How energy companies can create customer-focused digital experiences

Users place high demands on their digital experience and strengthening their customer relationships is more relevant than ever. In this article we dive into the challenges energy companies face when it comes to customer experiences. We take a closer look at some examples and explain how energy companies can strengthen their customer relationships and work more customer-focused by investing in digital solutions.

At Limetta we work daily to strengthen our clients' digital products and services. We make sure to create good user experiences where both the business and the end customer have their needs met with the greatest possible benefit. When electricity prices soared in Sweden at the end of 2021 and the beginning of 2022 we began to consider what energy companies' digital customer journeys actually look like. Here we have summarized our insights from the review.

When the electricity market was deregulated in the mid-nineties there was hope that it would lead to increased competition which in turn would benefit consumers. But in hindsight we see that households did not switch electricity supplier to the extent that had been expected. When investigating why the two main factors were: weak customer relationships and small differences in both price and offerings between the various players. Why switch to something that's the same as what I already have.

We are now in the midst of a new transformative era for energy companies and their relationship with their customers is once again a topical issue. Sweden is to be fossil-free by 2040 which in practice means a society that has the majority of its energy needs met by electricity — electricity that will also be produced by energy sources whose capacity fluctuates over time depending on the availability of wind, water and sun. The difference this time is that political decisions have real consequences for the end consumer in the form of sharp price fluctuations and, in the long term, capacity problems in the power grids. On top of that we currently have geopolitical events that also affect the energy market in the form of an aggressive Russia that uses Europe's dependence on natural gas to exert power in Eastern Europe.

How should energy companies handle all of this and still have satisfied customers? That is what this article will be about.

Building strong customer relationships

We start by focusing on the customers. That may sound obvious, but for many of the energy companies it is a relatively new insight. Traditionally, energy companies have viewed their customers as passive "metering points" in a grid to which they send a bill every month. This relationship is too weak to withstand many of the challenges the industry faces. Strong customer relationships build trust, and increased trust means greater opportunities to collaborate and drive through changes. Energy companies need to cooperate more with their customers to carry out the transitions required. Customers will need to be involved in producing and storing electricity and be demand-flexible. The user needs to become a co-actor in the grid and not just a metering point that is billed.

In the report "The big challenge" produced by SKI (Swedish Quality Index) in 2019, among other things they looked at consumers' willingness to be part of the transition required for Sweden to switch to fossil-free energy. About one fifth of customers wanted to take part. They were both interested and engaged and were willing to make investments to change their energy use. The majority of them were younger, highly educated men with an interest in technology. At the other end were those who were uninterested — around 25%. They did not understand why they should get involved and had no willingness to invest. The rest fell somewhere in between. By far the strongest motivator to get people involved was money.

So we have, on the one hand, those who are ahead of the industry and want more than the industry can manage and deliver, and on the other hand those who don't care. Energy companies must be able to handle both of these customer groups and everyone in between to succeed in their customer relationships. How are they doing then? Not very well. Customer satisfaction is declining according to SKI's latest measurements, especially when it comes to private customers.

The energy companies' challenges and opportunities

Energy companies need to work in a more customer-focused way

Where do energy companies stand in all this? Our impression is that they are aware they need to strengthen their customer relationships, especially digitally, to cope with the future challenges of the energy market, but that they are struggling to manage the shift to becoming more customer-focused.

Historically, Sweden has one of the world's best energy systems with low environmental impact, stable electricity supply and low prices. As we mentioned at the beginning, some cracks have started to show, but by and large Sweden's energy companies are very good at their core business. And perhaps this has contributed to not working in a customer-focused way to the extent they really should have? If one is to be critical, one could say it is a slow industry with silo thinking and a lack of a culture of taking risks and daring to try new things. If so, they are not alone.

How do other industries handle customer relationships?

An example of another industry where this is common is the insurance industry. There, traditionally, one has also not been so dependent on building strong relationships with customers. If you compare the energy industry with the insurance industry, you see that they have many similarities when it comes to customer relationships:

• You have not needed to meet your customers physically to any great extent
• You sign a contract and then it just runs on
• You have not had many reasons to contact the customer. The customer pays their bill and is only in contact with the company if something has happened
• You have a relatively unexciting product for the customer. It just has to be there and most people don't think much about it

As a comparison, you can look at other industries to see what transitions they have gone through regarding contact with customers:

• Banks, which traditionally had a lot of physical customer contact, have succeeded well in digitizing both their customer interactions and their systems
• The airline and travel industry has worked a lot with packaging, pricing and service around its core business to create added value for the customer and offer a complete experience
• The telecom industry has been good at using the data they have about their customers and using it to act in a customer-driven way

The energy sector would need to:

• Achieve a higher degree of digitalization and innovation in both services and customer contact
• Be able to offer better packaged services/products that customers perceive as providing clear added value, primarily financially but also environmentally. It must be very easy to both buy, have installed and maintain the technology required. If it is not simple, many will avoid it
• Use data better to be able to offer smart, personalized and automated services and become better at predicting consumption patterns and usage over time

The energy sector is an industry that can contribute to sustainability in a real way. Many other industries struggle with credibility in their efforts to appear sustainable because their conditions for making a practical difference are relatively small. If improvements can be achieved in all three of the areas above and they produce results, then there is every chance of becoming real environmental heroes.

Electricity is a special product because you cannot see it and it is consumed the same moment it is generated. How do you create engagement around a product people take for granted?

The challenges can be summarized in the following points:

• Our power grid is not sized for the sharp increase in electricity use that a green transition entails. Expanding capacity in the grid takes time and is expensive. By using the existing grid more intelligently, e.g. by smoothing consumption over the day, the total delivered power can be increased without having to expand the grid. To do that you need to involve those who consume the electricity, i.e. the customers.
• It will become "messier" in the power grids. The amount of planned energy, i.e. energy that is predictable because its production can be controlled, will decrease as renewable energy sources are expanded. This means both greater uncertainty regarding the ability to deliver a certain amount of electricity at a given time and potentially larger price fluctuations. At the same time we will get a larger share of locally produced electricity, which may mean that power does not need to be transported over long distances. Electricity that previously came from a few large power sources will now be delivered by many small ones. All of this will place higher demands on flexibility in both the grid and consumption.
• Energy companies will need to cooperate with their customers to a much greater extent than today. Individual customers will need to make decisions and invest in everything from their own solar panels, smart control and regulation systems, and energy efficiency measures.
• The energy sector must get better at using data to act more customer-driven, e.g. by offering personalized automated solutions that help the customer visualize and control both their electricity consumption and any electricity production. If they fail to do this they will be overtaken by other actors, e.g. startups or large established tech companies like Google, which have historically shown that they have both the knowledge and the capacity to build data-driven public services in areas such as maps, GPS positioning and traffic monitoring.

Understand customers' needs and behaviors

To better understand what is needed to solve challenges, it can be useful to look at people's behaviors and attitudes toward different aspects of electricity use. Here you find many interesting insights that the energy industry can use to change and deepen its customer relationships.

Traditionally, a great deal of trust has been placed in information, both from the industry and from authorities. There has been an overreliance on the idea that if we simply inform people about how they can save energy in their homes, they will do it. That hasn't worked particularly well:

• We are creatures of habit. Changing habits requires strong incentives. Such incentives have so far been lacking. How many people want to do laundry late at night to save one krona on electricity? None. Would you cook dinner earlier or later than usual because electricity is especially expensive at 6 PM? No, you cook when you're hungry. For the individual household consumption patterns don't have such large consequences, but when you add up Sweden's 4.8 million households the picture changes and the potential for efficiency and intelligent control is large.
• There must be a value in changing behavior. Money is an important incentive.
• Having to keep track of your own electricity use is too much hassle compared with what it yields. Just as we expect electricity simply to be there, we want energy efficiency and control to happen automatically without us having to worry about it.
• Getting people to consciously change their consumption habits solely through information is doomed to fail. However, there are other, much more effective ways to create changes in customers' electricity use. For example, it's known that our willingness to pay is greater for devices than it is for the electricity itself. Today we already buy a lot of smart technology in the form of mobile phones and various technical solutions for our homes. Many people could consider installing a smart heat pump or a charger for an electric car, provided the technology is packaged correctly. It's about creating offers that include not only the hardware but also services, data and applications around it in the form of automated control systems, statistics and service.

In this scenario, as a customer I make an investment decision and then don't need to worry about it anymore — the system takes care of everything for me. I have a heat exchanger that constantly communicates automatically with the energy company and uses data on electricity prices, temperature and consumption patterns to continuously make small optimizations. The people living in the household won't notice anything from one day to the next, but over the course of a year the savings for the household are substantial. From the energy company's perspective, this means there are great opportunities to even out consumption over time and use existing grids more effectively, as well as to bind customers closer by having incorporated them into one's own ecosystem of products and services.

How electricity companies can improve their customer relationships and strengthen their digital presence

The arena where companies meet their customers is today largely digital and this also applies to energy companies. People are used to and expect that they can manage all aspects of their relationship with a company digitally. Electricity companies also have a digital presence where they can meet their customers, but it is not being fully utilised.

A user who logs in to their customer pages at an average Swedish electricity company can probably see: facts about their installation, their meter reading and electricity usage over time, their invoices and their contracts and prices. Furthermore, they can move or cancel their contract and change their contact details.

Okay, that’s not so bad, right? No, but it’s not particularly exciting for me as a customer either. The interactivity that exists is exclusively passive, i.e. I can look at data but there is no way for me to actively influence it. Given the possibilities available, we think the digital service offering that meets the customer should be a bit richer and more inspiring.

For challengers like Greenley and Tibber this is the core of the business model. They provide smart mobile solutions that create a real-time customer experience. The customer can see their consumption right now and over time and also integrate various solutions into the household in the form of solar panels, charging stations for electric cars, or control systems and sensors for indoor climate, lighting and household electricity.

Tibber and Greenley take no margins on the electricity they sell. Instead they charge a fixed monthly fee for the service and can offer both hardware and services. It’s a radically different way of looking at the customer relationship. The product is not the electricity. It is the same regardless of whom you choose and is bought at spot price on NordPool. The product is packaged functionality, interactivity and information for a modern electricity consumer.

We understand that challenger companies like Greenley and Tibber would not survive entirely on their own. They should rather be seen as remoras hitching a ride on the big whales — the grid owners and energy producers. But they are interesting to look at from a customer perspective, i.e. how they, through their digital services, succeed in attracting customers and growing rapidly. Tibber today has around 200,000 customers in Sweden, Norway and Germany and is valued at 3.3 billion kronor. Greenley has 115,000 downloads of its app and in an interview from July 2021 the company’s CEO Tanmoy Bari says:

"All traditional energy companies base their profits on consumers using more electricity, energy is just a commodity to them. We aim much higher, and want to drive loyalty through a superior customer experience and continuously reinvest in our platform to drive it forward".

Energy companies in Sweden should do exactly this to be prepared for the future: drive loyalty through a superior customer experience. They need to focus as much on services and packaging as on operational reliability and capacity planning. If they fail, others will outflank them and gain market share.

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