Communications
around energy - its effect on the economy and the environment and the
undeniable impact it will have on our future - will drive how well government and industry can create public acceptance of the transformations energy will bring to lives. I know that sounds pompous and over the
top, but in the next couple of decades how we power our lives is going
to be transformed in ways only the dreamers can imagine.
What
this blog will do is translate the
technical language of engineers into words we lay people can
understand. Readers will be in a better position to
comprehend the impact on our lives of all the new gadgets and methods
of delivering power.
Most of
my posts will be on what is called the "Smart Grid", a network of
power generation and delivery of electricity to residential and
commercial consumers that uses two-way communications. The Smart Grid will:
Mean
greater efficiency;
Eliminate the devastating impact of power outages;
Spread the use of electricity over a larger portion of the day thus lowering costs;
Allow
consumers more control over their electricity usage;
Leaving a
cleaner environment to future generations.
The Smart Grid will replace the current century-old electric grid, which if left intact will, within a few decades, become an unreliable monstrosity. The current grid will require investments of trillions of dollars just to maintain its current capability and it will still be highly unreliable with outages and brown outs becoming even more common.
Power
delivery is going to change out of necessity. The main reasons:
population growth, globalization of more industries and, yes, climate
change make it necessary. It's simple, our economies and civilizations
cannot run in 21st Century mode using energy derived from processes that are stuck in the past.
Here's a two minute video with an overview of the Smart Grid.
I hope you tune in. Rocket ship Earth is about to be powered forward by amazing new fuels.
I attended the 13th annual Energy Efficiency and Renewable Energy Forum in DC on Capitol Hill this past week and walked away with a sense of urgency tempered by a sense that politics could block meaningful progress.
Sponsored by the Energy and Environmental Studies Institute (EESI), the forum attracted a diverse crowd who are all singing from the same song sheet...the country can move on a path to security, independence and economic growth through energy efficiency, while investment in new technologies will answer many job needs and move us toward a cleaner energy economy.
But there is a "but", and it is this.
Political Will
Can our legislators muster the political will to put the government's money where their mouths are? Even with a parade of representatives from Congress and the executive branch saying the right words, the people at the Forum knew that the investments government should be putting into a new energy economy aren't there yet. Those investments go beyond just money; they are also an investment of will.
In each panel presentation by association and industry executives, the agreement was that without a comprehensive energy bill in place, the movement toward greater efficiency, national energy security, and the growth of "green" jobs is going to be ad hoc. Last year's stimulus bill has some provisions for these new technologies and energy efficiencies, but these are scheduled to run out at the end of 2010. What a number of panelists and a couple of Congressmen mentioned is that putting a price on carbon will be a key mover toward ramping up investment in new technologies.
But as everyone knows this is rolling a huge rock up a very steep hill, battling an intense lobbying campaign against cap and trade or a carbon tax.
Consensus on Action
That said, there was a powerful optimism among the gathering with speakers challenging the usual shibboleths trotted out by those married to the traditional energy industry. The consensus among the gathering is that it's time to stop finding excuses for the lack of action on energy efficiency and renewable energy. It's almost comical that this argument has been going on since the environmental calamities of the 60s and the energy crisis of the 70s.
The group assembled yesterday for the forum is truly passionate about bringing in an alternative energy future in America. The knowledge and technology are in place; the challenge is to get the decision makers to stop excusing the delays and get in gear.
The term "customer engagement" is on many lips these days. And while engaging customers has been going on since the beginning of commerce, in the internet age the term has taken on new significance. Because of the online world customers:
are increasingly distracted - spending on average less than three minutes on a Web site
have increased expectations - novels delivered electronically
are listening to new forms of authority - Wikipedia and blogs
are building new communities - LinkedIn, Facebook.
Traditional marketing needs to adapt to these new circumstances in order to keep the customer engaged.
UK business strategist Richard Sedley defines customer engagement as “Repeated interactions that strengthen the emotional, psychological or physical investment a customer has in a brand.” The key words in this definition are "repeated interactions" and "investment". That investment goes beyond the price of the purchase; it is an emotional investment that is only satisfied when the customer perceives she had received value. According to Gallup Research more than two-thirds of consumer loyalty and spending decisions are based on emotional rather than rational factors. Marketers need to realize that
they are not simply selling something. They are convincing someone to
invest in them.
How one company is truly engaging the customer
Last month I wrote about a young company, OPOWER. They have a software program that provides customers of utilities with a report on household energy usage, along with suggestions on how to be more energy efficient. OPOWER contacted me a few days ago to give me a demonstration of an update to this software they call the Advanced Customer Engagement (ACE) Platform (OPOWER3.0). As a communications guy it's the customer engagement bit that intrigued me the most.
OPOWER's software has been developed based on customer behavior analysis and the earlier version has already proved successful - 30 utilities have purchased the system. So like all growth-driven companies, OPOWER decided they had to improve on it.
The upgraded system provides a report with three parts: data, insight, action. It includes only the data that the customer needs to have in order to take action. The report has great potential to change behavior by offering:
1. an impressively consumer friendly display of household energy usage;
2. a comparison with other similar households; and
3. a short list of suggestions on how the household can lower next month's consumption.
It even allows customers to test different energy use scenarios to show how their utility bill would be different if, say, they adjusted their air conditioner settings.
Based on all this it would seem that customer adoption would be a no-brainer.
However, as OPOWER's VP of Marketing, Ogi Kavazovic told me, engaging the customer is the challenge.
How does an organization strengthen the investment its customers have in its brand?
The challenge of effectively communicating with customers, that is getting them to take action, means reaching them in a way that makes their purchase decision easier. Kavazovic says that OPOWER has looked into alternate methods of providing customers with the information. A couple - Web portals and In-home displays - are hot properties in this broadband era. Web portals are definitely 21st Century technology and have great interactive capabilities that can be fun to play around with. The problem, says Kavazovic, is that less than 5 percent of people will actually go to a Web portal to view their household energy usage and learn how to become more energy efficient, even if they know that doing so could save them money. In-home displays were easy to pass on; first, adoption rates are suspect, second, they won't be readily available to customers for many years. So the company realized that
they needed to add more channels of communication.
Based on its consumer behavior research, OPOWER uses multiple channels to reach out to and engage utility customers, with its primary communication being the good old-fashioned way. They push the information out to the customer in the monthly energy bill. The customer receives just enough information to act on and it's in a form that makes taking action easy.
Amazing how when a dazzling technology meets simplicity, the desired outcome ensues.
Getting an audience to take action is the holy grail of marketing communications. Even the greatest product or service will fizzle out if not enough people are motivated to buy it. OPOWER's "ACE" platform is an impressive next generation of its original product. But what makes the difference is they seem to have cracked the code on engaging the customer and changing behavior.
Say your company sells a photovoltaic system, a system that both reduces the amount of electricity a customer draws from the grid and at the same time uses a pollution-free energy source. Are you in the environmental business or in the energy efficiency business? And does it matter?
One of the greatest challenges in marketing communications is getting an organization to define what business it's in. You might be surprised to learn that executives aren't necessarily adept at articulating why potential customers should do business with them. Most executives do a pretty good job of describing the products and services the company offers and what goals the company wants to achieve. Where the sales effort breaks down is getting the organization to define what market segment it serves and what customers actually want.
Marketing's strength lies in identifying and solving a problem a potential customer has. Basically, unless someone sees a problem he won't move to find the solution. If I'm not thirsty I won't be looking for a drink. That seems to makes sense, but bottled water companies know that to stay healthy I should be drinking eight cups of water a day. Even if I don't feel thirsty, I should be maintaining my hydration. So the marketer redefines the business as a supporter of a healthy lifestyle and not simply a thirst quencher. Result: large numbers of people begin drinking water more frequently during the day pushing sales of bottled water through the roof.
Customers use a product or service to fulfill a need. They look for a provider of a solution that offers value and a company that can deliver what is promised. Identifying and filling customer needs is the job of the marketer.
So you have this great PV system. Do your customers primarily want to install it to save energy costs or to be environmentally conscious? Appealing to prospects according to their needs is going to help you determine your communications strategy. And it's going to go a long way to helping your organization achieve its business goals.
Like any marketing professional, I'm all about persuading my clients to understand the power of the unique selling proposition (USP).
By definition, the USP sets one brand apart from the competition and positions it in the minds of potential customers. The idea is that the USP will put forward enough of a benefit to persuade the audience to purchase the brand. In energy efficiency that's proving to be a tough sell. A majority of people will agree they need to be more energy-efficient, yet a majority of that majority are currently not doing much to actually accomplish this. Unless that changes, the efforts of government and Utilities are going to go for naught.
How An Innovator Found Its Magic Bullet
I recently came across a young company in Arlington, Virginia, that has an apparent winner of a USP. The company is OPOWER. In 18 months they have employed their USP to persuade 26 Utilities in 10 states with over a million customers to buy into their energy efficiency program.
OPOWER's USP is a software program, according to Ogi (with a hard "g") Kavazovic, OPOWER Senior Director of Marketing and Service. I interviewed Mr. Kavazovic on April 1 and was convinced their system is no April Fool's joke.
Essentially this software analyzes household energy usage and produces a report that shows the customer how his energy consumption compares to other consumers and provides tips on how to become more efficient. The software was developed out of a 2004 independent study on consumer behavior in energy usage.
Channeling Consumer Behavior
The study gave customers of San Diego Gas & Electric one of three choices that could potentially motivate them to lower their use: saving money; saving the environment; or, being a good citizen. Different groups were each exposed to one of the messages and after a time their actual energy consumption was measured.
Guess what? None of these three choice caused any significant difference in consumption. The study authors then threw in a fourth choice - comparing one household's use against that of a collection of similar households. After a time consumption among these households did decrease. OPOWER recognized this as an opportunity, developed the software, and began selling it to Utilities. Each of the Utilities that now uses the system has seen efficiency gains ranging from 1.5 to 3.5 percent since taking it on. And they've experienced gains in customer satisfaction.
I asked Mr. Kavazovic how Utility customers felt about their information being public. He corrected me, pointing out that OPOWER policy is that customer information is never made public. He said that a few customers actually fed back to the Utility that they didn't like being told what to do. However, with less than 1/2 of 1 percent of customers rejecting the program, he indicated that doesn't appear to be much of an issue.
A Presidential Stamp of Approval
Utilities have been saddled
with some seemingly impossible energy efficiency mandates through
ever-changing legislation and executive orders. Much of their efficiency
results are going to be achieved only through their customers taking
some specific actions. OPOWER's reports and energy tips appear to be motivating them to do so.
OPOWER's tag line promises "Energy
Efficiency, Delivered", a promise they seem to be fulfilling. The company is using some unlimited
thinking to capitalize on the opportunities emerging in energy. The company's success was acknowledged
by none other than President Obama who visited them in early
March.
Getting a change in energy consumption behavior requires an especially strong USP, given the dichotomy between people saying they need to be more energy-efficient and actually doing something about it. Innovators like OPOWER who communicate their USP will be the leaders in the new energy economy. Then, an energy efficiency revolution just might truly take hold.
(NOTE: This is an update
of
an earlier post that clarifies the point that OPOWER never makes
customer information public. My apologies for not making this clear in
my first post.)
Success in any business requires engaging and persuading your potential customers.
Any marketer knows this. Yet, we have witnessed the furious reactions of customers when they have been taken for granted, especially when it comes to smart metering and the Smart Grid. When it appears that the government or a behemoth of a business (say a power utility) is imposing an intrusive product or service that we have no choice but to accept, people tend to undermine it.
Partly in response to those negative reactions from Texas and California utility customers, a group of private businesses, utilities and advocacy groups last week announced a non-profit call the Smart Grid Customer Collaborative (SGCC). The mission according to the SGCC Web site is to better
understand consumer needs in the Smart Grid universe.
The Smart Grid appears to be inevitable. But if consumers revolt or simply refuse to accept a role in this inevitability, the business of implementing it could get very ugly.
The SGCC Web site states that this (Smart Grid) "strategic imperative in the country's march toward energy independence can't happen unless consumers participate and embrace the new technologies needed to revitalize our electricity
infrastructure."
SGCC has three initiatives that will help them work toward their goal:
Listening to consumers through primary research.
Developing messaging that reaches out to and educates the
general public about the importance of Smart Grid investment.
Sharing best practices with SGCC member
organizations.
With heavyweights like IBM, General Electric, Best Buy and the National Renewable Energy Laboratory backing this initiative, it would appear that SGCC could help bring skeptical consumers on board for the Smart Grid.
(Note: SGCC is so new that the Web site is one page asking viewers to stay tuned for news and in-depth content, but feel free to subscribe to the newsletter.)
Success in anything only happens when intentions are followed by actions. Getting from intention to action, though, is often a tough climb since what is often needed is a change in behavior. The irony of this is that even though many people will recognize that a change is needed, changing behavior isn't that simple.
In the world of energy efficiency, even small behavioral change can create massive large-scale savings. Eliminating the inertia that blocks action is the challenge. My utility company, Pepco, provides customers with tips on how save money through energy efficient behaviors. How successful is that? I have to admit that even with my focus on this issue, I haven't taken all the energy saving measures they recommend. And I think we can safely assume that the majority of energy consumers haven't.
How can behavior be changed? Let's see. There are incentives, like a $100 rebate for a new refrigerator. These can work, but the incentive has to be large enough to cause action, and that can lead to something being more costly than the return justifies.
There is coercion or mandated change. New smart meters have been installed in some homes in Texas and California and almost immediately tons of people with these new meters are complaining about a more costly utility bill. Be prepared to handle that kind of blow-back when change is mandated.
What previous research in the area of energy efficiency indicates is that an immediate and favorable
impact on behavior can occur from implementing a combination of goals/actions/feedback. In the area of home energy efficiency, utilities and vendors have introduced measurement devices that demonstrate simply and quickly how the results of an action such as changing the air conditioning setting will show up on the utility bill. Will such devices cause people to change their energy consumption patterns? Possibly, but as the American Council for an Energy-Efficient Economy (ACEEE) discusses in a paper on "Behavior, Energy, and Climate Change", understanding the motivations behind behavior and creating change in energy consumption patterns is likely to require greater study.
Marketers know the challenges in getting people to change behavior, but when it happens the rewards are worth the effort. In the communications challenge of convincing the public to be more energy efficient, marketers have the opportunity of succeeding in this if they can convince people that even small changes in behavior will make significant changes in the cost of powering their homes.
Just like your nerves send messages back and forth between your brain and your body, the Advanced Metering Infrastructure (AMI), as part of the Smart Grid, is a two-way communications link between the distributor and consumer of electricity. And just like when you stub your toe your brain receives the message and sends a message to you hand to rub the sore spot, AMI sends usage data from the customer to the utility that allows it to adjust electrical output to meet customers' requirements. The utility can return the favor sending the customer power level and pricing information to make the customer a much better informed user of electricity.
AMI combines three core components: smart sensors (including smart meters) at customer premises; two-way communications; and master controller for managing and metering hourly energy use. I talked about smart meters in a previous post. They will measure, monitor and help manage energy use at the customer location. Two-way communication links employ cellular networks, satellite and radio frequency networks to exchange information between distributor and consumer. The master controller uses what is called "Time of Use" price information to provide consumers with real time data and the option of adjusting use to take advantage of variations in the price throughout the day.
While the customer gets to use electricity more efficiently, the utility is able to detect problems in its systems and operate them more efficiently—ultimately improving reliability. Imagine during a wind storm that your power has been knocked out by a downed line. The utility learns from your smart meter that your electricity is out and then redirects a new source of power to your home, restoring it in hours or even minutes versus days or weeks. That's the possibility with AMI. On a less spectacular level, your utility would have the ability to let you know when your power is most expensive so that you can shut down some appliances/devices to save yourself some money. Customer control of usage is also enhanced, as I talked about in an earlier post showing how Apple has an application for the iPhone that lets you shut off lights or appliances using the phone and from anywhere.
Another benefit of AMI is that utilities can send price signals to "smart" thermostats and "smart" appliances to alert them about an upcoming high-cost period. Based on consumer-determined responses, these smart devices can reduce usage until the high-cost period has ended or shift that usage to lower-cost periods.
On the transmission side, AMI can monitor grid conditions in real-time and automatically diagnose grid disturbances, so the utility can either fix them remotely or dispatch a crew.
Two-way communications has many benefits. What those developing AMI must build into the system is security to make sure all of this information stays protected. I discuss this in my post on cyber-security and the Smart Grid.
It's the old real estate quiz, writ new...What are the three most important things about the evolution of energy generation? Location, location, location.
Mega-power plants, those massive generators of power built to supply electricity for wide-spread consumption, are becoming problematic as the market for more efficient and cost controlled generation runs headlong into the CO2 debate. There is an element within the Smart Grid discussion that could very well put these huge central
generating facilities on the road to obsolescence. That element is known in the industry as "distributed generation". Everyday consumers call it local or community power generation. Basically, distributed generation means that small or "micro-grids" will rely on electricity produced closer to the consumer, even as close as your own backyard.
Distributed generation will be a key component of a successful Smart Grid, because long distance transmission is notoriously inefficient. It also has shown increasing susceptibility to frequent major power outages. Transmission of electricity over long distances means a loss of as much as 7 percent of the power during transit. Anyone in the Northeast will recall the blackout of 2003. And if you've suffered through an ice-storm or a hurricane, you can testify how disrupted life is are with power out for even a few days.
My family endured five days in Northern Florida without electricity in early September, 2004 after Hurricane Frances swept through, and a further three days that same month in the aftermath of Hurricane Jeanne. Perspiring through the humidity in the midst of the Florida summer without air conditioning is certainly inconvenient. But that was only part of the problem. We needed to re-side much of our house as siding and insulation absorbed the moisture and mold normally dissipated by the air conditioner. The expenses of lost electricity go well beyond just having to throw food out of the refrigerator. Local generation could have greatly reduced the time to get our power back up and mitigated our moisture problems. (Photo Hurricane Frances: courtesy NOAA)
Distributed generation makes it easier to manage electricity usage, especially at peak times. Currently, managers of central power plants make assumptions about peak requirements then fire up plants that are used solely for that purpose. When power generation is more widely distributed closer to the customer, peak power generation can be more selectively used. The result is much greater efficiency than when electricity travels over long distances. And it means lower capital cost outlays, because those central plants, lying idle except to meet peak demand, won't have to be built.
One other key benefit of distributed generation is the increased use of renewable sources on a small scale. In the micro-grid, renewable
sources are likely to replace traditional fossil fuels in generating
power. Last October the Washington Post ran an article titled,
"Transforming the Clean-Energy Industry Into a Local One". It provides a
good overview of the pluses and minuses of distributed generation, with
a large focus on renewable energy sources, telling the story of how a
small Minnesota town power co-op has built two wind turbines and
experimented with corn instead of coal as the fuel for the local energy
plant.
Individual homeowners who install solar PV systems or local utilities that put up wind turbines will slowly transform how communities source energy. Investing in large scale central generators that use renewable energy would result in the same transmission, if not emission, issues coal-fired plants have. Thus local developments seem to be the most practical way to bring renewables into the mainstream of power generation.
Distributed generation isn't a panacea though, and engineers investigating or using it are considering the downsides as well as the ups. For example, one problem resulting from distributed generation is that local producers will try to sell excess electricity back to the grid, but may not be able to as they will be competing for limited transmission line availability. Another example is providers such as utilities and distributors have existing contracts and relationships with suppliers they could be reluctant to disturb.
Distributed generation continues to make headway in the development of the Smart Grid. Still these issues will confront old and new energy resource suppliers, distributors and governments as the market sorts itself out.
Reaching the Correct Audience Is Essential to PR Success
As a follow up to my Feb. 15 story "Why Scientists Need PR", today's NY Times has an article about the science profession actually starting to fight a PR battle in the climate change debate. Exactly what my post argues.
The last bit of the article has a quote from a scientist, Dr. Gavin Schmidt of NASA, who says, “Climate scientists are paid to do climate science...(t)heir job is not persuading the public.” Despite my belief that science does need PR, I do have some agreement with Dr. Schmidt. The job of scientists isn't really to persuade the "public". The persuasion is to be done on their target audience.
Targeting messages to the right audience is the most important job of marketing communications. It requires knowledge, understanding and discipline. Knowing exactly who it is buying your service or product and understanding what causes them to buy are vital. But the number one requirement is discipline.
How many times have you had to steer an organization's executives back onto the road of tightly focused audience identification? They often seem to have this fear that if they don't reach the whole world they'll fail. Except, more companies have failed trying to do just that. An organization's ability to succeed is greatly enhanced when they stay on track speaking to a specific audience. Even a company the size of Coca-Cola knows that they would be wasting resources trying to convince water-drinking, health-nuts like me to buy their product.
Determine and define the target audience, then with a laser-like focus, use your best resources to reach them with a persuasive message.
Who is the clearly defined target audience of climate scientists? My guess is their audience is actually very narrow; it's not the general public. At a minimum it's those who finance science and those who pass legislation allowing the scientists to continue to do the job they are paid to do...science.
I saw a TV ad yesterday for an iPhone app that lets a person shut off the lights at home from anywhere using the iPhone. Leave it to the software geeks to find ways to make Smart Grid technology come to life for us regular people.
Then a NYTimes article on Feb. 27 talks about how this remote control technology can be taken to even more useful stages.
With all the negative consumer feedback about Smart Meters I discussed in a recent post, wouldn't it be ironic if the public relaxes its push back of the Smart Grid because Apple has made it cool?
