Lighting the way exec v3.03ss

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Almost 70 percent of 5000 respondents in our 2008 Global Utility Consumer Survey are willing to experiment with how they interact with energy providers. Many consumers have specific visions of what they want – and how much they will pay for it. Their attitude change coincides with rising environmental and economic urgency that is focusing attention on energy infrastructures across the globe. To satisfy the smart energy consumer and stay competitive, utilities must plan now to encourage beneficial consumer behaviors, leverage customer analytics and segmentation, and understand the enhanced customer interactions – all vital in a participatory utility network where consumers, utilities and service providers share responsibilities and benefits.

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  • Our 2007 report, “Plugging in the consumer: Utility business models for the future,” explored the radically changing relationship between consumers and energy providers. Even during the global economic downturn, progress has continued along the two dimensions shaping these changes: technology advancement and consumers’ desire for more control. To continue our research about consumer expectations of energy providers, we launched a second survey in the fall of 2008 to assess how changes in the economic environment, persistent strong messages on climate change and increasing technological awareness of consumers are further influencing consumer expectations of energy providers. This time, we surveyed an “Expanded Group” of over 5,000 customers, which included the original group of six countries from our 2007 survey – the U.S., the UK, Germany, the Netherlands, Australia and Japan) – plus Canada, Denmark, Belgium, France, Ireland and New Zealand. Questions covered a range of topics, including consumer preferences for green offerings (both energy-related and in general), future views on costs, usage and control options, sources of information on energy, and willingness to pay for new products and services. We summarize these findings in a new report entitled “Ligthing the way: Understanding the smart energy consumer.”
  • Over the first century of the history of the utility industry, the Passive Ratepayer was the dominant force. But these typically uninvolved, acquiescent customers – in the past, virtually 100% of the customer base – measured out at less than one-third of the total in our survey, a remarkable shift. Much more engaged and goal-oriented customers all along the income scale – from Frugal Goal-Seekers, with limited resources but unlimited will, to Energy Stalwarts, with strength enough in both will and wallet to take measures anywhere along the spectrum from simple efficiency improvements to taking the generation of electricity into their own hands – approach one-half of the total customer base in combination and stand to strongly influence the other half as they succeed in meeting their goals. And the Energy Epicure, passive in some ways but open to experimentation in others, will remain a stable, high-revenue-producing customer for years to come as they continually add new energy-consuming devices into their home while abstaining from moves toward conservation. In the long run, even more radical changes may yet emerge as the Millennial Generation (or Generation Y) continues to move into adulthood and the energy customer base.
  • To understand and encourage beneficial new consumer behaviors, energy providers must recognize that technology evolution and increasing consumer control have led to the emergence of four industry models (see Figure 1). As described in our 2007 report, they are: Passive Persistence – Traditional utility market structures still dominate and consumers either accept or prefer the historical supplier-user relationship. Operations Transformation – Some combination of grid and network technology evolves to enable shared responsibility, but consumers either cannot (or elect not to) exert much control. Constrained Choice – Consumers take decisive steps toward more control, but are limited to certain “levers” (technologies, usage decisions or choices in providers) by regulatory and/or technological constraints. Participatory Network – An interconnected environment characterized by a wide variety of grid and network technologies that enable shared responsibility and benefits. Though each is described distinctly here, for at least the near term the industry will be represented by various combinations of the four models in different parts of the world. Ultimately, increasing demand for control by consumers and continual improvement in technology will result in movement of the basis of the industry to the upper right quadrant – driving the creation of entirely new markets (virtual and physical) and products.
  • Two main attributes are associated with variances in consumers’ behavior patterns: Personal initiative – A consumer’s willingness to make decisions and take action based on specific goals, such as cost control, reliability, convenience and climate change impacts. Disposable income – A consumer’s financial wherewithal to support energy-related goals; in early adoption phases, only those with sufficient resources will be able to implement new technologies and buy more expensive products. Passive Ratepayers (PRs), who embody a passive preference for the status quo, remain the most prevalent of any of the four consumer archetypes. However, we see a remarkable change: in the past, these typically uninvolved, acquiescent customers comprised virtually 100 percent of the customer base – they represent just 31 percent of our 2008 survey respondents. Frugal Goal-Seekers (FGs), about 22 percent of the 2008 survey population, have limited resources but strong will to change the way they use energy and manage its consumption. This group desires low-cost control of energy choices. Energy Stalwarts (ESs) have enough strength in both will and wallet to proactively take measures anywhere along the spectrum – from simple efficiency improvements to controlling the generation of electricity, They have a clear willingness to invest in energy choices and represent about one in five consumers surveyed. The remainder of respondents (26 percent) are Energy Epicures (EEs), who are curious but not committed in the sense that, while they actually demonstrate more knowledge about their provider and options than the any other group, they do not share the cost concerns or clear desire for information and control. This appears to be a matter of choice and not ignorance. While passive in some ways, this group is open to experimentation in others, particularly when the cost and lifestyle impact of a behavioral change are low. Whether they gravitate toward Energy Stalwarts (if their early experimentation has results that spur additional involvement) or simply continue to add new energy-consuming devices into their home while abstaining from (or postponing) moves toward more active management of energy usage, they will remain stable, high-revenue-producing customers for years to come.
  • In order to evaluate and compare various tendencies of the four consumer types, we used a scoring system to quantify the relative response to similar questions based on six key attributes: Focus on Environment: Interest in green products and willingness to make changes to reduce personal environmental impact Hunger for Information: Desire for more frequent and more detailed information about the cost and impact of personal energy usage Willingness to Take Control: Motivation and desire to actively manage energy usage, cost and environmental impact Motivation to be Efficient: Willingness to take steps to increase energy efficiency through some combination of lower-cost and higher-cost actions Knowledge about Providers: Overall awareness of energy provider and options that the provider makes available to manage efficiency, environment and cost Sensitivity to Cost: Sensitivity to overall cost of energy or options to actively manage it.
  • Passive Ratepayers (PR) represent the “traditional” utility customer. They are consumers who are relatively uninvolved with decisions related to energy usage and because they do not have the proper regulatory environment in place to do so, lack the technology to do so, or simply want to maintain the traditional provider-ratepayer relationship. PRs were most likely to be at the extreme youngest and oldest ends of the age scale; 44% of those age 18-24 and 41% of those age 65 and older were in this category. France had the highest percentage of respondents who were PRs (41%); those in Canada and Denmark were the “least passive” overall (27% PR). It is likely they will take a “wait and see” approach to new programs – particularly those with costs involved – and only take advantage of those which are recommended to them by more involved friends and neighbors. Until then, it is crucial to maintain good customer service in a traditional relationship with this large group of customers. Energy Stalwarts (ES) are those consumers who have specific goals or needs related to energy usage and have both the income and motivation to act on those goals. As demonstrated here, , they are the precise opposite of passive ratepayers in our scoring system. They are above average on all but one of the other measures shown on Figure 2-3, with particularly high scores in willingness to take control of energy management and desire for more information. They tend to concentrated in the middle age ranges, with 54% of ESs between 35 and 54. ESs are much more prevalent than average in Canada (30%) and Denmark (28%). France (16%) and the Netherlands (15%) have the fewest ESs as a percentage of the total.
  • Frugal Goal-Seekers (FGs) share many of the same values as ESs. However, because they are economically similar to PRs, their success stories will likely have a major influence on future decisions to become more active by that group. Marketing and communications resources spent on FGs, then, may over time influence about half of all consumers. There is only a few percentage point difference across countries in terms of percent of the respondents that were FGs, with the exception of France and Germany (both higher at 30% apiece). France (18%) and the US (19%) had the smallest percentages. FGs are most likely to be in the 55 and older group, especially in the Asia-Pacific countries (Japan, Australia, and New Zealand), where they represent about one-third of that age group’s segmentation. One interesting consequence of the attributes of FGs is that they are much more likely than other groups to respond positively to questions around time-of-use rates. They are 19% more likely than average to change the time that they do energy-consuming housework if they receive a cash rebate or similar incentive payment; 22% more likely if they can save even a modest amount (10%); and 28% more likely if they believe that it has a positive impact on the environment. Like changing providers to get a lower rate – something they are 17% more likely to do than average – these are no-cost ways of getting to their energy goals. As demonstrated here, EEs are inversions of FGs in their attribute levels. The EEs do not share the cost concerns or clear desire for information and control that the FGs have, and they have a much lower interest in green offerings. This appears to be a matter of choice and not ignorance by the EEs; they actually demonstrate more knowledge about their provider and options than the any other group. The Netherlands had a much higher EE percentage than average, with one of three consumers being in this group. The US and UK were next at 29% and 28%, respectively. At the low end, in both Germany and New Zealand, only 18% reported answers consistent with EE attributes. Over half of all EEs are between 35 and 54, but less than one in five 55 and over is in this group. EEs are very similar in their attribute levels to PRs, with the primary differences being that EEs do not have the high cost sensitivity that PRs do, and are much more aware of what is available to them. EE consumers are much more likely to own multiple televisions, computers, and gaming systems, and this is likely part of the reason why they report much higher electric bills than PRs. But this higher monthly outlay for bills, combined with high levels of awareness of energy options, leads to a sort of behavioral paradox – although they profess little desire to have control, they are willing to experiment with inexpensive programs that do not impinge much on their lifestyle.
  • Cost remains the most powerful motivator for desire for control and willingness to change behavior. Four in five consumers would change the times at which they do energy-consuming housework in exchange for large savings (50 percent); this pattern did not vary much by income level – by country, those in the upper 5 to 10 percent of the respondents’ national income distribution were as open to such change as those below median national income. Even for a small discount (10 percent) for specific time of usage, about half were willing to change their usage pattern. These numbers were virtually unchanged from 2007.
  • Overall, 2008 respondents have a slightly more pessimistic view of the next five years than those in 2007, apparently more because of expected increases in consumption than to any change in perspective stemming from energy price surges in the summer of 2008. Two-thirds see their bills increasing over the next five years, versus 59 percent in 2007; however, the differential between this number and the percentage expecting usage increases remained the same, at 29 percentage points (in 2008, 38 percent see usage increasing versus 30 percent in 2007).
  • With the prevalent feeling that prices will move inexorably upward and awareness of smart meters growing, over 90 percent of respondents indicated that they would like a smart meter and tools for managing their usage, with 55-60 percent of these respondents willing to pay a one-time or monthly fee for that capability. Consumers are largely indifferent to which form this control takes – the percentages wanting this service via a dedicated control panel, a home computer interface or a smart meter automatically controlling devices are essentially the same, although there are some differences across age groups.
  • The emphasis on climate change is as strong now as with consumers in our 2007 survey. It is also fairly consistent across our Expanded Group of countries. For ten of the twelve countries, between 65 percent and 75 percent of respondents stated that environmental factors are “important” in purchases of non-energy products (only the Netherlands, at 64 percent and Canada, at 78 percent, fell slightly outside that band). The availability of renewable energy programs in response to this demand for more carbon-neutral products remained about the same year to year. Across the Core Group countries – those surveyed in both 2007 and 2008 – the percentage reporting that they did not have renewable power programs available dropped from 21 percent in 2007 to 16 percent in 2008. Rather than changing their answers to the affirmative, however, most switched to the “Don’t know” response (up to 50 percent, from 46 percent in 2007). Responses were very similar across the set of 2008-only countries. According to industry experts in some of the countries surveyed, the high level of “Don’t know” responses in part reflects doubts in some countries about the veracity of green power claims. Since these customers truly cannot answer that question, particularly in countries with significant renewable resources and high participation levels, this could indicate a valuable opportunity lost to ineffective communication with customers.
  • In addition to environmental concerns, the global economic downturn of 2008 is clearly having severe impacts on consumers. Across the Core Group countries, the number of consumers paying a premium for green products and services is down 20 to 30 percent
  • This change in spending patterns also seems to influence perceptions of green power options among Core Group consumers who do not have (or know if they have) green power options. The percentage of these respondents who say they want green power options is down slightly, from 85 percent in 2007 to 78 percent in 2008. But, during that one-year period, the percentage of those willing to pay an additional 20 percent or more monthly dropped by nearly two-thirds, from 16 percent to just 6 percent. The percentage of those with green power options who actually buy them remained about the same, however. This is not surprising, given contractual commitments, significantly higher prices for non-renewable fuels in the past year (which eliminated some of the cost differential between standard and green power), and the overall commitment to the environment expected of buyers of green power. Still, prudence in launching new green programs may be wise until the global economy is in recovery. Extended recessionary conditions or further deterioration in consumers’ incomes might suppress acceptance of higher-cost programs until conditions improve.
  • As utilities, energy and product/service providers, and regulators begin the process of moving from the existing infrastructure base toward a participatory network, one of the most important questions in the public debate is, “What are the societal benefits of these investments?” Both customers and company shareholders need to be clear that these investments provide value. Utility companies need some idea of how programs will be received by customers prior to rolling them out – including an understanding of what groups they most appeal to – so that marketing and awareness campaigns can be effectively launched. To effectively determine the best strategy for a customer-focused transition to the participatory network of the future, every provider of energy or related services will need to construct an inventory of existing customer interactions with the spectrum of current and future providers, including how customers get information from governments, the media and even one another. These will collectively shape the customer experience and pinpoint wants and needs inherent in the experience they will find most satisfying; this is a representation of a generalization of the types of experience that will be incorporated into this ideal. This will in turn shape specific consumer segments view the technology and business advances associated with key interactions.
  • Important messages from providers do not always reach consumers, as evidenced by consumers’ lack of awareness of available green power options. In addition, only one in six consumers foresees a decrease in usage over the next five years, and only about a third say their provider can help them save energy – this despite strong efforts by the industry and governments to promote energy efficiency through utility providers. In particular, provider messages are not reaching the youngest consumers: those 18 to 34 years old are 40 percent more likely to not know whether they have choice in providers – and twice as likely to not even know their provider’s name. While all age groups will continue to rely heavily on their providers for information about energy (85 to 90 percent of respondents indicated this was a likely source), reliance on Web 2.0 content differed starkly. Ten percent of those aged 18 to 24 were likely to view social networking and online video content as important sources – three times the rate at which those over 45 expected to use these technologies. Similarly, those ages 25 to 34 expected to go to their now-familiar Facebook, Ning, YouTube and Revver arenas to gather energy information at almost twice the rate of the 45-plus group. Quite the opposite held true for government information. While 28 percent of respondents over 55 (more than one in three over 65) consider their governments a trusted information source on energy matters, only 16 percent of those under 25 would use this source regularly. So, those over 55 are more than ten times more likely to look to governments for energy information than to social networks and other Web 2.0 content while those under 25 are becoming almost as likely to use the latter as the former. To reach all generations, companies need to understand how different ages of consumers tend to educate themselves about providers and their offerings with the wide variety of media available.
  • The Energy Stalwart group is the most receptive to premium-priced programs and services; 49% buy green power if the option is available to them, and more than 70% would pay $5 a month for an energy management service that saved them an amount that exceeded that payment. Over 60% would pay for smart meters through either a monthly or one-time fee. Six percent have installed their own generation systems, versus less than one percent for the other groups.
  • By varying definitions, the first wave of the Millennial Generation - information-hungry, technology-savvy consumers - is somewhere in our 25-34 year old demographic grouping and fully encompasses the 18-24-year-old age group. It is precisely at this juncture that we see major changes in the survey results related to the ways consumers learn about companies and products, what they value and what they will pay for, and how they communicate with each other and companies with which they do business. This, ultimately, may give way to new customer segments that will influence the shape of the industry in ways unimagined just a decade or two ago. Not surprisingly, those ages 18 to 34 were most eager for the types of “self-service” and automated energy management that smart metering and smart grids will bring; after all, these young men and women have grown up with technology-driven interactivity with the world as an essential part of their lifestyle.
  • What may be surprising, however, is that this age group – and particularly those under 25 – were the most willing to pay a stated premium for these services of approximately US$100 as a one-time fee, or a monthly fee of US$5. The fact that well over half are willing to pay these premiums is remarkable because the income of the under-25 age group was the lowest in comparison to median incomes; 72 percent of the youngest respondents had incomes below national median household incomes, versus 51 percent of the rest of the groups. Compared with the percentage of highly-motivated FGs below the median income level (66 percent), one would expect this age group to be about as willing (maybe less) to pay for smart meters and their associated tools than FGs. But under-25s overall are about 15 to 20 percent more likely to pay than FGs – in fact, they are even more likely than comparatively wealthy and motivated ESs by a few percentage points. Having a message sent to a mobile device when power is out at the consumer’s home also garnered significantly higher interest from the under-25 age group (about 30 percent were more likely than the other age groups to be willing to pay US$1 per month for such a service). This finding may be related to the generally higher willingness of younger age groups to subscribe to these programs, to their higher rate of ownership of mobile data devices and plans (over 80 percent higher mobile device ownership, 45 percent higher mobile Internet plan subscription), or a combination of the two.
  • Energy and utility companies will need a strategy for aligning customer wants and needs with technology deployment roadmaps, beginning with rigorous customer segmentation and building an inventory of customer interactions. The combination of existing organizational strengths and new capabilities to be developed – one by one or in combinations – will form the basis for a broad menu of new products and services that the energy provider can offer. Each current (or potential) energy or service provider must be prepared to analyze its existing (or expected) customer base to determine their specific wants and needs before deciding how customers want to see new products and services emerge, as different programs will appeal to different subgroups of consumers. After preferences are assessed, they need to be applied to the customer interaction inventory in a way that identifies the interactions to be enhanced through technological improvements, regulatory change or improvements to communication channels. The wayHow emerging consumer preferences are met will can open new avenues for consumer satisfaction, create new revenue streams, define new business models, and accelerate technology deployment, lighting as we approach an ultimate end statethe way to a participatory utility network in which consumers, utilities, and service providers successfully share responsibilities and benefits.
  • To successfully integrate the voice of the customer into deployment roadmaps, energy providers and utilities must: Create an inventory of the customer interactions that collectively make up the utility customer experience Identify customer wants and needs specific to each of those interactions Choose select customer interactions that can be enhanced (to the benefit of customers) by leveraging the technical capabilities introduced through deployment plans Define the additional business capabilities that must be developed to translate technical capabilities into customer benefit Integrate the development of the net new business capabilities into your existing AMI deployment roadmap Communicate new plans and options to consumers in a way that is simple to understand and outlines the benefits and costs clearly The outcome of this program will lead to critical decisions about the customer-facing business capabilities on which the enterprise will focus. Existing organizational strengths and new capabilities to be developed – one by one or in combinations – will form the basis for a broad menu of new products and services that the energy provider can offer. Each current (or potential) energy or service provider must be prepared to analyze the specific wants and needs of its existing (or expected) customer base to determine how customers want to see new products and services emerge, as different programs will appeal to different subgroups of consumers. After preferences are evaluated, they need to be applied to the customer interaction inventory in a way that identifies the interactions to be enhanced through technological improvements, regulatory change or improvements to communication channels. Such consumer segmentation and analysis will be new to many utilities. For early movers in particular, lessons will come from consumer-focused industries outside the utility sphere, including industries with some similarities (other network-focused industries like telecommunications and cable), as well as those that are very different (like retail goods and banking). This needs to be an ongoing process; customer assessment will not cease to be important after the participatory network is in place. The good news is that the data required to perform this continual assessment will be ubiquitous and arrive in realtime from multiple sources of value-generating insights. But with this capability comes a challenge – finding new and powerful ways to collect, assimilate and evaluate this torrent of new data to inspire new programs and products that appeal to an expanding number of increasingly involved consumers.
  • Lighting the way exec v3.03ss

    1. 1. Lighting the way: Understanding the smart energy consumer IBM Institute for Business Value www.ibm.com/iibv
    2. 2. We conducted a new Utility Consumer Survey in the fall of 2008 as a follow-up to Plugging in the consumer in light of the year’s events Sample respondents 5,084 responses from households in twelve countries – two in North America (United States, Canada), seven in Europe (Germany, Netherlands, UK, Ireland, Denmark, France, Belgium), and three in Asia-Pac (Japan, Australia, New Zealand). The survey results were weighted to achieve a geographical distribution representative of relative population for each country. Questionnaire structure 34-36 multi-part questions in six languages covering a wide variety of topics including attitudes towards energy and environment, interest in green power, and energy costs. The survey was conducted during Sept.-Oct., 2008. A similar survey was conducted during June-July, 2007, and is used for comparison where questions were the same in 2008 as in 2007. 46% 38% 16% Source: IBM 2008 Utility Consumer Survey
    3. 3. Seventy percent of consumers queried in the 2008 IBM Utility Consumer Survey would experiment with new ways of interacting with energy providers <ul><li>From a historical base of almost entirely Passive Ratepayers, three new consumer profile segments are emerging </li></ul><ul><ul><li>Frugal Goal-Seekers (22% of survey respondents), energy consumers who are willing to take modest action to address specific goals or needs in energy usage, but are constrained in what they are able to do because disposable income is limited </li></ul></ul><ul><ul><li>Energy Stalwarts, (21% of survey respondents), energy consumers who have specific goals or needs in energy usage, and both the income and desire to act on those needs </li></ul></ul><ul><ul><li>Energy Epicures, (26% of survey respondents), high-usage energy consumers relatively unconstrained by budget limits; though they have little desire for conservation or active involvement in energy control, they are willing to experiment with new ways of interacting with their providers if programs do not interfere with their lifestyle </li></ul></ul><ul><ul><li>Thirty-one percent of respondents remain Passive Ratepayers </li></ul></ul><ul><li>Even more radical changes may yet emerge as the Millennial Generation (or Generation Y) continues to move into adulthood and the energy customer base </li></ul><ul><ul><li>More likely to purchase new products and services – and more likely to pay a premium for smart meters and their capabilities </li></ul></ul><ul><ul><li>Need to get better communication on providers and offerings through preferred channels </li></ul></ul>Source: IBM Institute for Business Value (IBV) analysis
    4. 4. Plugging in the consumer outlined a future for energy providers driven by technological evolution and increasing consumer control Source: IBM Institute for Business Value (IBV) analysis Operations Transformation Some combination of grid and network technology evolves to enable shared responsibility, but consumers either cannot exert much control or elect not to and the balance of benefits favors the utility Participatory Network A wide variety of grid and network technology evolve to enable shared responsibility, and consumers’ strong interest in specific goals creates new markets (virtual and physical) and new product demands, which balances benefits more equally between the consumers and utilities Constrained Choice Consumers take firm steps to move toward more control, but are limited to certain “levers” (technologies, behaviors, or choices in providers) by regulatory and/or technological constraints Passive Persistence Traditional utility market structures dominate, and consumers either accept or prefer the traditional supplier-user relationship Low High Technology Evolution Utility Industry Models 2007—2017 Centralized and One-Way Distributed and Dynamic Degree of Consumer Control
    5. 5. As this industry model unfolds, customers will gravitate toward specific behavioral patterns based on two key factors <ul><li>Two factors will determine the nature of the interface between utilities and consumers in the future: </li></ul><ul><li>The degree to which consumers take initiative in decision-making in their energy supply and usage toward meeting specific goals </li></ul><ul><li>The consumers’ disposable income available for energy choices in supply and conservation </li></ul>Disposable Income Available for Energy Choices Low High Decision-Making Initiative Taken Low High Passive Ratepayer (PR) Frugal Goal-Seeker (FG) Energy Stalwart (ES) Energy Epicure (EE) An energy consumer who is relatively uninvolved with decisions related to energy usage and uninterested in taking or unable to take added responsibility for these decisions An energy consumer who is willing to take modest action to address specific goals or needs in energy usage, but is constrained in what they are able to do because disposable income is limited An energy consumer who has specific goals or needs in energy usage, and has both the income and desire to act on those needs A very high-usage energy consumer relatively unconstrained by budget limits, but with little or no desire for conservation or active involvement in energy control Residential and Small Commercial Energy Customers 22% 21% 31% 26% Sample Size = 5084 Sample Size = 5084
    6. 6. <ul><li>Focus on Environment: Interest in green products, willingness to make changes to reduce personal environmental impact </li></ul><ul><li>Hunger for Information: Desire for more frequent and more detailed information around the cost and impact of personal energy usage </li></ul><ul><li>Willingness to Take Control: Motivation and desire to actively manage energy usage, cost, and environmental impact </li></ul><ul><li>Motivation to be Efficient: Willingness to take steps to increase energy efficiency through some combination of lower-cost and higher-cost actions </li></ul><ul><li>Knowledge about Providers: Overall awareness of energy provider and options that the provider makes available to manage efficiency, environment, and cost </li></ul><ul><li>Sensitivity to Cost: Degree to which behavior would change (or be limited) by the cost or energy or of options made available </li></ul>Using survey responses, we evaluated these types of consumers on six key attributes Source: IBM Institute for Business Value (IBV) analysis
    7. 7. Passive Ratepayers and Energy Stalwarts behave in almost directly opposite ways Respondent score in key attributes Average Source: IBM 2008 Utility Consumer Survey High Low
    8. 8. Frugal Goal-Seekers and Energy Epicures behave in almost directly opposite ways Respondent score in key attributes Source: IBM 2008 Utility Consumer Survey Average High Low
    9. 9. Cost remains the most powerful motivator for desire for control and willingness to change behavior Sample Size = 5084 Source: IBM 2008 Utility Consumer Survey
    10. 10. Consumers have a slightly more pessimistic view of cost changes over the next five years than they did last year What will be the impact of changes to your electric power and / or natural gas usage on you total energy bill? Sample Size = 5084 Source: IBM 2008 Utility Consumer Survey This pessimism increases the likelihood that regulatory structures, tariffs, and utility programs that are targeted on cost will resonate with consumers
    11. 11. Over 90% of consumers would like to have a smart meter installed, but there is no clear consensus as to how they would use the capability it provides Sample Size = 5084 Energy management capabilities desired, percent responding strong to moderate interest Source: IBM 2008 Utility Consumer Survey
    12. 12. The availability of green power programs is about the same as last year, but a high percentage of consumers are still not sure what is available to them Does your electric power provider offer renewable energy sources (such as solar and wind power) as an option for your household energy use? Sample Size = 5084 Source: IBM 2008 Utility Consumer Survey
    13. 13. Consumers in all countries which we surveyed last year are significantly less likely to “buy green” this year Percent of respondents that pay more for non-energy related environmentally friendly products Sample Size = 3345 (2008), 1893 (2007) 26% 25% 31% 29% 20% 27% Source: IBM 2008 Utility Consumer Survey We believe that this is a direct result of the impact of the global economic crisis on consumers’ overall willingness to spend
    14. 14. How much more would you be willing to pay for green power? (percentage of respondents) Among those with no known access to green power, 63% of consumers will pay a premium for green power, but only 1 in 10 will pay 20% or more Sample Size = 5084 Source: IBM 2008 Utility Consumer Survey
    15. 15. Compiling a set of provider-customer interactions is necessary to incorporate new preferences into the design of products and services Utility Customer Experience Enhance Service Learn Choose Connect/ Disconnect Use Pay Solve Problems <ul><li>Learn about providers and their offerings </li></ul><ul><li>Understand how a provider fits my needs </li></ul><ul><li>Choose services </li></ul><ul><li>Confirm services will meet my needs </li></ul><ul><li>Schedule service connect/disconnect </li></ul><ul><li>Activate service connect/disconnect </li></ul><ul><li>Hook up appliances </li></ul><ul><li>Monitor energy use </li></ul><ul><li>Receive bill </li></ul><ul><li>Review and understand bill </li></ul><ul><li>Request help understanding bill </li></ul><ul><li>Pay bill </li></ul><ul><li>Obtain information on outages and interruptions </li></ul><ul><li>Report an emergency </li></ul><ul><li>Request help with appliance repair or maintenance </li></ul><ul><li>Understand options for controlling costs </li></ul><ul><li>Understand options for conserving energy </li></ul>Source: IBM Analysis
    16. 16. The vast majority of consumers still see their utility as the primary source of learning about their provider and options Sample Size = 5084 Younger people use government information less than their elders and are more willing to use Web 2.0 tools to get energy information – and that use is accelerating Source: IBM 2008 Utility Consumer Survey Note: Respondents could choose more than one source, and percentages reflect selection of at least one option in the category
    17. 17. Energy Stalwarts are more willing to spend on new programs and services than the rest of the consumers Sample Size = 5084 Source: IBM 2008 Utility Consumer Survey
    18. 18. Age is a strong driver of likelihood of new program acceptance… Sample Size = 5084 Source: IBM 2008 Utility Consumer Survey Among all age groups, energy management services are most popular choice Percent of respondents that would pay a monthly fee for specific services
    19. 19. … and a key factor in assessing likelihood that those new programs can generate new revenues Sample Size = 5084 Source: IBM 2008 Utility Consumer Survey Percent of respondents that would like smart meters under different payment structures
    20. 20. <ul><li>The historical view of residential and small commercial customers as uniform and like-minded is not sustainable in the long run and is already be outdated in most places </li></ul><ul><li>There are critical actions energy providers must take in light of this shifting consumer landscape </li></ul><ul><ul><li>Invest in customer analytics and segmentation </li></ul></ul><ul><ul><li>Align customer requirements with infrastructure deployment roadmaps </li></ul></ul><ul><ul><li>Prepare strategies for meeting emerging customer requirements with attractive programs and services </li></ul></ul><ul><ul><li>Continually analyze key interactions and customer data relevant to them as it becomes available through Intelligent Utility Network infrastructure </li></ul></ul>To fully understand and benefit from these changes, utilities must take steps now to integrate the “consumer voice” into strategic planning Source: IBM Institute for Business Value (IBV) analysis
    21. 21. Aligning consumer needs with technology deployment will be required to demonstrate that public benefits will stem from infrastructure investments Create an inventory of customer interactions Identify customers’ wants and needs Choose interactions relevant to deployment plans Define business capabilities required Integrate new capabilities in Participatory Network roadmap Communicate new plans and options to consumers As more data becomes available on the Participatory Network, this process becomes cyclical and continually improves both the company’s capabilities and the customer experience
    22. 22. Key Contacts Visit the IBM Institute for Business Value (IBV) at: www.ibm.com/iibv/ Lighting the way is available at : www.ibm.com/services/gbs/lightingtheway John Juliano Global Lead, Energy and Utilities IBM Institute for Business Value [email_address] Tel. +1 240 361 8157 Michael Valocchi Global Lead Partner, Energy and Utilities IBM Global Business Services [email_address] Tel. +1 610 212-9763 Cheryl Linder E&U TL Marketing IBM Global Business Services [email_address] Tel: + 1 503 308-3771 Eric Lesser Research Director and North American Leader IBM Institute for Business Value [email_address] Mobile: +1 617 693 6418 Allan Schurr Vice President, Strategy and Development, Energy and Utilities IBM Global Business Services [email_address] Tel. +1 303 419 4296 Authors Other key contacts Plugging in the consumer is available at : www.ibm.com/energy/plugin

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