In addition to the work that I do at CBD, I sit on the Board of Trustees in a suburb of Chicago. Like dozens of other communities in Illinois, my village passed a municipal electric aggregation referendum in March of 2012. I, along with another Trustee and our Village Manager, was tasked with seeing the aggregation process through on behalf of the village.
When determining what was important to me in aggregation, I understood that savings was a given. What mattered to me was getting the most flexibility for residents and making sure that I was making the right—not the wrong—decision. It’s easy to explain to residents that they are going to save a significant amount of money on their electric bills, but the last thing that any elected official wants to deal with is making a decision that creates issues for residents. I wanted to be confident that residents would get good customer service and that they could opt out without financial penalty at any time.
Other things I would have liked to see that may have helped tip the scales in favor of one provider or another, if everything else was on-par:
- Help with getting the word out about the referendum, as the village was prevented from taking a side on how to vote when informing residents about the ballot initiative for aggregation. This could include:
- Augmenting regular consumer-focused customer acquisition campaign tactics with a “vote yes on aggregation” message.
- Hosting a coffee reception for residents (not Village Board members) to explain what aggregation is and how it benefits residents, encouraging them to vote to pass the referendum.
- Reaching out to local press to discuss the benefits of municipal aggregation and explain what a “yes” vote on the issue means to residents.
Knowing that a company was willing to act as a partner with the village prior to the referendum would have created some goodwill, not to mention positive visibility, for the provider.
After the referendum vote, bidding REPs could have considered:
- Providing concise, yet compelling “why us” narratives to the Village Board. Help the decision-makers understand that there is a qualitative difference between providers.
- In the bid package, offer to send out a mailing explaining why the board made a good decision in selecting the provider (if they are selected).
- Offering more than one plan for residents to choose from. Ideally, I would have liked to have offered residents a default green plan, but also give them the option of a brown plan to opt into—with both plans priced at an attractive, aggregated rate.
Bottom line: There’s opportunity for REPs competing for municipal aggregation contracts to meaningfully differentiate themselves at a time when it’s very likely that bids will be a tenth of a penny per kWh or less apart.
At last week’s DNV KEMA Retail Executive Forum the spotlight was on the customer as the industry works to create new experience strategies and value propositions aimed at competing beyond price.
As smart energy products start to be consumed, the industry concedes that the impact is game changing. Customer conversations, owning and managing more dynamic relationships and developing more relevant products and services are just a few of the opportunities that illustrated the theme of the conference, Sustaining Momentum.
While there wasn’t much disagreement in a discussion among the Big 5 (Reliant, FirstEnergy, TXU, Direct and Constellation), there was diversity in their approaches to harnessing opportunity and achieving success. Bruce Stewart, CMO of Constellation, wants the kind of stickiness with his customers that the financial services industry enjoys through its online banking initiatives. He is keenly aware that we are all “one click from death,” which is how he articulates the ease and speed at which customers can switch.
Being easy to do business with, solving customer problems and delivering different levels of customer care were the key issues being addressed at TXU Energy according to its COO, Scott Hudson. He explained how TXU defines these levels by segmenting customer needs into two categories; those looking for either control or cruise control.
But it was Steven Murray, President, Residential Markets, of Direct Energy, who presented the industry’s biggest opportunity for offering the customer more value and expanding the relationship. “It’s time we owned the bill,” said Murray. “If you don’t own the bill, it’s impossible to offer new services, let alone cross-sell to our customers.”
It remains to be seen whether or not energy providers are ready to make the investment in customer billing systems, but Bruce Stewart did offer the best method for getting started. His advice: just take the leap. Trial is the best way to advance and the only way to get the best customer feedback.
It seems that Direct Energy is taking a little bit of heat this week. The retail energy provider is canvassing door-to-door to attract new customers in Con Edison’s service territory. Unfortunately, an urgent public warning was released by the utility last week…urging the public to be aware of scammers. Three types of scams were described in the utility warning. One was related to fraudulent meter readers. The neighborhood watch must have immediately gone on high alert.
It’s easy for the average citizen to fail to distinguish between a fraudulent meter reader and a salesperson who is asking to see their electric bill. And it’s easy to understand why Direct Energy would utilize door-to-door sales… to manage their cost per acquisition while reaching elusive consumers at a place where they have access to their electric bill.
Perhaps suppliers should test the use of door-to-door efforts as an education channel that drives sales, rather than a closing channel. Of course they’d need to weigh higher cost per acquisition vs. lower cost to reputation.
But retail energy providers should definitely suspend any door-to-door campaigns immediately after a utility scares customers out of their socks with threats of imminent home invasion.
Don’t you wonder, though, if this was just a case of unfortunate timing for Direct Energy, or a shrewd move by Con Edison?
This has been an exciting year for electricity providers in Illinois. Competition to acquire new customers has been fierce. In fact, many providers, having just introduced themselves to consumers, are claiming success. Early on, these wins came through marketing campaigns that drove brand awareness and enticed residential customers to switch via money-saving offers. As we wrap up the year, a new phase has emerged.
Providers are now heavily courting municipalities. Municipal aggregation efforts have significantly gained in importance. An enormous amount of outreach by providers and broker organizations have helped educate communities on how residents would benefit and how village boards might realize a boost to their bottom line along the way.
And while it may have started with a handful of communities, voters in several Northern Illinois municipalities have passed referenda approving the process for aggregation and many more are poised to follow. The deadline to pass a board ordinance to place a referendum on the March 20, 2012 ballot is December 31st, and over 100 townships and districts in Northern Illinois alone are on the membership list of the top-ranking broker organizations specializing in aggregation.
The energy providers competing in this space embrace aggregation opportunities enthusiastically. They view it as a cost-effective avenue to acquire customers and as a way around having to spend money to build a brand and consumer trust. But there are significant perils to that approach. First, it’s a winner take all scenario, and to date, only a small number of providers are winning these bids. That means many energy providers competing for aggregation are coming up empty. Secondly, these efforts put the providers who do not win the bid in a situation where marketing becomes even more critical. That’s because they are faced with the challenge of convincing residents in aggregated communities that they can still switch. But those marketing efforts will require more education, surgical and targeted application, and offers that extend value far beyond price. Differentiation through value proposition development is something the entire industry has yet to focus on, and prefers to ignore. It’s the hard work that has to be addressed and thanks to aggregation the time to tackle it is now.
The wind power industry unveiled its new WindMade™ logo recently, marking a big step toward helping consumers identify products made with this clean-energy source. The move is worth applauding and already has the support of many corporate giants including Microsoft, Ikea and Wal-Mart.
Though it is yet to be determined which products will be the first to carry the new logo, criteria for using the designation requires that at least 25% of the electricity used to create a product must be derived from wind power. Are there products that don’t require electricity in their creation? Perhaps that’s a blog for another day.
For now, everyone involved in the project from the Wind Energy Foundation to the World Wildlife Fund, will have to wait and see what impact on purchase choice and behavior the new mark will have. The degree of persuasiveness will ultimately depend on marketing. If enough effort is put into awareness and education by those brands earning the designation, it stands to reason that sales and ROI will follow.
There are other gains these initial brands should also expect by promoting the mark in their marketing materials. For starters, their sustainability halo will glow considerably brighter, positive PR mentions and placements will thrive and social media mentions will grow exponentially.
Currently, it’s hard to imagine a downside to this new and exciting initiative, unless its not supported by marketing.
Excerpt from the New White Paper… The Customer Imperative: Why the Energy Industry Must Embrace the Customer to Survive
With any drastic market shift, the old ways of doing business can quickly become obsolete. This has never been more evident than in today’s energy sector, particularly in highly competitive markets.
Deregulation in any form means a shift from being focused, often exclusively, on regulators and legislators, to becoming customer-centric. This is a dramatic departure for almost any organization facing deregulation, and has proven particularly difficult for those in the energy industry. Even utilities in regulated markets need to adopt more customer-focused initiatives as consumers are increasingly mindful of alternative power sources and envious of their peers who boast of living off the grid.
Leading change and making the transformation brings with it a degree of difficulty often unprecedented. However, the upside is tremendous. There is significant opportunity in understanding customer needs, attitudes and drivers, and then harnessing this information to create relationships that yield more value and longevity. This is not really a choice. Taking action to adapt these realities is the only viable option, as many companies in other deregulated industries have learned. Any and all energy utilities or providers have to make these changes.
Through information presented here, you’ll learn more about why becoming customer-centric is an imperative and what you need to make your corporate change efforts highly successful. You’ll gain insights from our national research study that reveals exactly what customers today think about their utility provider, and how they compare it to other services that help run their homes and contribute to their lifestyle. You’ll be exposed to new views on energy and how they have a direct correlation to the quality of life of today’s consumer. You’ll learn about the dangers of “received wisdom—” the things that people assume are true, but may not be. You’ll also gain lessons learned from companies in other deregulated industries and in markets that have undergone rapid change. A few were utter failures, but many have thrived and their stories are both relevant and inspiring.
We will show how the energy companies are getting it wrong. The progress of smart meters epitomizes the kinds of mistakes that many are making. From its very name to the lack of communication regarding customer benefits, the industry is failing and turning what should be as great an advancement tool as the DVR was for cable companies into a distrusted negative. We will show how this can be reversed by being sensitive to customer perspectives and how other new technology and services can be successfully used to enhance profitability and loyalty.
Most importantly, you will be armed with the steps you need to take and the tools you can use to build marketing strategies for your organization that will differentiate you, more closely align your products and services with what is relevant in today’s marketplace, and endear you to customers in a way that will continually drive profitable growth.
Colman Brohan Davis is grateful to the experts that contributed to the insights and strategies presented here, starting with Richard Guha, President of Max Brand Equity and former President, Reliant Energy. Richard is a pioneer and the architect of many of these initiatives. From telecom to cable, energy to healthcare, he is unmatched in his understanding of how organizations in industries experiencing discontinuity should go to market.
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008