2013 report by McKinsey & Company states that, “It is becoming clearer that reaching the next level in energy savings will require an improved understanding of consumers’ behavior and better ways of engaging them.” One important way of tackling that problem and improving customer service for utility companies is by segmenting and understanding consumer attitudes about energy efficiency.

Utilities Customers

The McKinsey report, “concluded that messaging to consumers in a way that includes an emotional appeal to the priorities of each of… five segments is a key success factor for increasing the adoption of energy-efficiency programs.”

The report groups consumers according to their response to energy efficiency initiatives, and notes that, “[S]ome energy-efficiency measures such as light- emitting-diode lighting, programmable thermostats, and efficient shower heads have broad appeal,” but that, “the segments vary significantly in their responses to other actions.”

Credit: McKinsey & Company, Using a consumer-segmentation approach to make energy-efficiency gains in the residential market.”

They placed utilities customer experience segments on a continuum based on energy efficiency attitudes and behaviors. They found that more than four out of five of consumers (81%) have some motivation or willingness to participate in energy-saving whether it is environmental concerns (19%), financial concerns (20%), interest in home improvement (25%), or just willingness to make set-it-and-forget-it improvements (17%). Less than one in five (19%), were not yet engaged.

Nor was McKinsey alone in finding that environmental and financial factors motivate customers. Nielsen’s 2014 U.S. Consumer Energy Sentiments Report of about 32,000 respondents, “sampled to be nationally representative,” found that the top incentives to change energy consumption behaviors are cost savings and environmental concerns. Providing these incentives and making that information readily accessible to consumers is one means of improving customer service for utility companies.

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Cost-Focused Consumers

The 2014 Nielsen U.S. Consumer Energy Sentiments report highlighted differences in energy behavior with socio-economic groupings. They found that while energy bills were higher with more affluent respondents, energy costs made up a larger percentage of of lower-income respondents' budgets and that monthly budgeting attention increased as affluence decreased. So:

  • 41% of low-affluence respondents budgeted their monthly energy bills, while
  • 32% of mid-affluence respondents and
  • 24% high-affluence respondents did the same.

It appears that energy efficiency programs should address households at all income levels. Mid- and lower-income households might be more amenable to change (and comprise a larger part of the market), and higher income ones might have more room and ability to make significant differences in their energy usage. This may explain why Nielsen reported that more people reported being motivated by, “personal cost savings than [by] reducing environmental impact.” Nine out of ten were, “willing to change [their] energy usage behavior to save money on [their] energy costs,” and over two thirds were, “willing to live with some discomfort to save money on [their] energy costs.”

This difference in budgeting and financial motivation suggests that, communication about cost is probably more important for mid- to lower-income groups, and that higher-income ones may prove to be responsive to one or more of the other motivators noted by McKinsey in 2013:

  • environmental concerns
  • investing in home improvements
  • new technology — which had appeal across several McKinsey segments.

The Environmentally-Minded Consumer

Environmentally-minded consumers want to develop a collaborative relationship with utilities in order to reduce their energy costs and be more green. With smart home devices and new applications, collecting consumer data and partnering to produce timely, informative information has never been easier.

According to the Nielsen U.S. Consumer Energy Sentiments report mentioned above, “72% of consumers believe they have control over the amount of energy they use in their homes,” and 77% were, “willing to change [their] energy usage behavior due to environmental concerns.” Nor was this just talk devoid of any intent to act: “78% [had] made [an] effort to reduce energy usage in the past year.” A majority were even willing to pay more (59%) for something and to put up with some discomfort (57%) for environmental reasons.

Utilities can enhance their customer relationship management by providing personalized energy data and energy-saving tips, and even simple communications from a utility about its environmental practices could help to strengthen the customer relationship. Improving customer service for utility companies helps to solidify this critical relationship going forward.

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Home-Focused Energy-Savers

Utilities Customer ExperienceAccording to the 2013 McKinsey report, this, “group primarily seeks home improvement, which can include a technological and cost-saving dimension; [it] can clearly link to more efficient use of energy.” Utilities may have the easiest time targeting part of this segment of any since it includes new home buyers who will reach out to them to set up service.

The rest of the home-focused group may be harder to reach. One method of reaching these customers would include digital marketing initiatives that link customers in this category directly to online tools and available utility programs. For instance, utilities could use locally targeted advertising with search terms for homes and appliances that shows users relevant utility programs like appliance rebates available to them.

However, search advertising can be expensive, and because search terms for which the ads will show are auctioned off, a small municipal utility could find itself competing against major appliance makers and retailers to get information in front of people who are already customers. Under these circumstances, messaging that can reach customers before they start searching for a new appliance would be ideal.

As we discuss more below, smart homes will become the expected norm, and homeowners who want to increase their home value are motivated to invest in smart home technologies. As home buyers become more comfortable with technology, either because they grew up with it or because they adopted it later in life, smart home technologies look like an investment that could increase the marketability of a home.

Non-Green Selective Energy Savers

Convenience drives this market segment. “Members of [this] segment… are happy to save energy as long as they don’t have to think about it (in other words, capturing savings through ‘set and forget’ actions),” the McKinsey report said. This offers utilities that can help install and configure energy-saving devices, or at least offer devices and clear instructions for installation and setup, a chance to operate more efficiently and to delight the group of customers that might otherwise be less inclined to give them a second thought. It may take more than a message or an ad to get this group on board. Where it is cost-effective, assistance or easy-to-follow directions pushed to a phone or tablet may do a lot to get them to make simple, one-time changes — especially where the communications in the utilities customer experience make it clear and simple.

Disengaged Energy Wasters

This group, it seems, is just not yet thinking about energy efficiency. They are less concerned about saving money; environment concerns are not something they connect with their utility consumption, and they do not seem particularly interested in new technologies. This group may only be reachable with mandatory upgrades like smart meters that are required and done for them.

It is easy to think of this group as opposed to energy, water, or gas efficiency, but many may simply be preoccupied with other matters. People are not static, and as financial, environmental, technological, and home-improvement motivations change, it seems probable that at least some will move into a different segment.

Addressing multiple groups with a single program

Personalization is the watchword for utility programs going forward, but some programs could strategically address multiple segments while requiring only some tweaks in communication.

For example, green, cost-focused and home-improvement focused consumers are all interested in new technologies. And even the least engaged groups: non-green, selective savers and at least some of the disengaged wasters might appreciate programs that take next to no effort or expense on their part. A thermostat that allows demand response adjustments by their utility, if the utility installs and configures it, would be an example.

Many of those with real antipathy toward such programs are likely changing their minds about the utilities customer experience as more and more information becomes available, their situations change, or they begin to age out of the utility consumer base.

The Digital Consumer

Improving Customer Service for Utility CompaniesOne trait that runs across multiple segments is customer interest in new technologies. According to the 2013 McKinsey report most segments are interested in new technologies. Technology is a meaningful opportunity for utilities to delight customers.

Industries seem to enjoy increases in customer satisfaction along with increases in digital consumer engagement — even industries starting with below-average customer satisfaction, such as retail banking. Utilities, therefore, need to replace static websites and inefficient customer service call centers with real-time, interactive communication streams. By doing so, they can change their relationship with customers to provide superior service and create loyal, happy customers. One way they may do this is by eliminating one drain on customer satisfaction: remember those staff interactions discussed earlier?

With features designed to bring more responsiveness, control and even fun to the utility experience, utilities also have the opportunity to move customers from the less engaged segments to more engaged ones.

For example, many consumers are not even aware if they have a smart meter per the 2014 Nielsen sentiments report, and these last two segments appear to represent many of them. While this says little for smart meters as a customer relationship tool, effective communications seem like the starting point in improving customer service for utility companies and engaging and moving these customers to a new category. It also indicates that some early resistance to smart meters has ebbed significantly.



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