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The Utility Transformation Opportunity for Business Customers

Erik  Mazmanian's picture
Vice President of Market Development and Partnerships FirstFuel Software

Austin Whitman is director of regulatory affairs at FirstFuel Software, where he helps clients use technology to meet strategic and regulatory needs, and advocates for smart energy policy. He has...

  • Member since 2017
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  • Nov 2, 2017

Utilities spent a century perfecting the science of delivering safe, affordable and reliable energy service. The rapidly changing energy ecosystem has now made “customer centricity” the must-have core competency.

“The Focus on the Customer” has dominated industry thought leader agendas for a while, but the proof lies in the investment patterns of energy providers. In recent years, a much greater percentage of utilities have launched customer transformation programs as a means to adopt new engagement models. Notably, they are taking cues from service organizations outside the energy industry.

As utilities embrace customer centricity, two noticeable trends have emerged. One trend is digital. Energy providers continue to digitize core aspects of customer service and operations, from web self-service and mobile to call centers and other support functions. The other trend is one I call “residential first,” where utilities have prioritized the energy consumer at home in an effort to reach scale through standardization, automation and repeatability.

The first trend, digital, is both understandable and necessary, but must be done carefully as industry leader Accenture convincingly argues in their most recent Accenture New Energy Consumer 2017 study, titled New Paths to Operating Agility. The second trend, residential first, may be leaving opportunity on the table.

From an economic or value-driven argument, the business customer segment offers a significant – and often overlooked – value as part of utility customer transformation initiatives. The small and medium business (SMB), and commercial and industrial segments offer tremendous revenue generation and cost reduction opportunities. More specifically, business customers:

  • Comprise 60-70 percent of energy load and commodity revenue in most service territories
  • Provide anywhere from 2x to 20x greater impact per customer on key utility revenue objectives such as cross-sell and retention, and as compared to the residential market
  • Represent approximately 60 percent of new product and service budgets, in aggregate
  • Cost 1.5x to 2.0x more to serve per customer compared to residential consumers

With that perspective, where are the “business-first” transformation programs? One answer may lie in the inherent complexities of achieving broad-based engagement of this segment at scale. Utility business customers are more difficult to segment, as each customer has large variations in size. Even the energy users themselves vary in role, responsibility, sophistication and so on.

However, new technologies and tools are helping utilities see past the complexities (glass half-empty) and grasp the potential opportunity (glass half-full). The most notable examples include providers focused on tackling both residential and business sectors in a single program, which mixes common investment themes (e.g., CRM) with bespoke industry-specific variations (e.g., channel mix to engage customers).

In today’s changing energy landscape, business customers represent the key to entering new markets, cultivating strategic relationships and realizing greater operational value. Leading providers are prioritizing business customer transformation as a critical component of their strategy pivot to next generation energy providers. At this point, the stakes are too high and the opportunity is too large to ignore.

This post follows a series on Business Customer Transformation insights and considerations

Erik  Mazmanian's picture
Thank Erik for the Post!
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