Contents:

TABLE OF CONTENTS CHAPTER 1 EXECUTIVE SUMMARY 3 We use cross-functional consumer insight to help utilities simplify life for their customers 3 Definition and Background: the simplicity trend is rooted in the desire to reduce stress and clutter 4 Socio-economic drivers: people are overloaded in four different ways 4 Segments, sizes and profiles: simplifiers can be categorised as core simplifiers and mass market simplifiers 5 Core simplifiers downsize several areas of their lives; and fall into two categories 5 Mass-market simplifiers fear a complete lifestyle change 5 Although all three groups are growing, mass-market simplifiers are by far the most significant for utilities 6 The ‘simplifying energy services’ chapter is presented through case studies for each of 8 customer touch points 7 The product: Georgia Power’s FlatBill could be worth €3 million if implemented by a utility with 5 million customers 7 Advertising: British Gas made a return of €4.80 for every €1 invested in its Internet advertising campaign 8 The point of sale: SSE could save over €1m per year through its professional sales approach 8 Switching: URS’S contract management system claims to increase simplicity and lower price across all segments 9 Meter reading: Vattenfall and KCPL have pioneered AMR in the US and Europe 9 Billing: Powergen’s OneBill could save it as €7m per year 10 Customer service: Cogas may not win many new customers through improved service, but it can make small cost savings 10 Payment: Exelon saves money both directly and indirectly 11 Action points 11 Strategies for product simplification 11 Strategies for simpler advertising and marketing 12 Strategies for sales 12 Strategies for simpler switching 12 Strategies for simpler metering 13 Strategies for simpler billing 13 Strategies for the contact centre 14 Strategies for bill payments 14 CHAPTER 2 INTRODUCTION 25 We use cross-functional consumer insight to help utilities simplify life for their customers 25 This report is structured to benefit a range of user groups in Europe and across the world 26 The body of this report is presented in the following four chapters 26 CHAPTER 3 DEFINITION AND BACKGROUND 28 ‘Simplicity’ is the trend towards reduced stress and clutter, and has academic roots 28 Simplicity is not convenience, and is not the result of financial constraint 28 Simplicity has US roots, but is becoming more common in Europe 29 CHAPTER 4 SOCIO-ECONOMIC DRIVERS 30 Introduction 30 Key findings 30 Increasing workloads make people wish for simplicity 31 Two-thirds of managers would prefer to work less 32 Family commitments are a major factor in the quest for simplicity 33 Goods impinge on space; consumers prefer services and experiences 33 Modern technology has led to an information overload, but does offer small solutions 34 Marketing volumes are overwhelming, and consumers are resisting them 35 CHAPTER 5 SEGMENTS, SIZES AND PROFILES 36 Introduction 36 Key findings 36 Core simplifiers downsize several areas of their lives; and fall into two categories 37 There were 1.9 million holistic simplifiers in 2002, predicted to grow to 2.2 million in 2007 37 Holistic simplifiers are likely to be idealistic and to value individual fulfilment 38 There were 12 million downshifters in 2002, mainly in Germany and the UK – and growing fast 39 Downshifters come mainly from highly paid, high stress professions 40 Mass-market simplifiers fear a complete lifestyle change 41 There are 80 million white-collar workers in Europe, forecast to be 91 million in 2007 42 Mass-market simplifiers can be identified by their attitude to their FS providers 44 60% of white-collar workers are simplifiers of some description 45 There are 48 million mass-market simplifiers in Europe, 24 million are prepared to pay to simplify 46 Mass-market simplifiers cannot be defined by age or income; but they can all be reached with a convenience message 47 Although all three groups are growing, mass-market simplifiers are by far the most significant for utilities 48 CHAPTER 6 SIMPLIFYING ENERGY SERVICES 50 The ‘simplifying energy services’ chapter is presented through case studies for each of 8 customer touch points 50 The Product: Georgia Power’s FlatBill 51 Georgia Power’s is a regulated energy supplier in the US, and introduced its flat bill in response to customer demand 51 Georgia Power began with a small pilot study to examine the way in which energy usage was affected 51 4 concerns dispelled: flat bills could lead to a rise in consumption, customers will not pay for it, risks would be unmanageable, and regulators will not approve 52 The benefits of a flat bill tariff could equal more than €3 million for a company with 5 million customers 54 Advertising: British Gas 54 British Gas is trying to move its customers online; and its advertising campaign fits with its service proposition 54 British Gas used adverts warning of ‘cowboy’ tradespeople to raise awareness of its website 55 The intention was to communicate a sense of trustworthiness and reliability 56 The adverts had to be simple and yet forceful, without being intrusive 57 The advertising campaign was successful, both in terms of customer response and value for money 59 British Gas made a return of €4.80 for every €1 invested 60 The point of sale: Scottish and Southern 60 SSE is a UK vertically integrated utility that needed to overcome the problems of doorstep selling 60 SSE succeeds both because of its employees and because of its sales processes 61 SSE benefits, both in terms of fewer complaints made and customer retention 62 A professional and rigorous sales approach could be worth over €1m per year to SSE 63 Switching: Utility Retail Systems 63 URS developed a software system to overcome the the problems caused by high switching volumes 63 Enlighten organises the sales process, and automates contract processing 64 Automating contract management costs €150,000 to implement, but improves satisfaction and reduces costs 65 The meter read: Vattenfall and Kansas City Power and Light 66 Vattenfall is a state-owned utility with 6 million customers in Europe; KCPL has 490,000 customers in the mid-west US 66 Vattenfall installed AMR because it could not afford not to; KCPL was preparing for deregulation that never happened 66 Vattenfall is currently stalled in the early stages of its programme; KCPL took three years to roll out its own 67 It is still too early for Vattenfall to quantify the benefits of AMR, but KCPL can list a large range of benefits 68 AMR also introduces potential problems – utilities must be aware of the pitfalls 69 AMR will yield a direct cost saving in a few years time, but there are already many indirect cost savings 70 The bill: Powergen’s OneBill 70 Powergen launched its OneBill service in 2001 in order to cut costs, improve customer loyalty and differentiate itself 70 Powergen paid close attention to customer needs, but there are several potential pitfalls 71 Powergen could save as much as €7m per year because of its OneBill service 72 Customer service: Cogas 73 Cogas’s retail proposition relies on quality customer service, which is based on four pillars 73 Improving the efficiency of customer service is not an acquisition tool, but does yield small cost savings 75 Payment: Exelon Corp 75 Exelon wanted to avoid pressuring good customers who missed a payment 75 Exelon introduced credit scoring to differentiate between habitual and occasional late payers 76 Exelon saves money directly by reducing its revenue management team, and indirectly by avoiding bad publicity 77 CHAPTER 7 ACTION POINTS 78 Strategies for product simplification 78 Strategies for simpler advertising and marketing 78 Strategies for sales 79 Strategies for simpler switching 79 Strategies for simpler metering 79 Strategies for simpler billing 80 Strategies for the contact centre 81 Strategies for bill payments 81 CHAPTER 8 APPENDIX 82 Research methodology 82 Future readings 82 SPP writing team 82 How to contact experts in your industry 83 LIST OF FIGURES Figure 1: All three groups are growing, but mass-market simplifiers deservce the most attention 6 Figure 2: The pace of work in Europe is increasing 31 Figure 3: Percentage of UK full time workers that would like to work fewer hours for reduced pay (2002) 32 Figure 4: The number of holistic suppliers in Europe, 1997 to 2007 38 Figure 5: Already 12 million downshifters in Europe, with more to come 40 Figure 6: Simplifiers are typicall white collar-workers – there were over 80 million white-collar workers in Europe in 2002 (aged 18 to 60) 43 Figure 7: 48% would like to reduce the number of FS providers that they deal with, 36% would pay to aggregate their statements 45 Figure 8: Only 40% of the sample group was not interested in either method of simplification 46 Figure 9: If 60% of white-collar workers are mass simplifiers, there are 48 million in Euripe, 24 million of whom are willing to pay for simplicity 47 Figure 10: All three groups are growing, but mass-market simplifiers deservce the most attention 49 Figure 11: Eight case studies 50 Figure 12: An overview of a flat tariff 54 Figure 13: Simple and amusing…the online adverts 56 Figure 14: Based on a consistent British Gas theme…the online adverts 57 Figure 15: Impact without intrusion…the online adverts 58 Figure 16: house.co.uk adverts overview 60 Figure 17: An overview of Scottish and Southern’s sales strategy 63 Figure 18: Overview of Enlighten 65 Figure 19: Overview of AMR 70 Figure 20: Overview of OneBill 72 Figure 21: Overview of Cogas’s customer service 75 Figure 22: Overview of Exelon 77