Prepay Billing Has a Branding Problem

The term “prepay” can carry a negative connotation. Although consumers use prepay for purchases every week (ex: prepaid gift cards, gasoline), in some cases, it has been unfairly tied to the Hollywood depiction of seedy characters using burner cellphones. This reputation makes some consumers reluctant to engage with prepaid energy services.

“In the past, some consumers have viewed Prepay in a negative light, so it could benefit from a rebrand,” said David Elve, Executive Vice President and Chief Marketing Officer at PayGo, a cloud-based, customer engagement and payment software company. “Today, it certainly is an untapped opportunity for most utility marketing departments.”

While traditionally used in association with debt recovery, prepay billing has emerged in recent years as an exceptional tool for decreasing energy consumption while, at the same time, increasing customer satisfaction scores.

“We need to remove the negativity associated with prepay,” said Darren Thraen, VP of Business Development at Questline. “It’s not a payment plan reserved to help low-income customers. It’s a payment option that meets the demands of younger generations and offers consumers more transparency and control.”

With prepay, customers can get alerts as often as they choose with updates about energy use and spending thresholds. They can then either reload their accounts or chose to curb their energy usage.

“Prepay could be seen as a behavioral efficiency program. It’s almost impossible to get the same level of energy reduction from anything else,” explained Jamie Wimberly, CEO of DEFG

For some utilities, tying prepay to efficiency initiatives has proven successful.

“Prepay energy could have an interesting future to help drive energy efficiencies” explains Joe Thomas, Director of Clean Energy Solutions at Duke Energy Corporation. “With prepay, utilities get better engagement on a daily or weekly basis with customers. Which means we can more effectively influence customer energy behaviors through creative tips to more effectively manage their prepaid energy.”

Minnesota Department of Commerce also examined the potential of prepay as an energy efficiency program back in 2018. They found that customers on prepaid electricity plans are likely to use less electricity than they would otherwise. On average, the estimated electricity usage reduction was approximately 9 percent.

“Prepay is very sticky,” continued Elve. “Unlike other energy efficiency programs where you may see high engagement the first three months then a drop-off of activity, prepay customers typically pay more attention to their account while on the program.”

IT’S ALL ABOUT MESSAGING

The unfair stigma that lingers around prepay will take some work to dissolve. Tying it to energy efficiency may or may not be the key to success.

“Utilities need to put a new face on what prepay can really be,” said Thraen. “You prepay for gas and never blink an eye. Different language needs to be used to remove stigmas and paint prepay in a positive light.”

NV Energy, Ameren and Kansas City Board of Public Utilities (BPU) call their prepay programs “FlexPay.” This naming accurately depicts how many customers chose to take advantage of the pay-as-you-go structure, effectively removing the connection to prepay cell phones.

“Although 30% of customers use prepay smart phones, it’s a relatively new program for a lot of customers in the utility market,” said Elve. “So messaging is critical. Utilities must convey the benefits and explain the available options. Honestly, I think Questline would be well positioned to do prepay program branding for a utility.”

To really get prepay programs mainstream, utilities will need to invest in both internal and external marketing efforts. This includes everything from call center staff training to branding initiatives and creation of short explainer videos.

THE FUTURE OF PREPAY

The technology used by providers such as PayGo is tied to AMI and provides hourly readings on energy usage. This allows customer to be alerted about consumption on a real-time basis.

“There’s a lot of opportunity to engage on communications,” said Thomas, referring to the alerts that accompany usage readings.

In an ideal scenario, customers could receive an alert that they only have a few dollars left in their account along with advice on how to curb their energy habits. Offering up timely and helpful content could aid utilities in reaching goals of increased customer engagement, keeping energy top of mind.

“It’s conceivable that we could see a doubling of prepay customers in the next five years,” said Wimberly. “Could be more. The factors of allowing it in the first place plus the addition of more marketing to promote it – we could easily see a doubling or tripling.”

“I’d be hard pressed to believe that in ten years prepay is not a much more common offering for utilities,” said Thomas. “Most all other industries have some sort of prepay solution - and it is a model that customers are familiar with for other products and services.”