How utilities can better use customer data to improve their poor performance

In an exclusive for EBM Dr Katie Russell explores how much maligned utility companies must capitalise on their customer data in order to reduce churn and create customer loyalty as they play catch up with other industry sectors

The importance of personalisation based on a comprehensive understanding of consumer data has become critical, and utilities have a unique opportunity to reinvent themselves in terms of consumer engagement and revenue generation. All utilities need is the expertise to extract valuable insights from the complex goldmine of data they are currently sitting on.

In other consumer facing industries such as banking and shopping where the underlying infrastructure has evolved from analogue to digital, we’ve seen the impact of this evolution in service and products. Through these changes businesses gained much more than they first anticipated; for example initiatives that were primarily created for stock control and inventory quickly became focal points for understanding consumer buying patterns.

The utility industry is now following the same path and it is very timely as customers themselves are demanding more control, clarity and understanding. They want their utility providers to be more proactive and to engage with them in a more personal way. All they need are the tools, and for utilities, energy analytics is the toolmaker.

What can data tell utilities?
Data can enable utilities to identify new and innovative ways to grow their business and increase revenue whilst reducing the cost to serve. The development of complex models can explain consumption patterns and behaviours such as: how certain households respond to changes in external temperature, or the intricacies of how occupancy patterns change over time in a household.

These insights are then applied in real use cases. For instance, understanding usage patterns per household recently helped a utility identify that just 23% of their customers would experience both cost and comfort benefits from installing a smart thermostat. Instead of mass targeting customers with a certain product, utilities can understand if it will actually benefit the customer through personalised insight into their propensity to use the product. It also saves money on product costs and helps to build better relationships with customers by making propositions more relevant.

In theory this sounds straightforward; the challenge is making sure the accuracy of the applied algorithms and analytical process remains consistent regardless of appliance, energy behaviours or location.

How data can fuel better customer engagement

Using data, utilities can take each customer through a personal energy journey tailored specifically for individual households. In building a closer relationship with their customers, utilities will be able to leverage data science and provide their customers with greater visibility of their energy use, show them how to improve, helping them be more efficient and reward their efforts to incentivise behavioural change. Use of innovative engagement tools, such as a smart phone app, means energy usage can be seen at an appliance level and compared with other similar households. This helps the individual to understand and manage their energy consumption, whilst adding an element of gamification through targets and rewards.

Consumer data at this level can also assist with bill breakdown by enabling clearer explanations as well as providing practical, personal and relevant advice about how bills can be managed. For the utility this builds trust with the customer and can have a direct impact on customer retention. As households save energy as a direct result of the advice and relevant products from their energy supplier, they are more likely to remain loyal customers.

More personalised relationships a must for the future

This can in turn have a real impact on behavioural change. If utilities have more personalised relationships with their customers it means they are less likely to switch to a different energy provider. A recent pilot showed that this type of personalised engagement with the customers achieved an initial 8% reduction in the targeted period followed by a sustained 5% reduction over time with continued engagement. Personalised engagement with consumers will improve the hit rate for requests to shift energy use to off-peak times.

To conclude, there is a huge opportunity for utilities to differentiate themselves and disrupt the market due to the low levels of consumer trust the sector currently faces. It is inevitable that utility businesses will evolve to become highly dependent on consumer data, therefore companies need to ensure that they are capable of using customer insights to benefit their business operations and enhance relationships with the customer. The utilities that do this the best, will ultimately be the most favoured by the consumer and the market.

Dr Katie Russell is Head of Data Science at ONZO

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