July 24th, 2013 | Published in Smart Energy
For many years the best way to insult a mobile operator was to suggest to them that they were just a pipe for voice and data. They’d foam at the mouth and point out that they were a brand, not a utility. They’d justify this by pointing out that they had marketing people and that they offered differentiated products. It took a far more expert brand in the guise of Apple to make the commercial point with the iPhone, which was offered to mobile operators on the “stick it up your pipe and smoke it” principle, giving the consumers to Apple and ultimately forcing the operators into a price war in supplying a largely undifferentiated consumer data pipe.
At the same time, utilities were beginning to think that they might be more than a pipe. Particularly in areas where the market is deregulated, allowing consumers to switch energy supplier, they’ve been toying with ways to attract customers through segmentation and selling other services.
On the same day this week, in the UK, we’ve seen two interesting examples of this playing out. O2, which had been chasing the health market with their Help at Hand and Health at Home products, unexpectedly pulled out. At the same time, British Gas launched an initiative to become the energy supplier of choice to young renters. It’s useful to consider what these say about the potential to gild your pipe and rise above the status of utility. As we enter the era of the Internet of Things, the market will need service providers who can aggregate services and who have trusted relationships with consumers. These moves suggest that although utilities and network operators ought to be well placed to extend their relationships, they may lack the skills to do so.
Starting with the bad news, O2 made the decision this week to terminate their Help at Hand and Health at Home products, even though they were only announced in March this year, with first deployments in April. There’s a sad irony that O2 made the announcement on the eve of International Self Care Day. This has to be one of the shortest product life cycles ever and is worrying because of the amount of work that has gone on behind it.
O2’s health offering wasn’t a hastily put together set of products to try and grab a new chunk of market. Telefonica – the parent company, has been running a health R&D lab in Granada for many years and has poured terms of million into getting mHealth and eHealth right. The UK service was a well put together one, that wasn’t just hardware and a contract, but an end-to-end offering with 24/7 call centre. It looked like the first genuine attempt to tackle the current hegemony in the UK telecare market.
I, for one, am sad to see it go. It’s not clear yet why it was pulled after just three months. The current UK healthcare climate will not have helped, but I suspect that it hit the eternal problem of how to sell telecare. It is an odd market, because you don’t know you need it until it hits you. Or rather, until it hits your parents. At which point you discover that there aren’t any shops selling it, most of what is on the web is expensive and needs decent DIY and technical skills to set up, whilst what’s available through the NHS is a lottery and mostly obsolete. As a purchaser you feel a bit like someone who’s been sent out into an unfamiliar foreign town, where you don’t speak the language, in an attempt to try and buy illegal drugs.
That O2 didn’t have the clout to make it work must be a worry for the industry, because telecare, if it is going to succeed, needs brands. Maybe it just didn’t fit in with O2’s latest marketing strategy of persuading us being more like a dog. It could be their marketers are wondering why users should bother with ailing parents when there’s a more interesting bum to sniff down the road? It would be good if O2 could share some of the reasons for its failure, as those are going to be important lessons for anyone following them. There are plenty of people out there who need telecare – the eternal problem is finding the channel to supply them.
Which brings me to British Gas. British Gas is the largest of the UK energy suppliers, supplying electricity and gas to around 11 million customers. They also been one of the most aggressive in searching out additional value-add services, and are particularly successful in boiler installation (furnace for our US cousins) and servicing. On the same day that O2 gave up on telecare for the elderly, British Gas announced it was targeting young house sharers with its new Me brand.
Me is a mobile energy (intriguingly not mEnergy) app, which is designed to make it easier for young people in shared accommodation to manage their energy and bills. The implication is that it allows people to split bills between housemates, manage moving house and taking their energy account with them, viewing how much their energy bill comes to, and seeing how much the next one is expected to be. It’s not clear whether that will involve splitting the ultimate responsibility for paying the bill, but it’s an interesting play to a market segment that traditionally has little engagement with energy.
There’s something to be said for an energy utility wooing this segment, as all the evidence is that established customers hate them. Accenture recently reported that consumer trust in utilities was at the lowest level since they started monitoring it. Their research shows that there is a growing gap between customer expectations and the energy experience they receive from their providers today.
Part of that gap is in expectation, which is where the Me application is interesting. Today consumers expect to get up-to-date data on their phones, PCs and tablets. The energy companies stand out as failing to grasp that. Even with smart meters, they’re only providing information a day in arrears in the best case, with many offering much less than that. It’s an industry that doesn’t embrace consumer technology. That lack of competence is only widening the perceived gap in customer’s eyes. The problem is that consumers don’t see the effort that goes into the reliable supply of power – they just see the occasions when it fails and when they receive what feels like a Dickensian customer experience. So engagement will probably only get worse compared to any other industry.
That makes Me interesting. It may be that utilities need to give up on the 30+ demographic that constitute the vast bulk of their users and start afresh. British Gas has worked with the Rufus Leonard consultancy to design Me and it looks appealing. They’re not alone in looking at the younger generation. In the US another consultancy – DEFG, has been working with students to try and work out how to sell prepay electricity – something which is still quite novel over there. There’s a good snapshot of their work in the report Prepaid Energy: Marketing to the Millennial Consumer, which touches on some of the same Millenial’s concerns that Me is addressing.
However, this is a fickle group. As one slide puts it, they’re after the six I’s: Integration with online platforms & apps, Instant access & gratification, Input on how the product could improve, Influence over the product itself, Involvement with the future of the product and Interactivity with the product. It sounds a bit like a Kickstarter mantra and I’m not sure that’s it’s very compatible with a utility. Maybe it would work for a mobile operator, but even there I’m not convinced.
Which brings me back to whether either energy suppliers or mobile operators can break out of the straightjacket which afflicts all utilities, which is that they have a product which isn’t really differentiable. It’s the same whoever you buy it from – all that changes is the price. So whatever they may do or wish to do, they will remain utilities. We’ll change suppliers intermittently where we’re allowed to. We won’t love them. However much they try, their mindset is about reliability of supply, not customers. We’ll forget that and castigate them when the supply is interrupted. And in return they’ll forget that they need to love us. Which is a great shame, as both the O2 and British Gas initiatives have a lot going for them. But as the current O2 adverts point out, in real life a dog just isn’t like a cat.
None of which is good news for the brave new world of connected devices and services masquerading as the Internet of Things. But that’s another blog.