The world we live in is increasingly “digital first” – from retail to banking to transport, consumers are more and more digitally led. As such, there is little doubt that this is the right option for the utilities sector, with recent research from Fujitsu’s Digital Inside Out report highlighting that one in five people always opt for a digital service first when made available. The challenge is clear for suppliers to make the most of digital services to better serve their customers. But making the switch to digital technologies like smart metering is not without its challenges.
Energy suppliers have a challenging five years ahead of them. Thanks to the government’s smart meter initiative, they are required to roll out smart meters to all UK homes and small businesses between now and 2020. That’s 53 million meters for 30 million homes and business premises.
Although it will be a lot of work for suppliers, this is a positive change for consumers and providers alike. For example, the move to smart metering offers potential for improved access to customer data. Inaccurate customer data slows down the switching process, so addressing this through the deployment of smart technology will enable suppliers to become more streamlined, reducing switching times and making the 24-hour switching process more manageable.
The rollout of smart metering is not just about reducing bills and monitoring spending. It is true that these are some of the benefits of the initiative, but another benefit to all in the industry will be a change in customer behaviour. Smart metering will encourage consumers to be more energy smart. For example, if a customer finds they are not seeing any reduction in usage when no-one is in the home, they will be able to spot this and rectify any potential problem quickly – thereby saving money.
These are just a few benefits that will be felt by the utilities industry and the customers it serves. However, before the nation and its energy suppliers begin to benefit from smart metering, there are some challenges we need to overcome:
For a start, we need to gain insight into customer preferences. If energy companies knew more about their customers’ preferences, they would be able to identify those that were least welcoming to technologies such as smart metering, or indeed those customers who are likely to embrace and take full advantage of it. It is this kind of insight that would enable suppliers to think strategically about how best to target customers who are likely to be slow to make the most of smart metering. If the implementation seems difficult for customers, they will resist, which will inevitably result in making the rollout harder, and more costly. However, customers are more likely to be in favour of the switch if they are being provided with a full digital journey.
Customer engagement and education is another challenge that needs to be overcome. With digital services and improved data accuracy suppliers could benefit by increasing their interaction with their customers, thereby increasing their understanding of them, improving services and boosting loyalty.
However, according to Fujitsu’s Digital Inside Out report, only 48 per cent of customers feel satisfied with the level of digital services provided by utilities, comparatively low when you compare it with financial services and the retail sector. In fact, the utilities sector came third when looking into where consumers want to see an improvement in their digital offering, coming behind only local and central government.
What is more, the research highlighted a need for digital from employees within the sector; 74 per cent of utility employees want to see more investment in digital services that will enable them to work more efficiently and remotely. This research suggests that energy suppliers need to embrace digital services in order to effectively communicate about the smart meter rollout. Through improved digital services, suppliers will have access to more customer information, which will enable them to be more effective in implementing the rollout.
Logistics is another issue that utility companies are going to have to tackle while implementing smart metering. Energy companies are going to need to strategically plan how they intend to ensure that every household and small business has their smart meters installed. For some properties this could involve multiple smart meters, which is where having customer data would prove useful and help energy companies be more efficient. However, it is also an area that will need digital enablement to increase data accuracy, because poor data input during the rollout will cause years of cost and lost customer satisfaction.
As our research has highlighted, there is a growing demand for utility companies to make more digital progress. This demand comes not only from customers but from employees, who believe that digital will help drive future success of the business. Digital channels provide a way of driving engagement with the consumer and gaining insights into their habits. Ultimately, it will help improve service.
However, unless there is good quality data at the start, maintained through use of digital technologies in the delivery, poor data will lead to mistakes in deployment. Consequently this will result in poor customer satisfaction and, potentially, customer loss. It could also lead to increased rollout costs. If costs increase on average by £10 per meter due to errors in data, it would result in a total cost increase of £530 million. Will suppliers be able to sustain this without impacting customer bills?
It is evident that the successful rollout of smart metering and 24-hour switching will depend on the quality of data. An effective smart metering rollout will help to change consumers’ energy habits and behaviour, as well as providing both the utility and the consumer having access to the right data at the right time.
Graeme Wright, associate director of manufacturing, utilities and services, and Russell Beale-Burchell, sales and business development lead for manufacturing, utilities and services, Fujitsu UK