Go downstream! - New opportunities for the Utility Industry to increase revenue per user
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Go downstream! – New opportunities for the Utility Industry to increase revenue per user

In nature, those species who are unable to adapt to changes in the environment will not survive. The same is true for business. Those who work in the Utility and Energy sector know it, especially if they deal with marketing and customer service.

The reality and the context of this important sector, has experienced significant changes over a short time period.

As Isabelle Kocher, CEO of Engie, one of the 10 most important companies in the Utility and Energy sector said, “The word ‘transition’ falls short of the change that we are witnessing: we are facing a real revolution”

Companies that provide essential services such as electricity, gas, water, internet, and telephony have found themselves operating in a market that, is characterized greater complexity, rapid growth, and by new players and competitors. Today, new regulations have made it easier for consumers to switch from one supplier to another.

Furthermore, public opinion is increasingly attentive to issues of energy efficiency and environmental sustainability. Individual customers are increasingly more informed, and they demand clarity, transparency, and simplicity of dialogue with companies they do business with. They are no longer willing to spend minutes waiting to talk to a call center operator, perhaps getting vague answers and cumbersome solutions. At the same time, a murmuring of a few consumer voices can become a chorus and turn into a real storm, starting with something as simple as a single complaint published on social media.

 

Go downstream! A new business model

Until a few years ago, the main players in the Utility and Energy world were few, and they were all giants. Oftentimes, the only time the customer came into contact with the business was when it was time to pay the monthly bill or to report a service issue.  

It was also a matter of selling pure commodities: with margins and revenue per customer that are often not huge, but constant, solid, and achieved under zero or almost negligible competition.

The companies in the sector, therefore, had rigid and very vertical structures, long-term planning, with a focus on marketing and customer care.

Then everything changed.

Today, it is vital for companies to increase their horizontality and fluidity, review and restructure brand identity, consider a new and absolute centrality of the customer.

Today, it’s absolutely vital for companies to put the customer at the center of their business and to build a strong brand identity.

In short, this requires a laser focus on marketing (from social media to storytelling about your brand) and customer service. This will require a data-driven approach that points to the most complete and omni-channel personalization.

In technical terms, we can talk up-stream activities, those that are “far from the customer,” such as raw materials extraction and optimization of everything related to this part of the supply chain.

On the other hand, downstream refers to everything that is close to the end user, and it is here that Utility and energy companies can generate the greatest value, both in terms of increasing revenue per user and gaining a competitive advantage over the competition.

It is no longer a question of engaging in a price war, with very low margins. This is neither profitable for companies and adds little benefitfor customers.

This is confirmed by Nicola Lanzetta, Head of the Italian market for Enel: “The product we offer – especially the basic product (the commodity) – is not a” sexy “service and we operators must be able to talk to consumers. To date, we still focus too often on the price of the single kw / hour and the single cubic meter. However, we think what happened with Telco: no one buys “x a minute” now, but acquires a more complete service.”

 

Not only commodities – the customer is the added value

If we follow the traditional business model that was valid until a few years ago, we can see that revenues per Utility customer are in decline.

This dynamic is triggered by several factors: above all, the demand for raw materials, which is stagnant due to the growing focus on energy efficiency and the rapid and steady growth of energy from renewable sources. Then there are higher costs, caused by the opening of the market and the need for companies to be more competitive in the face of more competition.

This trend is constantly accelerating, and the 2017 CGI Global Insights report highlights the growing importance that companies in the  Utility Industry attribute to the search for new sources of revenue: this is the goal of sector giants as well as new players. The challenge is here.

Value is shifting to the downstream structures of the business, which are experiencing intense and interesting phases of change. The ‘new downstream’ refers to all of the activities and services that want to be closer to customers, as well as those that focus on environmental sustainability and energy efficiency, flexibility and customization, and collaboration with large networks of companies, suppliers, and institutions.

Here, all efforts are aimed at building new business models that aim to elevate companies above the simple sale and distribution of raw materials, and shifting the focus on the search for added value, the client, who wants to be informed of company choices, its mission, and its involvement in environmental and social responsibility. It’s a customer who increasingly wants additional services: from home automation to smart consumption monitoring services, and who wants to be able to communicate through many channels, especially through mobile.

All the companies in the sector are putting downstream revenue research among the main priorities.

EDF, the largest electricity production and distribution company in France, has created Sowee, which develops new offerings that combine energy supply with smart solutions for home consumption monitoring and optimization.

Engie did the same with the acquisition of OpTerra Energy Services, which supplies consumption optimization services for public and private customers.

Iren has a new business model, called “New Downstream,” for the sale of products such as LED light bulbs, home automation systems, consumption and maintenance monitoring, and insurance. These products are in the theme of sustainability and energy efficiency, with the goal of increasing customer loyalty.

In short – from large to small, from global to regional operators – Go Downstream is the mandate. And for a very simple reason: it’s the area with the greatest potential for added value, still to be explored.

To do this, companies in the sector need to radically reinvent themselves. And they must present themselves in a more multi-faceted way, shaping their image around customers and their motivations. In fact,  this is already happening.

 

Eco-sustainability – The new keyword

Alberto de Paoli, CFO of Enel, issued the following statement during the presentation of the company’s strategic plan for 2019-2021.”This year we are increasing investments in renewables, for two important reasons: the first is that we are seeing a radical change in our business, a decided trend in economies towards decarbonisation, the second is that we want to have increasingly direct contact with customers, who are increasingly sensitive to the topic. And we are moving rapidly.

It is not just about responsibility towards the planet we live on: there are economic reasons that justify this transition. There are also reasons for marketing and brand positioning: people are increasingly attentive to environmental issues.

From a survey conducted by Enervee on British consumers, it turned out that as many as 90% of respondents consider efficiency and sustainability to be important for their energy choices.

As we can see, the trend is global and unstoppable. Ignoring it means losing contact with your user base and losing market share.

 

Dialogue with customers in one-to-one mode

Consumers want to do business with companies that are sensitive to efficiency and sustainability, and they are willing to purchase additional services in this vein.

But the most modern marketing tools allow us to know the behavior and needs of customers in a detailed and targeted way, which allow companies to significantly enhance the effectiveness of their downstream strategies, from customer service to cross-selling and up-selling functions.

All of this is possible thanks to the analysis of big data, which enables clustering and segmenting an audience of users. Companies can also take it a step further, to personalization: this is what two giants like Enel and Engie are doing, relying on a company like Doxee, which is focused on personalization and customer-oriented technologies.

Fastweb and A2A are doing the same, again with Doxee, with the aim of transforming the customer bill into a smart, interactive and multi-channel tool, in an opportunity for dialogue with the customer, an additional point of contact with unique calls to action and specific marketing operations and tailor-made for each user.

 

Discover the value of video marketingpersonalized customer care, and new digital revolution tools for the Energy & Utilities sector. Download the eBook:

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