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Alyssa Farrell, product marketing manager, energy and sustainability at SAS
Today, the energy market is more condensed and competitive than ever before. Under imposing regulation, suppliers are fighting for prime position to get ahead. With a snap General Election added to the mix and most political parties calling for reform, the pressures to provide cheaper and more competitive tariffs are heightened. In this relentless climate, suppliers have no option but to reassess their business models.
In February of this year, UK regulator Ofgem announced that customers switching providers was at the highest rate in six years, with many increasingly shopping around for the best deal and savings. However, the regulator revealed that suppliers were still not doing enough for about two-thirds of the market when it comes to value for money.
As ever, the energy battleground remains on price. Tomorrow though will be about how these firms can engage with younger consumers, who are increasingly expecting a more personalised service. As we see an uptake in connected technology in the internet of things (IoT) era, it’s not just a case of knowing a customer’s likes and dislikes, but understanding and predicting their future needs and preferences. Only those suppliers that adapt to provide these personal experiences will thrive, leaving others behind.
Fuelling 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. Experts say the sector is set to experience substantial growth in the adoption of big data and IoT as the industry opts for intelligent assets, smart meters and appliances that drive business efficiency. Indeed, big data and the IoT will 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 of energy companies surveyed have adopted big data analytics. By 2020, this is expected to rise to 80 per cent. This data explosion provides opportunities for electric, gas and water suppliers. Already, companies are embracing technologies such as data analytics, which will unearth customer insights and help suppliers drive a more 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 energy 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 programs, 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 can 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, energy providers 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. Analysing this data will help households take energy-saving measures with short and long term financial gains. Maybe you can even forecast the impact on your quarterly energy bill by taking advantage of an offer, via an app on your smartphone.
Giving back power
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.