.

“In addition, around half of those surveyed said they want to be rewarded. Around 60 per cent will stay with their existing provider if they are rewarded, particularly with surprises, and they are happy to change their behaviour for incentives.”

This understanding of loyalty and the expectations that stem from it, has already led to the emergence of reward bundles, particularly in overseas markets. In the US and Europe, a number of high street retailers are forming relationships with energy companies. Even supermarket and homeware chains, such as Sainsbury and Tesco in the UK, and Best Buy and Home Depot in the US, have partnered with energy companies in an effort to attract, reward and retain customers.

“We’re starting to see evidence of cross-industry bundles here in Australia as well, with the hook up between AGL and Coles/Flybuys that is being very well received. While Australia may be a bit behind on the convergence front, we do also have a number of tier-two telecommunications companies, like Dodo, entering the market. It’s going to make for an interesting energy landscape and I would expect we will see a series of additional partnerships emerging in the next short period,” she says.

Extending the value proposition

Rather than proving a roadblock for the industry, Ann says the surprising pace of adoption and preference for digital channels is a real opportunity for utilities and essential services providers to reinvent their proposition.

“It’s a chance for consumers to participate if they are interested in saving time, saving money or even saving the planet,” she says.

“Utilities have a choice; they can disrupt or they can be disrupted. The energy market moves quickly because of its competitive nature and it has the ability to put forward a disruptive proposition.

“Managers can respond now, or wait and see how this emerges and then respond. But at some point, soon, they will have to respond.”