You may think Europeans are more sophisticated
than you Americans. Well, it turns out that when it
comes to utility customer psychology, we are pretty
much the same as our cousins in the US of A.
There are some pertinent universal truths for the
utility industry. Customers don't like you. It's
true. They feel powerless against the mighty utility
which almost always holds the whip hand: they decide
the price and customers have to stump up. They feel
they have no real choice about this; it's certainly
true this is an industry whose participants offer,
at base, undifferentiated products. (There are no
premium electrons or value-range CH4 molecules.)
In simple terms, customer behavior in different
nations boils down to the level of energy
liberalization/deregulation, market mechanisms and
how smart are the utilities. In those countries with
state-run command and control energy systems,
customer behavior simply doesn't matter as long as
supply meets demand.
In sub-Saharan Africa or South Asia, rolling
blackouts are often part of everyday life. Most
customers in Europe, however, do not even think
about energy because it is omnipotent and because it
is not expensive enough to really worry about.
In many cases, the command-and-control way of
thinking refuses to die, even in nations quite far
down the smart track. In North America, utilities
are able to create an entire framework for smart
grid because they more or less control the entire
chain. This means customers are pulled into smart
grid on their terms.
In Europe, there is much more potential for an open
market, as utilities are more fragmented and they
are innovating to compete to have the most
attractive offering. This innovation is leading to a
change in consumer psychology.
Established thinking says that customers want
predictable, flat prices. According to Dr Philip
Lewis, who has directly researched over 1 million
customers worldwide as CEO of VassaETT, this remains
the case, but is becoming increasingly nuanced. The
question is what the customer means by
predictability?
"Price rises, and volatility, make customers want
predictability," said Lewis. "Australia has had
several price rises in recent years and as a result
it is the most active market in the world. Customers
are looking for a way out."
Often that means fixed-term price contracts, but
smart grid means more innovative, variable contracts
are increasingly popular. "The old wisdom that
customers want predictable pricing is changing,"
said Lewis. "What they actually want is a
predictably good deal, even if that means
volatility. It's rather like mortgages, you have
fixed-rate or variable-rate, and you pick and choose
depending on which way the wind is blowing.
"We're starting to see more and more countries in
Europe customers preferring to have more volatile
prices in order that they have more transparency. In
Norway, 55 percent of customers have spot-tied
contracts, in which the supplier charges a
commission on a rate tied to the Nordic spot
market."
Conventional wisdom that customers save money
through competition, i.e. switching supplier, is
also changing. Despite also experiencing sustained,
inflation-busting energy price rises, no market has
experienced a more dramatic decline in customer
activity than Britain, once the most active market
in the world.
VaasaETT figures show Britain has fallen from first
to twelfth in eight years and from a rate of 21
percent switching per annum to just 11.5 percent in
seven years. Shoddy practice, such as miss-sold
tariffs and (now outlawed) aggressive door-stop
sales, as well as the deliberate complexity and
variety of tariffs has bewildered and alienated
consumers.
Ultimately, said Lewis, customers want to feel on
equal terms with their energy supplier. This is
easier said than done, but smart grid technology
offers utilities to change customer psychology away
from distrust and dislike.
Fundamental to any behaviour change is education of
the customer. Automation alone is not enough.
Customers who participate in automation without
education are actually less likely to save energy at
off-peak times than if they had no automation at all
because they believe automation is doing it all more
them, says Lewis. Reduction at peak hours is 40
percent more effective when participants are
provided with feedback.
Customers want to feel in control and they have to
feel rewards through their own direct
experimentation. Feedback is vital, but it need not
be complex. Devices like the simple rate clock
fridge magnets trialed in Ireland are good for
time-of-use tariffs. If a smart meter display unit
shows the change in tariff and the current cost of
consumption, there is an immediate feedback loop.
In the longer term, utilities will need to show some
ankle if customer psychology is to be transformed
from borderline hate to love.
Ben van Gils, Ernst & Young's global leader for
power and utilities, said it's not about products,
it's about the relationship. "In our experience,
utilities tend to think they are not successful
because they haven't introduced the right product.
In reality, the negative perceptions that consumers
have of energy providers has resulted in limited
permission for energy providers to stretch into new
products and services.
"This lack of permission creates a huge obstacle for
utilities, and minimizes the chances that any
product, regardless of how good it is, will be taken
up by customers. The quality of consumers'
experience with utilities must be improved before
the relationship can stretch any further.
Essentially, consumers want a voice; they want to be
listened to and treated as an individual. Brands and
companies that can offer this are the ones that earn
their trust and loyalty," he added.
So there you have it: Customers need to feel the
love wherever they may be.
Copyright © 1996-2014 by
CyberTech,
Inc.
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