[Not so] Secrets of Successful Energy Retailers

Written by: Azkar Choudhry, Vice President, CG Infinity Inc.

I have spent more than a decade hands-on building technology and business solutions for various small and large Retail Energy Providers (REPs); both as my employers and as my clients. During this time, I have seen a lot of Provider churn. Poorly managed, non-profitable, operationally delinquent businesses are sold as books of business and successful ones earn a premium on their Enterprise Value (EV) when merged or acquired.

At a macro level, the successful REPs are observed to excel in these 3 key areas:

  1. Deeply focused on Customers
  2. Early adopters of Enabling/Emerging Technology
  3. Creators of disruptive/innovative business models and product offerings

These are broad topics, and much can be written in the context of each. However, I will try to distill my observations and for the benefit of some, list best practices and methodologies that seem to work well in this space (Retail Energy). I will expand these topics in my near future articles.

Deeply Focused on Customer

 Yes. Customer. Individual Customer. One at a time. This is a big deal. The entire retail industry is rapidly changing. The old model with one-size-fits-all does not apply anymore. The ease of switching energy suppliers online, as well as greater transparency about the prices on offer, is increasing churn rates and shortening the duration of customer relationships. Customers are demanding a more seamless and individually tailored user experience. They must believe that a product or service offering is of good value to them before they buy. Customers are expecting intelligent, easy, two-way communications that give them visibility and control. They want to be educated and empowered to make better choices to manage their energy consumption and cost. 

So, how are some of the REPs remaining relevant and profitable in this hyper-competitive market? Here are some observations:

  1. Creating customer-centric culture and capabilities
  2. Wining their customers’ trust
  3. Personalizing with hyper-relevance to increase loyalty and customer evangelism
  4. Simplifying the customer journey – for example, reducing the number of interactions that are needed to switch providers when moving a house or renting a new apartment!
  5. Keeping the Prosumers (advanced users, generating their own power through resources, such as solar panels) engaged and giving them what they need (for example, selling Energy back to the grid)
  6. Generating more value from each customer by providing hyper-relevant services

Early Adopters of Enabling/Emerging Technology

Energy Retailers are being disrupted by regulations, economics, evolving customer habits, and expectations, and by far the most by technology. The barriers to entry are lowered using digitization and disruptive technologies, especially in the deregulated markets. Successful Energy Retailers resemble more to an online consumer retailer rather than a traditional retail power provider. Successful retailers are transcending the role of energy supplier by offering a broader range of innovative services, such as helping people to better manage their consumption, save money and promote energy conservation.

Successful Energy Retailers are accelerating the adoption of enabling and emerging technologies. Rather than blindly going after every new shiny technology, they are strategically identifying business problems that can be solved with emerging technologies. They are piloting and creating proofs of concept to see which solutions are effective and profitable. Business and IT leaders are embracing a culture where educated risks are allowed, and lessons learned from mistakes in order to quickly transform the business.

Here are my observations around the top trends and technology adoptions by the more successful Energy Retailers:

  1. Going Digital at Warp Speed
  2. Using Big Data and AI to gain useful insights, better forecasts
  3. Automating everything that can be automated (economically)
  4. Building next-generation, flexible and elastic Information Technology infrastructures to enable data-driven business
  5. Grow business by working with capable and smart IT vendors (e.g., CG Infinity ) that understand the Retail Energy business

Creating Innovative Business Models/Product Offerings

Retail Energy businesses are challenged with ever-decreasing margins as a result of several market forces (competition, decreasing usage, decreasing prices, etc.). Customers are expecting value add services (expanded insights into energy consumption, HVAC filters, weather info, etc.) and products from their Energy Retailers. Even the larger pure-play REPs are expected to constantly innovate and keep adding exciting product offerings to stay in business. Here is a brief list of what the successful REPs are doing:

  1. Creating partnerships with multiple industries to offer bundled products and services
  2. Going from customers to Energy “partners” – mini-power producers, battery storage, etc.
  3. Developing an effective partner ecosystem (for example, sharing call centers to reduce costs to serve)
  4. Creating new business models to better compete in auxiliary areas such as home energy management systems, EV charging, “capacity leasing” or “peer-to-peer” energy sales, etc.
  5. Shifting business models to providing services and thus increasing the value of their brand and having more of a presence in customers’ lives—delivering valued, interactive services.
  6. Reorganizing their businesses to operate with agility and dynamic capabilities

MonologueNothing in this article should come as a surprise to the Retail Energy practitioners. I am simply regurgitating what has been observed to be successful business tactics and strategies. I will expand on the individual themes in the upcoming series of articles.