IDC’s “Predictions Season”
The beginning of a new year marks the culmination of IDC’s traditional “predictions season”, during which analyst teams come together to predict the top 10 technology trends for the next five years. It’s one of the most exciting periods of the year for IDC’ers, as we get to work with our peers from around the world in what is a truly global effort.
For IDC Energy Insights, this effort rests on an analyst team that stretches from Europe to Asia, Oceania and North America. This blog expands on one of IDC’s 2020 predictions — that, by 2022, half of utilities and energy retailers will have reorganised their operations along the customer journey, leveraging agile to speed up processes and outcomes while increasing C-SAT by 30%.
Customer Experience: A Priority for Utilities Globally, a Must for Competitive Retailers
With customer expectations largely formed by digital-native, customer-centric brands from outside the energy industry, it’s imperative that utilities deliver an experience that measures up. Unfortunately, customer experience (CX) — or lack thereof — averaged just 3 out of 5 in a global IDC consumer survey and continues to be a real pain point for utilities. Improving it is a must. In particular, only 10% of customers globally are satisfied with the amount, relevance and timeliness of the information they receive.
While poor CX is a global utility phenomenon, it has deeper ramifications in those regions where the energy market has been liberalised, including Europe. Here, household switching rates have risen steadily over the past few years, surpassing 15% for either gas or electricity in countries such as Norway, Portugal, the Netherlands, Ireland and the UK. In fact, in the UK, switching rates reached a record high of over 20% in the year ending April 2019.
In these markets, challengers are emerging using digital channels, more personalised experiences, better service and lower prices. Unsurprisingly, IDC Energy Insights’ regional surveys show that improving CX is consistently one of three top business priorities for utilities, together with efficiency and innovation.
Reorganising Operations Around Data and Along the Customer Journey
More than episodic customer conversations, today’s energy companies must deliver a consistently positive and engaging customer journey at every stage, progressing from segmentation to hyper-personalisation. The secret? In-depth customer insights that reveal individual customer preferences, personalities, habits and motivations enable energy retailers to truly get to know their customers and create enduring personalised relationships. Energy consumers are starting to expect their energy suppliers to be aware of their personal preferences and needs and to offer a tailored experience. IDC research shows that these are the two areas where energy suppliers have the biggest gaps to fill — scoring a low 2.7 and 2.8 out of 5 respectively. In Europe, only about 20% of consumers think their energy retailer knows their needs and preferences, and less than 30% receive a personalised experience.
All is not lost, however. Spearheaded by some of the most innovative names in the industry, utilities are turning to data as the foundation for personalised CX transformation and are redesigning their operating models to support rapid CX innovation and continuous improvement.
Key Challenges to Getting CX Done
IDC Energy Insights’ 2019 European Utilities Survey highlights a number of challenges to successful CX strategy implementation. Not surprisingly, most revolve around data, including access, availability, integration and management.
Figure 1: Implementing a CX Strategy — Top Challenges for Utilities
Q.: Which of the following do you think are the top challenges to implementing a CX strategy? n = 220
Source: IDC Energy Insights, 2020
- Integrating data silos across the company and gathering data from new sources: To effectively reorganise operations along the customer journey, retailers will need to make use of data that is sitting across disparate back-end systems (e.g., customer information systems, meter data management, CRM) and tap into additional data that can provide insight into customer demographics, usage, experience and sentiment in real time. This includes digital channel and social media data, as well as, crucially, granular meter data for load profiling and disaggregation.
- Collecting customer data consent: GDPR requires that energy retailers ask for their customers’ consent. Most successful retailers typically offer tried and tested solutions to increase consent and manage its life cycle. This is a significant undertaking as it involves customer trust and the ability to persuade customers about the benefits, and, very importantly, let them experience the difference. IDC Energy Insights data shows that GDPR compliance has been the single most important data security priority for European utility retailers since GDPR came into force in May 2018.
- Identifying appropriate AI applications for CX enablement and the right tools to improve customer retention: To meet customer satisfaction goals and continuously optimise operations, energy retailers will need to provide machine learning and AI capabilities. They will need to leverage existing and new data sources to learn about and respond to customers’ expectations for convenience and hyper-personalisation, ultimately helping to deliver agility and empathy at scale.
A Word of Advice: Challenge How Things Are Done
Traditional organisations tend to be inward looking, rigid, strictly functional and heavily hierarchical. They are often laden with siloed processes. To thrive, they must become resilient organisations that can change frequently and quickly, and innovate continuously and rapidly to grab new opportunities as they arise.
AI provides the data analysis prowess to create a cognitive (“empathic”) digital retailer; customer journeys, agile and design thinking provide the blueprint to create a customer-obsessed organisation geared towards constant change. This goes beyond removing old silos — it requires a change of mindset.
Associate Research Director, IDC Energy Insights