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Show 120 – Future of e-commerce and brand communications in utilities

Produced in partnership with SAP, we discussed the future of e-commerce and brand communications in the utility sector.

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Joining Russell Goldsmith online were:

screenshot of guests

Florian explained that he was keen to bring everyone together for the podcast as these are interesting times, not only because of the Covid-19 pandemic, but because of what has happened to the telecoms over the last 10 years has carried over to utilities. He said one factor of utilities that needs to change is digitisation – the change of relationship from being very meter centric to putting the customer into the centre of what they’re doing. Florian said on top of that, there’s climate change, so they have to shift the focus more on to renewable energies. He said they see that communications are changing with customers – less event driven. Florian said he met Fridrik some years ago and what really impressed him was Fridrik’s brand management and how utilities companies need to change on the technology side, as well on their own. He said that thinking about what their vision and mission are on the brand is equally important. He explained that he believes that from time-to-time experts need to come together and openly talk about what’s happening and to really check and see where they are in the industry, check on the industry and what can be done.

João explained that EnBW is the second largest utility company operating in Germany. They provide electricity, gas and water to customers and have around 2.6 million B2C customers. They also provide products like mobility and telecommunications with around 25,000 employees, with their main operations in the state of Baden-Wurttemberg, South West of Germany. They have other units in Sweden, in the US, in Taiwan, who focus on offshore and some other providers being in Switzerland and France. He explained that in the last years, there have been a lot of transitions going on in Germany within this energy event. He said they saw the phase out of nuclear energy in 2012 and from 2012 until now, they have to restructure the brand to accomplish this move from the German government and now have a more ambitious goal, to become completely carbon neutral by 2035. João said that they are trying to change the way the customer sees them, not only as a utility, but also as a solution, infrastructure provider, he said it helps tie them throughout this energy transaction.

Fridrik explained that clients at LarsEn Energy Branding are late to catch on in understanding what green energy renewables is all about, but that’s understandable because the customers themselves don’t even understand what it is. He said that the customers can’t distinguish between what is green, sustainable corporate social responsibility or just regular sustainability. He said all these words come to a mix in the consumer’s mind, so traditionally, the utilities are showing typical green commercials, but people just don’t understand it. Fridrik explained that people in different states in the US, different places in Germany and the Scandinavian countries all have a different mentality. Therefore, he said you can’t use one approach for all, many of them are doing good things, but they are not telling about it efficiently. Therefore, Fridrik explained that he is ‘the marketing guy’, he understands you have to make a profit as a company, but if you cannot tell people what you’re doing, all the nice things that you’re doing, you might as well not have done it. Fridrik then agreed with what Florian said about changing times and said disruption is twofold. One is in technology and the times are changing, the paradigm is pushing from utilities being monopolies and oligopolies into where customers have the choice. Therefore, he said the utilities focus too much on only the technological side, but many of them disregard the disruption in the consumer’s mind. He said if you look 20 years back, nobody could have imagined a company like Uber or Airbnb for example, people think differently. Fridrik said that many utilities are going about doing business like they used to, using legacy measurements that don’t work anymore and he said they need to adapt the way they think.  He said the biggest challenge is not how to do the marketing, but to fight internal cultures of shifting mindsets and that people like João, are innovative people that understand the need to change, more than the marketing people themselves. Fridrik said they haven’t seen many changes over the last few years in terms of the analysis they did in ‘The World’s Best Energy Brand Report’. He said he hasn’t seen any changes in statistical analysis, but there has been a movement of understanding, where you move from egocentric approach to a customer centric approach. He said that to American companies, five years ago, the concept of green was almost non-existent, but it’s moving slowly. He said there’s a tremendous difference between Europe and the US – the European companies are much better in terms of communications and branding.

Florian agreed and said that because he works in a global role, he works with European utilities as well as US. He said they get approached by their customers that are even in the US, who are starting to think more about renewables and being green. He said it’s coming slowly but there is a movement, and everything needs to run hand in hand, so they have to have the technology as an enabler, but the mind set too. He said that is something that needs to be supported from top management of the utilities, down to the call centre agent, everyone needs to understand where the utility is, what their vision and mission are, where they need to go and what the values are that they want to express to the outside world. Florian said he believes that the similar revolution we saw in Telecoms with smart phones and electric vehicles could be something in utilities. He said he sees a big opportunity for utilities to step up and fill in the role, the energy experts that they are.

João explained that you can sell green energy and at EnBW they do sell green energy, however, what they sell is basically certificates that say the energy is being produced from a renewable energy source. He said that if the customer wants to be 100 percent sure that they’re using only green energy, they will have to install solar panels and batteries. João explained that this is because of the way that the energy system operates, all the energy that is being produced floats to the same thing. So, in the end, you are buying renewable energy, however, you are being supplied with the whole mix of the country, which will also have all the other sources of energy within it. João said it can be quite confusing for the customer and they see a lot of challenges trying to explain to them a little bit what they get when they buy the renewable energy. He said if the customer is going to buy renewable energy that is made in Germany, they’re willing to pay a little bit more than if they’re going to buy energy from outside of Germany. Therefore, João said they have to change the way that they market themselves. He said it’s not about only the way that they communicate, it’s also the way that the customer perceives it, which is quite complicated and most people, at the end of the day, just want to put their plug in the socket and get the energy and in the meantime, do something good for the environment. He said that’s what they try to do, they try to give the possibility so that customers can actively engage on the energy transaction and try to make it as confident as possible so that they actually use the product.

Fridrik said that João raised an interesting point because customers are confused. He said when you talk to them about Green, they understand it in so many different ways, so if you are unable to tailor your message quite clearly, you have to break down these green segments. He added that customers are also very sceptical and on the academic side he has done research on this in several different countries. One of the main things he found associated with green energy is actually scepticism, because we have come from times when greenwashing was commonplace and that companies weren’t transparent in what they were doing. They were trying to sell something green, but they were selling a terribly polluting product but because they planted a hundred thousand trees they thought they could say they were green. Fridrik explained that this is one of the reasons why a utility of today has to be extremely transparent, they shouldn’t be trying to hide anything because the only way that they are going to win the consumer’s mind is being human, being honest.

Fridrik then referred back to ‘The World’s Best Energy Brand’ report they published. He said one of the category’s is Green Brands and last year, they called the winners to the stage and he didn’t give them any time to prepare or didn’t tell them what question he’d be asking. He asked, ‘why do you deserve to win as the world’s best energy brand?’. He said it was a sudden question and there was a lot of people watching them, but he said they are smart people and overall, they answered it’s about being human about your work. Fridrik explained that traditionally, utilities come from a nonhuman, mechanical approach, and an engineering culture. He said the social scientists’ aspect was kind of frowned upon. He said that Covid has actually changed somewhat to the better some of the utilities that he has worked with because now they have to be open, there’s a pandemic going on, people are dying. He said there’s not a time to be strict on collecting the bills, some of them have even employed health workers to give good advice and they are actually showing a better side of themselves that they’re used to because they are not afraid of being judged, they’re just trying to help a bigger cause. He said this will change the way many of them think afterwards, it’s okay to be normal, it’s okay to be like this, just be human, be yourself.

João agreed and said that being human, creating trust with their customers is very important. He said that trust is the basis for all interactions that they have with their customers, so it’s important that they listen to them. He said that at EnBW, that is something that they’ve been focusing a lot, they are putting a lot of money on market research too, inviting the customer to talk with them, trying to understand what they actually need. João added that it’s all about the way that the story is told to the customer, to actively engage with them and see what actually makes them tick and fulfil those needs.

João said in terms of competition, in Germany alone they have around 800 utilities operating. He said it’s very complicated for a utility to actually get into the market because they will immediately go into a price war because everyone wants to give a little bit more incentive to the customer but at the end of the day, they are operating a business that in itself has to be sustainable in an economical point of view. He said you can’t just give the energy for free to the customer, so what they try to do is provide more value to the customer who is willing to pay more and try to be as transparent as possible. He said that’s why their vision is to go towards both sustainability and also comfort, both at the same time.

Florian agreed with what João said, he said he lives in Germany, and there is a broad variety of utilities to choose from, in the end, it’s about the price. He said they don’t know if they add additional services or value, but this is something that needs to happen because otherwise it’s only about these wafer-thin margins like switch bonus and the incentives, but he said they are so much more than that. Florian added that people, especially the elderly, are afraid of switching because they believe if they do so, the next day, they might have no energy or no electricity because they don’t understand what is really happening. People think that they already have something that works, so they can’t switch. He said there’s the other side of the spectrum too, the ones that do switch regularly and there’s a broad mass in between. He explained that if you look for help, you are still quite alone and this is where there is a big opportunity, because SAP do a lot of industries and see their competitors moving in from other industries, big oil and gas or big retail companies. They are very strong on the brand, strong in the B2C business, they do offer a combination of other value-added services and it could be a logical extension and try to win the market there.

Florian said there’s no golden rule with what works best in terms of marketing solutions with SAP clients, but most of them look into the area and want to go beyond commodity. He said there are different approaches. He said one approach is putting the customers at the centre. For example, their interest may be in getting the newest PlayStation, they may want to have the newest iPhone and then pay it off and subsidise it by having a two-year contract and pay it off over time. Florian said that getting the newest PlayStation and a two-year contract may not the cheapest tariff, but the customer can pay it off over time and renew it after one and a half years. He said in Australia and New Zealand, for example, there are highly competitive markets where consumers want to be something like a lifestyle provider. They can connect it with their smartwatch and if they do ten thousand steps a day, they earn loyalty points then with those loyalty points they can convert it into something like bonus points or cash rewards. Florian added it’s about creating a relationship with the customer where they think about utilities more, not just when the bill comes, but trying to build up something that is longer lasting or more frequent.

Fridrik said when it comes to the Covid-19 pandemic, it doesn’t affect utilities as heavily as others, the revenues are more or less the same in most cases. He said in terms of what people always do wrong in the world is they seem to just look at the better end of the quarter and they have to cut costs. He said the easiest thing to cut is the marketing costs. Fridrik said he is a branding person and that’s a philosophy running a company, they are cutting marketing costs, which means that they will be a weaker brand coming out of it. He said compared to tourism and other industries, this industry has not been that much affected.

João agreed and said there has not been a big change in terms of the end result, however, they have seen that for B2C customers, there was a small increase in their energy bills, and he said it’s logical because people are working from home. He added they are also seeing a shift in the peak of energy consumption from later hours into the day. João said in their case, they also acquired a telecom company and expanded their business on the offshore so overall, in spite of the crisis, they were able to reach the goals they had set off with. One thing that changed a lot for them was moving to working from home, they had no interactions with colleagues or customers, it was digital first.

Florian said that this has that meant some of the briefs that they get have been accelerated due to Covid in terms of digitisation. He said where they were contacted at SAP, the utilities were reaching out and they said, for example, that their call centre guys needed to work from home, how do they go about this as they see an increase in need of the whole digitisation. So, then they have self-service selling so that the customers can sign up to, meaning the whole notion of acquiring new customers can work in an automated way, that was something that increased a lot. He said that working from home is challenging for everyone, but the lights need to start to stay on and business has to go on.

João said the German government decreased the amount of taxes that they put on products during the pandemic. So, energy tax on 90 percent was decreased to 40 percent to reduce the impact that it had. As for the loss of jobs, they have a lot of mechanisms taking place to make sure that there was still a service provided to these people. João said the biggest change actually came from the political side, a lot of political decisions were made early on in Germany to make sure that these people were not left alone which he said was a very good move from the German authorities.

Fridrik agreed and said governments were more or less helping out, as well as the utilities. He said everybody’s working together on this.

Fridrik said that brands tell stories and that’s is how they touch people emotionally, that’s one half of brands. He explained that the other half is the rationality, how they can actually make people’s life easier with having electricity flowing for example, they have to have a holistic picture. He explained that a company like João’s they have to understand why they exist, because he said the why of their existence today is not the same as 20, 30 years ago. Fridrik said they have to have an understanding of what their story might be, a story that’s interesting to their clients, and then implement that story on a large scale through the whole system and just constantly touch and engage with people because that’s what creates trust at the end. He said if the utilities don’t pick up on it soon enough, their death will be faster than many have predicted. Their main weapons are a good story, an understanding of the client, and the best IT solutions.

When asked what key trends to look for over the next few years, João agreed with what Fridrik said, he explained that they are also trying to move two things. One is to make the customer a little bit more energy cautious, also to be putting active role on the energy transaction. He said they do that by providing any new customers for EnBW only with renewable energy, they also acquired Cynic, the second largest battery supplier, so they are giving the possibility for consumers to become customers and supply their own energy to fulfil their own needs. Going to the future, João said one thing that’s going to be very important to do is actually build this digital layer, which is going to manage all these new renewable energies that are going to be in place because the system is going to get even more complex than it is now. He said it’s going to help them to do this smooth transaction and help to achieve the goal of becoming completely carbon neutral.

Fridrik said a mega trend that we all know about is, of course, becoming green. He said he designed a scale called EBBI, Energy Branding Benchmark Index, which helps companies to understand how strong they are from a position perspective, which is the essence of a strong, good brand. He said this year they added the sustainability aspect as a special dimension because there are four main dimensions. Until now, he said it didn’t really matter in positioning because it had such a low commercial impact, but it only predicts about 10 percent of the purchases. Fridrik said if you are a utility that’s going to go and become green when the market becomes green, that’s wrong because you cannot predict those points, you have to go in really fast, you just have to be it. He said people should look into how people in New Zealand are doing things, he added these are the best cases of energy brands basically. He said you have to move towards that greenside of life without telling everybody. Just be green.

Florian agreed and said the future plan is and what utilities need to evolve into is something similar than what the iPhone did to the market. He said they have complex things, but simplify it for the customer, put it with a nice brand. He said Apple revolutionised the market, so that it was easy to use and intuitive. He said in utilities, turnkey solutions are needed for things to come and that we don’t need to expose it all to the customers. He said they need to help people around their home, to live greener, to be more sustainable to help customers with what they can do to live a more sustainable life, Florian believes that utilities can and need to step up as the big trend moving forward.

To find out more information about the work SAP are doing in the utility sector, visit the Utilities section of their website, that is full of reports, further information and supporting videos.

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