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© 2013 IBM Corporation
Lighting the Way: Understanding the Smart Energy Consumer
John Juliano, IBM
EEI/AGA Conference and Exposition, Atlanta, GA, April 18, 2013
© 2013 IBM Corporation2
Agenda
� IBM’s Global Utility Consumer Surveys
� Strategic directions in response to findings
� Customer Service and the Next Best Action
� Contacts
© 2013 IBM Corporation3
IBM has surveyed over 17,000 people in 17 countries since 2007 to learn more about tomorrow’s home energy consumer
© 2013 IBM Corporation4
The context for the questions in the prior surveys was that of a dramatically
different future for energy consumers
– Better information
– More control
– Better reliability and power quality
– More participation
– Greener
Since early 2009, many other surveys have come out with a similar focus on
what consumers will look for in the future
The consensus among these had been that many consumers are eager for the
enhanced reliability, control, and new programs and services that these
changes will bring
In our first two Global Utility Consumer Surveys (2007 and 2009), we assessed the future wants and needs of residential customers
© 2013 IBM Corporation5
We developed a profiling that showed about 40% had active interest in engaging - but one-third were likely to stick with the status quo
Two factors will
determine the nature of the interface between utilities and consumers in the future:
1. The degree to which consumers take initiative indecision-making in their energy supply and usage toward meeting specific goals
2. The consumers’disposable income available for energy choices in supply and conservation
Disposable Income Available for Energy ChoicesLow High
Dec
isio
n-M
ak
ing
In
itia
tive
Ta
ke
n
Lo
wH
igh
Passive Ratepayer (PR)
Frugal Goal-Seeker (FG) Energy Stalwart (ES)
Energy Epicure (EE)
An energy consumer who is relatively uninvolved with decisions related to
energy usage and uninterested in taking or unable to take added
responsibility for these decisions
An energy consumer who is willing to take modest action to address specific goals or needs in energy usage, but is constrained in what they are able to do because disposable income is limited
An energy consumer who has specific goals or needs in energy usage, and
has both the income and desire to act on those needs
A very high-usage energy consumer relatively unconstrained by budget limits, but with little or no desire for
conservation or active involvement in energy control
Residential and Small Commercial Energy Customers - 2011
22%(22% in 2009)
33%(31% in 2009)
20%(21% in 2009)
24%(26% in 2009)
Sources: Valocchi, M, A. Schurr, J. Juliano, and E. Nelson, Plugging in the consumer: Innovating utility business models for the future, IBM Institute for Business Value, 2007; IBM Global Utility Consumer Surveys 2009, 2011.
© 2013 IBM Corporation6
By 2011, in some parts of the world, issues emerged on more immediate concerns that competed with those views of the future
Examples have been consumer confusion and uncertainty, negative press, and valid yet troubling questions about privacy, cost, and distribution of benefits
© 2013 IBM Corporation7
What are their most important influences on knowledge
gained, opinions, and attitudes toward behavioral
change?
How do perceptions of providers and technological
change shape consumers’ expectations?
What levels of knowledge do they have on critical
elements that drive their perceptions and expectations?
What expectations do consumers have for energy
service and providers in the future – and what sets these
expectations?
The most recent survey focused on energy consumers’ potential sentiment drivers – positive and negative
© 2013 IBM Corporation8
We found that, in aggregate, providers’ influence on messaging for their customers is now outweighed by other sources
Percent of respondents that listed a particular information source as the one(s) to which they are most likely to go to get information about energy cost, environmental impact,
alternative suppliers, or new programs and services (grouped)
Source: IBM 2011 Global Utility Consumer Survey
influences
45%
55%
38%
62%
0%
10%
20%
30%
40%
50%
60%
70%
Sources for which providers control
messages
Sources for which providers do not
control messages
NA/EU/ANZ/Japan, 2010
Growth regions, 2010
© 2013 IBM Corporation9
In 1979, a famous movie tagline noted “In space, no one can hear you scream.”
influences
In the past, when someone had a bad experience with a company,
only the individual would experience it.
Now, the world can know about it in seconds.
In 2013, pretty much everyone
can hear you scream.
© 2013 IBM Corporation10
Where consumers’ perceive a shortfall in attention, this presents a potentially huge problem
Source: IBM 2011 Global Utility Consumer Survey
8%
16%
13%
18%
21%
27%
37%
44%
46%
50%
0% 10% 20% 30% 40% 50% 60%
Adopts new technologies
and ways of doing business
Invests in advanced
technologies
Helps me manage energy
use
Supplies cleaner energy
Treats me as a valued
customer
This describes my current provider My provider should focus on this
perceptions
29 point gap
28 point gap
31 point gap
21 point gap
19 point gap
Percent of respondents who believe that their current provider does/should
focus on specified activities or attributes
© 2013 IBM Corporation11
Source: IBM 2011 Global Utility Consumer Survey
Consumer perceptions are a strong driver of opinions on new initiatives like smart grid and meter deployment
Percent of respondents who approve of plans to deploy smart meters for each of five levels of privacy concern
0%
10%
20%
30%
40%
50%
60%
70%
80%
Strongly
disagree
Disagree Neutral/Unsure Agree Strongly agree
Reaction to statement "These technologies will put my privacy at risk."
Percent approving of SG/SM deployment(NA/EU/ANZ/Japan)
Percent approving of SG/SM deployment (Growth)
perceptions
© 2013 IBM Corporation12
Source: IBM 2011 Global Utility Consumer Survey
The counter to these challenges is better engagement – better communication and information to each consumer
43% 42%
52%48%
52%
58%
67% 69%
75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Willing to share
information on energy
usage
Likely to change energy
usage patterns to achieve
goals
Likely to actively leverage
new information about
consumption
No or MinimalKnowledge
ModerateKnowledge
Strong Knowledge
Percent of respondents expressing their likelihood of taking on specific behaviors or behavioral changes
knowledge
© 2013 IBM Corporation13
Data source: IBM 2011 Global Utility Consumer Survey; Quote source: Quantitative Research into Public Awareness, Attitudes, and Experience of
Smart Meters (Wave 2), UK Dept. of Energy and Climate Change, February 21, 2013.
Higher levels of knowledge strongly correlated with increased belief that new technologies and programs will bring benefits
35% 35%
43%47%
40% 41%
50%
55%
50%52%
61%
71%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Believe they will have a
positive impact environmentally
Believe they will have a
positive impact on energy
costs
Approve of the deployments
underway or proposed
Believe they will bring benefits
to their family
No or Minimal Knowledge Moderate Knowledge Strong Knowledge
Percent of respondents holding positive opinions of smart meters and smart
grid deployment plans locally (underway, proposed, or hypothesized)
knowledge
Two years after we released this data, the UK Government’s Dept. of Environment and Climate Change (DECC) also noted that “higher levels of perceived knowledge of smart meters were correlated with increased support and interest.”
© 2013 IBM Corporation14
Consumers’ expectations for smarter energy products and services will be further shaped by their experiences with other industries…
Source: Valocchi, M, A. Schurr, J. Juliano, and E. Nelson, Plugging in the consumer: Innovating utility business models for the future, IBM Institute for Business Value, 2007.
expectations
© 2013 IBM Corporation15
… which are often viewed as offering more personalization and innovation around consumers’ specific needs
7%
9%
13%
14%
16%
16%
26%
Utility
Providers
Pay TV
Providers
Online
Retailers
Insurance
Providers
Telecom
Providers
Grocery
Retailers
Banks
Understands me and offers products / services that are aligned
with my needs
Approaches me with innovative products or services
Treats me like an individual and delivers a personalized
experience
expectations
6%
9%
10%
16%
17%
20%
21%
Utility
Providers
PayTV
Providers
Insurance
Providers
Telecom
Providers
Online
Retailers
Grocery
Retailers
Banks
6%
9%
12%
14%
16%
21%
23%
Utility
Providers
Insurance
Providers
Pay TV
Providers
Grocery
Retailers
Banks
Online
Retailers
Telecom
Providers
© 2013 IBM Corporation16
How consumers feel about the evolution of their providers today speaks to a need to refine, personalize, and target communications
Their influences are still skewed toward the traditional – but
increasingly these are sources that are from places where utilities
have no control over the tone or accuracy of the messages
Consumers have mixed perceptions of their current providers and
what they will be able to do in the future – and where there are
negative perceptions, more negative reactions are likely
For customer buy-in to smart grid and smart meter plans, providing
knowledge is an absolute necessity – the more consumers learn
about what is occurring, the more favorable they are toward it
They have been promised – explicitly or implicitly – great benefits
from the smart grid revolution, and their expectations are that
those promises will be fulfilled
What can be done to keep perceptions (positive and negative) aligned with reality? How can expectations be shaped by providing more and better knowledge in the context of the most effective influences?
© 2013 IBM Corporation17
Agenda
� The 2011 IBM Global Utility Consumer Survey
� Strategic directions in response to findings
� Customer Service and the Next Best Action
� Contacts
© 2013 IBM Corporation18
Today’s consumers demand that we know them as more than a demographic, a zip code, or a transaction history.
At the same time, they are exhibiting a digital body language that gives us a look into their passions, opinions, and sentiments – but it comes in the form ofmillions of pieces of data from hundreds of sources.
We must be able to determine what new insights that data offers.
© 2013 IBM Corporation19
Transactions
Orders
Paymenthistory
Usage history
Purchasestage
E-mail / Chat
Call center notes
Web click-
streamsIn-person dialogs
Opinions
Preferences
Desires
Needs
Characteristics
Demo-graphics
Attributes
Demographicdata
Transactiondata
They demand we know more, in part, because they are telling usso much more in so many more ways
Interactiondata
Behavioraldata
© 2013 IBM Corporation20
Geography
Inco
me
Age
Most segmentation approaches focus on two or three dimensions
Transactions
Sal
es
20
Anticipating consumer needs has relied on segmentation approaches that are too limited to give views of individuals
These are typically not actionable because customers are more complex than 2 or 3 dimensions – leaving them unable to truly seize the opportunities that customer uniqueness presents
© 2013 IBM Corporation21
Demographicdata
Transactiondata
Interactiondata
Behavioraldata
Descriptive analytics
Predictive analytics
Prescriptive analytics
Transactions
Orders
Paymenthistory
Usage history
Email / Chat
Call center notes
Web click-
streamsIn-person dialogs
Opinions
Prefer-ences
Desires
Needs
Character-istics
Demo-graphics
Attributes
Purchasestage
To do this, we need to make use of:
New analytics to make sense of this complex and intricate data
Multi-dimensional models developed to explain or predict customer
We can move from simply reacting to a customer contact to predicting the next best action that meets the consumer’s need
© 2013 IBM Corporation22
A useful approach uses Feature Vectors to give customers personalized profiles that can be meaningfully clustered
A Feature Vector is a model of the customer’s response (historical or predicted) to one
specific aspect of the value proposition
Each Feature Vector is like a gene strand in DNA, describing a facet of customer
behavior
Theses building blocks that can be assembled into larger models of customer behavior
Action Clusters are aggregates of customers into groups that illustrate similar
behavioral propensities across many Feature Vectors
Age +Age +Age +Age +Income +Income +Income +Income +
GeographyGeographyGeographyGeography
Preferred Preferred Preferred Preferred Channel(sChannel(sChannel(sChannel(s))))
Length of Length of Length of Length of Time as Time as Time as Time as
CustomerCustomerCustomerCustomer
Annual Annual Annual Annual Energy Energy Energy Energy UsageUsageUsageUsage
Zip Zip Zip Zip CodeCodeCodeCode
Needs and Needs and Needs and Needs and Opinions Opinions Opinions Opinions
Expressed via Expressed via Expressed via Expressed via Social MediaSocial MediaSocial MediaSocial Media
Predicted Predicted Predicted Predicted Retention RiskRetention RiskRetention RiskRetention Risk
History of History of History of History of OnOnOnOn----Time Time Time Time
Bill Bill Bill Bill PaymentPaymentPaymentPayment
Predicted Predicted Predicted Predicted Customer Customer Customer Customer
Lifetime ValueLifetime ValueLifetime ValueLifetime ValueProbabilityProbabilityProbabilityProbability
Of New Product or Of New Product or Of New Product or Of New Product or Service PurchaseService PurchaseService PurchaseService Purchase
Engagement Engagement Engagement Engagement Preferences Preferences Preferences Preferences with Energy with Energy with Energy with Energy ProvidersProvidersProvidersProviders
© 2013 IBM Corporation23
Source: IBM Institute for Business Value survey data 2010, n=21,740
Attitude
Cluster
Security-
oriented
individualist
Demanding
support-
seeker
Loyal
quality-
seeker
Price-
oriented
minimalist
Support-
seeking
skeptic
Informed
optimizer
% of
total
13% 12% 19% 18% 21% 17%
Key theme "I know what I
want and
organize
myself"
"I need personal
advice"
"I trust my
Energy
Provider and
remain a loyal
customer"
"I do not like
Energy
Providers –
make it cheap
and stay
away"
"I need advice
but prefer to
keep distance
from my
Energy
Provider"
"I take time to
research to
find the best"
23
But “attitude” is only one of what could be several key “feature vectors” that affect Energy customer behavior. For example, some Loyal Quality Seekers might prefer to use the Web while others might not, and thus “attitude” and “preferred channel” are feature vectors that might need to be estimated separately (depending on correlation between the two vectors).
An Engagement Preferences Feature Vector helps define how customers want to engage with providers
© 2013 IBM Corporation24
Predicted Retention Risk, used in the airline industry, could be a valuable Feature Vector where competition is emerging in energy
Service recovery & loyalty architecture
Em
otional S
ignal
Mighty Eagle Airlines
Platinum FF#941827614
Emotional Signal
Date
∑experiences
Transactionsfrom Data
Warehouse
Observations
DemographicDemographicDescriptionsDescriptions
External Data
ExternalExternal
FactorsFactors
(Weather)(Weather)
VariablesServiceService
RecoveryRecovery
Treatments
AnalyticInformation
Store(Emotional Index)
Consolidated Data
Information Formation
• Pre-Processed Decisioning Scores
• Financial Performance• Profile & Attribute Analysis• Goal Priorities & Constraints
• Risk Adjusted Lifetime Value• Forecasted Treatment Response
Feature VectorDevelopment
24
© 2013 IBM Corporation25
Personal Attributes• Identifiers: name, address, age, gender, occupation…• Interests: sports, pets, cuisine…• Life Cycle Status: marital, parental
Personal Attributes• Identifiers: name, address, age, gender, occupation…• Interests: sports, pets, cuisine…• Life Cycle Status: marital, parental
Relationships• Personal relationships: family, friends and roommates…• Business relationships: co-workers and work/interest network…
Relationships• Personal relationships: family, friends and roommates…• Business relationships: co-workers and work/interest network…
Products and Interests• Personal preferences of products• Product Purchase history
Products and Interests• Personal preferences of products• Product Purchase history
Social Media based 360-degree
Consumer Profiles
Life Events• Life-changing events: relocation, having a baby, getting married, getting divorced, buying a house…
Life Events• Life-changing events: relocation, having a baby, getting married, getting divorced, buying a house…
Revealed intent to buy Life events
Location announcements
Intent to move into/out of area
I'm thinking about buying a home in Buckingham Estates per a recommendation. Anyone have advice on that area? #atx#austinrealestate #austin
I'm thinking about buying a home in Buckingham Estates per a recommendation. Anyone have advice on that area? #atx#austinrealestate #austin
Looks like we'll be moving to New Orleans sooner than I thought.Looks like we'll be moving to New Orleans sooner than I thought.
College: Off to Stanford for my MBA! Bbye chicago!College: Off to Stanford for my MBA! Bbye chicago!
I'm at Starbucks Parque Tezontle http://4sq.com/fYReSjI'm at Starbucks Parque Tezontle http://4sq.com/fYReSj
I need a new digital camera for my food pictures, any recommendations around 300?
I need a new digital camera for my food pictures, any recommendations around 300?
What should I buy?? A mini laptop with Windows 7 OR a Apple MacBook!??!
What should I buy?? A mini laptop with Windows 7 OR a Apple MacBook!??!
Timely Insights• Intent to buy various products • Current Location
Timely Insights• Intent to buy various products • Current Location
25
Further intelligence based on social media analysis leads to “360o
Consumer Profiles”, which add depth and richness to the analysis
© 2013 IBM Corporation26
Build the capability to do this at massive scale
5
Generate insights in real time that are predictive, not just historical
4
Interconnectsocial media data, other forms of digital data and transaction datato paint a more vivid picture of each customer
2
Instrument all the key touchpoints to gather the right data on each customer
1
Run the right analytics, at the right time, on the right customer to generate new ideas on whom to serve and how to best serve that individual
3
Va
lue
cre
ate
d
Capabilities over time
Understanding each customer as an individual does not happen immediately, but follows a progression path over time
© 2013 IBM Corporation27
Agenda
� The 2011 IBM Global Utility Consumer Survey
� Strategic directions in response to findings
� Customer Service and the Next Best Action
� Contacts
© 2013 IBM Corporation28
Demonstration: Next Best Action in Utility Customer Service
Information
Analytics
Speaking with the
customer
Building predictive models
Defining the Next Best
Action
Creating marketing
offers
Establishes the Information
Supply Chain
Operations
© 2013 IBM Corporation29
Demonstration: Next Best Action in Utility Customer Service
© 2013 IBM Corporation30
Agenda
� The 2011 IBM Global Utility Consumer Survey
� Strategic directions in response to findings
� Customer Service and the Next Best Action
� Contacts
© 2013 IBM Corporation31
For questions and additional information, please contact:
John Juliano
[email protected] (240) 361-8157
Cheryl Linder
[email protected] (503) 533-2117
Vickie Dorris
[email protected] (423) 622-1498
http://www-935.ibm.com/services/us/gbs/thoughtleadership/ibv-knowledge-is-power.html
Consumers have been promised a lot with respect to the “new world of the smart grid”. And they want what’s
been promised to them.