Traditional energy retail models are based on linear supply from generator to consumer and largely aim to drive down the cost-to-serve - especially operational costs (including headcount), and technology costs (software ecosystem). This is a very inward-facing model where the focus on value is for the benefit of the retailer. The retailers that have fared the best are those able to scale up while minimising the cost of providing energy.
Today, linear retail models are becoming outdated as the energy ecosystem rapidly evolves to meet the needs of diversifying B2B and B2C customer segments. This is largely due to a handful of important changes:
- The influx of distributed renewable energy resources
- Enabling hardware such as smart meters and battery storage
- Emerging markets like Virtual Power Plants and demand response
Succeeding in energy retail now is less about driving down cost to serve and increasingly dependent on the retailer’s ability to provide products and services that meet the needs and opportunities of specific segments. For example: low-cost overnight EV charging for residential consumers, providing access to smart Power Purchase Agreements, demand response, and grid services for commercial and industrial customers. Today, attracting and retaining customers is predicated on the ability to provide products and/or services that reach beyond provision of a basic commodity.
Balancing cost out and value in
Achieving harmony between cost-out and value-in has historically been impeded by legacy billing/meter-to-cash systems, which are inflexible, designed to serve a limited number of energy products (tariffs) and often based on outdated, siloed customer service models. As new products, services and alternative customer journeys are increasingly required to meet the evolving needs of the market, adding to these legacy platforms entails costly and time-consuming custom code and painful operational/workflow changes. The cost of change often outweighs the potential return of capturing market share in a new segment - especially when returns on novel propositions may not be guaranteed.
So, how do energy retailers find a better cost:value balance? And can they really have it all?
First, let’s look at increasing value. Retailers cannot sell what they cannot bill. Therefore, if legacy systems cannot be easily adapted or evolved to connect products and services with customers (if at all), then they are no longer fit for purpose. Configurability, advanced integration capability, and automation of basic tasks and industry processes should be the fundamental hallmarks of modern energy retail platforms. Indeed, this is the minimum functionality required to drive value in, and cost out.
When it comes to reducing cost, without doubt technology can also affect significant improvements, such as:
- Automating standard industry processes including switching, field service and metering files
- Enabling configurable and automated debt flows and customer communications
- Enabling intuitive operator interfaces, self-service customer functions, and configurable solution support
- Easy adaptation to various customer service models
Modern technology is essential to thrive in the new energy economy
Process improvement, automation, customer centricity, configurability, adaptability (and more) are all benefits of contemporary retail solutions such as those provided by Flux. And while managing cost-to-serve will always remain a priority for retailers, the focus has shifted to capturing and delivering value at every stage of the customer lifecycle. This is what’s needed to not only survive but thrive in the new, highly distributed energy economy.
By providing value to customers, retailers also capture value through better retention and overall customer lifetime value. In some cases, such as with Virtual Power Plants, the service can be mutually beneficial with returns split between retailer and consumer.
Flux can help you have it all
Flux has a strong track record in supporting and enabling energy retailers to capitalise on the dual demand with software that delivers value in as well as drives improvements in cost-to-serve. Our pricing and billing solutions allow retailers to bill any tariff, price any plan, and deploy new propositions faster to reach new market segments, all while ensuring total accuracy. Speak to our team today to book a demo or find out more.