It’s no secret that American utilities are in the midst of an industry transformation. This process, triggered in part by fears of a death spiral induced by the spread of distributed generation, requires adherence to increasingly demanding energy efficiency and renewable portfolio standards, and increased customer interaction and communication. This reality has caused utilities to re-examine their existing business models, which have informed their policies and business practices for nearly a century. The customer is now at the heart of the business plan.
A large part of meeting efficiency standards is better demand-side management on behalf of utilities, which requires effective insight on and communication with customers, as well as infrastructure upgrades that support increased grid reliability and the integration of renewables and microgrids. In order to meet these challenges, utilities must understand the wants and needs of different consumers and the monetary value of servicing specific needs to specific customers. Utilities are mandated to serve their customers (even in Texas, sort of) ‑ but how well can they serve specific groups of customers, how can they leverage consumer segments for efficiency and reliability programs, and what grid technologies out there are the most cost-effective in doing so?
Getting to Know You
Much of utilities’ segmentation strategy has traditionally relied on clustering customers based on simple demographics, geography, and reliability requirements. But these strategies are typically one-dimensional and aligned with a single operational goal. In integrating more advanced (and expensive) grid infrastructure and demand-side programs, customer segmentation must be multidimensional and aligned with firmwide objectives. Segmentation needs to incorporate some of the softer customer characteristics, including values, depth of energy knowledge, interaction with social media, residents that rent versus own homes, and communications preferences, to name a few.
These characteristics are quite disparate, and this list is only skimming the surface in terms of potential segmentation dimensions. Having this sort of open canvas can be intimidating for utility marketing managers, and rightly so. However, instead of identifying potential dimensions and then working to gather data directly from utility customers to sort them into segments (a process akin to releasing a flock of messenger pigeons with surveys attached to their necks), advances in data gathering and analytics can streamline the process of mining multiple sources of data, recognizing patterns that can potentially define customer segments, and then categorizing these groups for utility marketing purposes. Navigant Research outlines a number of vendors and considerations for this form of customer segmentation in our report, Smart Grid Data Analytics for Consumer Engagement.
In this way, utilities can develop meaningful segmentation based on multiple attributes that can actually inform business decisions across programs and investments. Because they operate in a highly regulated environment, utilities are largely unable to make investments where cost-effectiveness is in question. Infrastructure upgrades and new programs must deliver value by accurately targeting receptive groups of customers. But the questions remain: How to partition off these groups and how to define them? By way of big data analytics, utilities can define new segments that could help marketers feel less bewildered by and fearful of the actual results.
Tags: Demand Side Management, Digital Utility Strategies, Energy Management, Smart Utilities Program
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