Market segmentation: Defining a new attitude for utilities

By Patty Durand

SGCC Executive Director

Utilities now have a set of collective learnings from across the industry to answer some of their most basic questions during and after AMI deployments:  How can I best engage my customers? What can I do to drive smart grid program enrollment? What types of messages should I communicate and to whom? 

Recent research on Excellence in Consumer Engagement commissioned by the Smart Grid Consumer Collaborative (SGCC) examined a diverse sample of smart grid programs across the U.S. and identified key themes underlying best practices for successful customer engagement, including smart grid education, program messages, marketing tactics and acquisition channels.  

One key overarching theme that emerged from the analysis was that to fully engage consumers, utilities must transform their core service model from one that focuses primarily on service reliability to one that also focuses on customer needs and engagement.  But, it’s an evolutionary shift for a utility to go from serving all customers the same smart grid message and program to tailoring the message and offering based on customers’ needs, wants, habits and practices. Yet, some utilities are successfully employing practical approaches to market segmentation as a strategy for helping their marketing and engagement efforts become more efficient and economic.

Targeting based on demographic variables

The study found that a few utilities are targeting smart grid programs to particular customer segments, grouped homogenously based on demographic variables, such as square footage of home, having a smart meter, high/low income, use of central air, and average monthly bill.  Duke Energy targets customers for their DLC program based on wireless coverage, income, and whether or not a home has air conditioning.  Similarly, San Diego Gas & Electric tracks customers’ history with the utility and other demographic information that enables the company to construct customer “profiles.” Customer service representatives use the profiles to tailor interactions and refer customers to programs that might interest them. They find that higher-income and more technology-savvy customers have been more engaged in pricing programs.

The examples above show that demographic segmentation can help make the marketing efforts more efficient and economic.  But, it is severely limited in its application for optimizing program messaging and positioning.  How would you create messaging to position a smart grid program using only demographic variables, like income or household size?  Where would you even start?

Next page: Advantages of psychographic segmentation >>