Energy suppliers are fighting for prime position in the domestic energy supply market. Disillusioned customers, increased competition due to a flood of new entrants and tighter regulations are forcing suppliers to reassess their business models. According to UK regulator Ofgem, there were 3.8 million account switches in the first six months of the year. Today, the battleground is price. Tomorrow, it will be how energy suppliers can engage with younger consumers expecting a more personalised service. It’s not just a case of knowing their likes and dislikes, but predicting their future needs and preferences.
Engaging the ‘Data Generation’
What’s certain is that it’s going to be difficult to “wow” the next generation of energy users. These digital natives are highly selective about who they share their personal information with. Recent research we carried out with the Future Foundation into Gen Y (those aged 16-34 in the UK) shows that nearly half don’t feel comfortable sharing their data with energy suppliers. Only 18 per cent trust their provider to find them the best deal available. Despite this weariness, the findings show that this emerging generation recognise that insights from the data they share can be used to enhance their lives and wider society.
And the energy sector is sitting on a data goldmine. It has been forecasted that the sector is set to experience substantial growth in the adoption of big data and internet of things (IoT) as the industry opts for intelligent assets, smart meters and appliances that drive business efficiency. Big data and the IoT is forecast to deliver a £15.6 billion boost to the UK energy sector over the next five years, according to research carried out by the Centre for Economics and Business Research. At present, 67 per cent have adopted big data analytics. By 2020, this number is expected to rise to 80 per cent. This data explosion provides opportunities for electric, gas and water suppliers. There is a growing emphasis to embrace technologies such as data analytics which will unearth customer insights and help suppliers drive a more personalised service.
Delivering a hyper personalised service
With initiatives such as the smart meter rollout - where 53 million meters are set to be installed in over 30 million premises over the next four years - the sector is on the cusp of a data explosion.
Many regulators have insisted that smart meters are critical to achieving national energy efficiency goals. In reality, while smart meters give suppliers the opportunity to establish peak pricing programmes, changing customer behaviour is proving to be extremely difficult. Energy suppliers can use insights from meter data to better understand customer preferences and behaviour – an important first step. This could include, for example, the types of appliances they use and their peak usage times throughout the day. The more holistic a view the supplier has about its customers – including usage, payment information, communication preferences – the better it is able to manage each customer relationship.
Personalisation based on holistic understanding of customer data presents a unique opportunity for suppliers to improve customer engagement and revenue generation. All they require is the expertise and tools to be able to extract valuable insights from the repository of data they have at their disposal. Suppliers can then leverage data to take customers on a personal journey crafted specifically for individual households. By having more insight into their energy usage, they can highlight efficiency savings as well as enticing them with rewards to change their behaviour. For example, it will be possible to provide insights about the efficiency of major appliances and lighting in the home just by analysing changes in electric current. The analysis of this data will enable households to take energy-saving measures with short and long term financial gains. Maybe you can even forecast the impact on your quarterly energy bill of taking advantage of an offer, via an app on your smartphone.
Putting the customer back in control
The next generation of energy users are demanding more control, clarity and hyper- personalisation. They expect their provider to be proactive and engage with them on a personal level. Using analytics they can help itemise what is contributing to bills and identify key areas where savings can be made, as well as providing relevant and personal advice about managing energy use. This builds trust with the customer and can directly impact retention rates.
The suppliers that thrive in this new data paradigm will be those that have a detailed understanding of their customers. Winning the hearts of customers today, means predicting their needs tomorrow. The suppliers that are able to do so will become more than just a household supplier. They can transition into lifestyle partners and trusted energy advisors that help consumers to more effectively manage their home.