Small and mid-sized business accounts offer a large and largely untapped opportunity for energy efficiency, cost-of-service reductions, and revenue growth. Unfortunately, many energy providers struggle to engage these segments, often lumping SMBs in with residential or C&I programs.
Big Problems With Small Business
The two greatest threats utilities face are slowing demand and disruptive technologies. In looking to address these threats some energy providers have considered major business process changes and radical strategies for new revenue generation. Unfortunately, very few seem to be looking toward SMBs as a possible solution.
That's a shame. Small and medium accounts offer a large and largely untapped market for energy providers. With minimal changes to operating models utilities could potentially increase revenues and cut service costs to this critical segment.
However, before energy providers can achieve these positive results they need to recognize that SMBs are different from both C&I and residential accounts.
Energy Providers Are Searching For New Sources Of Revenue
Demand is flat, disruptive technologies loom on the horizon, and many energy providers are looking for new revenue opportunities.
According to Utility Dive, Pacific Gas & Electric now offers wireless cell tower co-location as an additional revenue source. Florida Power & Light offers a “surge shield” program that protects major appliances for $11/month. And FirstEnergy provides a professional tree trimming service as a source of additional revenue.
These new revenue opportunities will likely add some buoyancy to the bottom line, but chances are they won’t be enough to offset stagnant electricity demand growth.
Alternatively, if utilities can better engage their SMB accounts they can unlock large opportunities for both cost reduction and new sources of revenue without making major changes to their core operating model.
SMBs Offer A Large Opportunity
There are a lot of small and mid-sized accounts.
The department of labor statics estimates there are 29.6M SMBs currently operating within the United States and ACEE estimates that business facilities with under 1,000 MWh of annual consumption account for between 40-50% of total commercial energy consumption.
However, SMB participation in utility programs is dismal.
A 2017 Navigant report found that SMBs participate in demand side management programs (DSM) at a rate three times lower than non-SMB accounts. SMBs are simply less engaged with their energy provider than their C&I counterparts.
SMBs want more options - According to Accenture 34% of SMBs actually want their utility to offer new products relevant to their business but few of them feel that they currently have access to those options.
SMBs can help reduce costs - Business customers also make up roughly only 10% of utility accounts but contribute nearly 20% of customer service costs. Developing better relationships and proactively engaging with SMBs can eliminate costly call center time and save the utility money. In fact, Accenture estimates that better digitizing services to small and midsized accounts can potentially reduce cost-to-serve by 20 to 50%.
Finally, SMBs can help energy efficiency programs. According to a 2013 report by the Preservation Green Lab, the energy efficiency potential of 7 million (gas customers in this study) small businesses in the U.S. is enormous: savings of 1.07 quadrillion Btu (British thermal units) of site energy.
Energy Providers Struggle To Engage SMBs
Despite the large potential, many utilities don’t fully appreciate the needs of their small and mid-sized customers, often lumping them in with residential or C&I accounts. Until energy providers realize that their small and midsized business customers have unique needs and expectations they will continue to miss large opportunities for revenue growth and cost reduction.
SMBs are not like residential accounts.
The wide range of business types, usage profiles, and unique externalities across business consumers creates wildly differing energy profiles. Segmenting SMB accounts is simply much more difficult than segmenting their residential counterparts.
For example, single family homes of similar sizes would likely benefit from the same energy efficiency tips, making a generic program much easier to design and promote to that segment.
A neighborhood dry-cleaner, however, would have drastically different energy usage and different efficiency needs than a small manufacturer, or school building, or any number of other business types.
SMBs are not like C&I accounts
Unlike large customers, small business owners often don’t have the time, capital, or expertise to invest heavily in energy programs for their business. According to GreenTechMedia, "Although energy consumption can account for as much as 20% of a SMBs costs, their staff are too focused on the core functions of the business to dedicate time to improving efficiency".
Interactions with the utility need to take those constraints into account. Unfortunately, when utilities offer programs, services, and digital customer experiences meant for C&I accounts to their small and medium customers, they end up overwhelming those less sophisticated customers with complex language, programs out of their price range, and information that is too technical to be of immediate value.
Utilities need to change their approach to SMB customer experience. If they can, they have the opportunity to reap massive rewards. Learn more about SMB engagement techniques by following the link below.