(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit...
The Case for Customer Centricity
Understanding consumer preferences in energy efficiency.
have on their ecological footprints and on their ability to manage the bill); “Not Able” ( i.e., those who can’t participate in energy efficiency and conservation programs because of their socioeconomic circumstances); and “Not Willing” ( i.e., those who consider such programs inconvenient or unnecessary). Each consumer type presents a distinct barrier, and energy providers must develop different strategies for overcoming each barrier.
Yet, one requirement crosses all three consumer types—the need to change consumer behavior to make energy efficiency and conservation a mainstay in people’s everyday lives. Effecting such major change requires energy providers to evolve their strategy in two core areas: business processes and customer relationships.
The authors’ research suggests that 40 to 60 percent of core meter-to-cash processes will need to be changed or redesigned with the introduction of a full suite of smart metering and supporting consumer-centric energy efficiency and conservation programs. Furthermore, many policies and programs related to current rates and products—including budget billing, equalized payment plans, low-income programs, economic development initiatives, and credit procedures—will change as providers deploy smart meters and related energy efficiency and conservation programs.
Meanwhile, providers must redefine their relationships with customers, addressing key questions around how to encourage consumer adoption and uptake of energy efficiency and conservation programs at the lowest cost-to-adoption—while running operations at the lowest cost-to-serve. Energy providers should focus on three critical areas: knowing consumers, reaching consumers, and delivering a new consumer experience (see Figure 1) .
In the Accenture survey, only 42 percent of respondents recognized the damaging consequences of their own electricity consumption. By contrast, 85 percent acknowledged the negative repercussions of their petroleum usage. The implication is that consumers don’t seem to link their electricity usage to the upstream production required to fulfill demand—even though residential consumers are critical enablers, or inhibitors, of success in energy efficiency and conservation.
The industry has much work to do around educating and motivating consumers, but is only beginning to understand the new energy consumer. Unfortunately, traditional segmentation schemes based on risk, service, and customer lifetime value don’t identify propensity to increase efficiency and conservation. In the smart world, consumers fall into segments and microsegments based on nontraditional criteria. Thus, energy providers need to tap into the power of customer analytics to get to know their customers in a different—and deeper—way than in the past.
Such segmentation should address consumers’ needs, values, and behaviors, and research suggests that those criteria may not be intuitive. For instance, when deciding to adopt an electricity conservation program, consumers placed an average weighting of 17 percent on environmental impact. Interestingly, they assigned a weighting of 38 percent to the impact of electricity bill and nearly as much emphasis ( i.e., 37 percent) to the level of utility control through such mechanisms as demand response. In building a core competence in consumer centricity, providers need to develop and apply this type of consumer insight (see Figure 2) .
What is the best channel for helping customers learn about, sign up for, and receive support on energy efficiency and conservation programs? The answer