Customer Segmentation

Customer Segmentation

Published In: Intelligent Utility January / February 2012

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AS ELECTRIC UTILITIES IDENTIFY THE BEST ways in which to engage residential customers with tailored smart grid products and services, customer segmentation efforts are being re-examined and refined.

An Accenture global study released in mid-2011, "Revealing the Values of the New Energy Consumer," noted: "As more consumers gain access to smart in-home technologies, utilities have the opportunity to offer new, value-added products and services in both regulated and competitive markets. However, these opportunities will likely attract new market players and may lead to industry convergence. Utilities that embrace the perceptions and behaviors of their consumers will ultimately generate the most value in the evolving energy marketplace."

Analysis-based segmentation
An analysis, within the Accenture report, of answers received concerning customer preferences showed six separate categories for residential customers:

  • SELF-RELIANTS: This group prefers to manage electricity consumption on their own. A demographic breakdown indicates self-reliants have a higher proportion of women, and a higher proportion of consumers who are 55 years old or older.
  • SOCIAL INDEPENDENTS: This group enjoys testing new technologies. Social independents have a higher proportion of men, and are found at all ages and levels of income. They value a program that allows them to connect with a community and share experiences, and like the idea that a program would be regarded as "trendy" by family and friends.
  • COST-SENSITIVES: This group looks, above all, for the best financial rewards. Cost-sensitives have a higher proportion of women, and include a relatively high proportion of consumers who are 25 to 34 years old. This segment has a higher than average share of lower-income consumers.
  • SERVICE-CENTRICS: This group would like the best service for themselves and their families. Service-centrics have a higher proportion of women, and are spread across all ages and income levels.
  • TRADITIONALISTS: Traditionalists prefer a familiar experience. They are divided equally between the genders and levels of income, but have a higher proportion of consumers who are 55 years old or older.
  • TECH-SAVVYS: This group values convenience and efficiency. Tech-savvys have a higher proportion of men. They include relatively high proportions of consumers 25 to 34 years old and who are high income earners. They are more likely to choose a program that simplifies their lives.


Using information wisely
This is but one example of customer segmentation. Some utilities, using what they know about their customers, and available demographics, have segmented differently. There is no wrong answer here, just a number of different ways of breaking down a utility's customer base into actionable segments-groups who are more likely to accept and benefit from one type of program rather than another.

The key here is that customer segmentation is imperative to program planning and implementation.

And it begins with looking at what you know about your customers, and what might be important, such as age, income level, preferred method of communication and home ownership. To be most effective, any segmentation effort needs to be able to combine customer information with account and premise information.

Put quite simply, good customer segmentation is the key to being able to launch successful project pilots, and to being able to provide the products and services customers want.

Price in the new economy
As the categories listed indicate, price is not the key motivator for all customers. However, in broader project deployments that cross customer segments, price needs to be placed near, if not at, the top of the list. Harsher economic times have forced even more financially comfortable households into adopting new attitudes about the ways in which they spend. In the same study, Accenture found that 83 percent of the global population in the survey said that the No. 1 impact for them was the cost the new service would add to their utility bills.

The perception of value-and value that exceeds the cost of the service-is imperative, and must be addressed in utility marketing in such a way that each segment of the utility's customer base perceives its importance to them. As an example, cost-sensitives would first look for the financial reward: Will this new service end up saving me more money over the course of the year than what I'm spending on it? Tech-savvys, on the other hand, would want to know: How much will this new service simplify my life?

With the proper advance effort, consumers can be better engaged with the products and services that best fit their needs.


 

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