Bundling Energy Solutions: Going Beyond Conventional Thinking

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As electricity consumptions stagnates due to increases in distributed electricity resources and improving energy efficiency and conservation, many ESCOs (and utilities) are asking, “how can we continue to increase our revenue?” One potential answer to this question is bundled product offerings. Product bundling and cross selling are not new concepts in the sales world – but the latest, innovative solutions taking form in the retail energy market are. Some ESCOs are beginning to offer complementary products including HVAC maintenance, Internet, home security and even cable and video streaming services among others.

Bundling is catching on fast, as evidenced by several recently announced partnerships:

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According to a study conducted by Parks Associates, nearly half of US homes with broadband would be interested in subscribing to a bundle of energy with other services. HVAC maintenance and Internet topped the list of most popular services to bundle with electricity services.

Other examples of product bundling with the electricity market include services enabled by smart meters and smart home technology, such as home security and monitoring the elderly. Cross-selling efforts include adding solar panels, smart thermostats and intelligent light bulbs as standard offerings. By packaging energy services with smart home technology, retail energy marketers are able to collect valuable user data from smart devices to learn more about their customers and leverage that data to uncover new product and service opportunities.

Direct Energy in Michigan is an early adaptor to these selling strategies. Direct Energy implores customers to use their natural gas service… and let them serve as a “trusted source for plumbing, electrical and HVAC experts.” The company is definitely marketing itself as a one-stop shop for home services. Direct Energy also has linked up with Nest to include the Nest Learning Thermostat™ at no additional charge—while toting energy savings of an average of 10-12% on heating bills; and, Plenti℠ Rewards (new customers receive 1,000 Plenti points when they sign up).

Well-executed bundling and cross-selling techniques can lead to a boost in revenues by selling more to the same customer. For example, bundling strategies are responsible for upwards of 10% of ecommerce revenues. By offering bundled services, energy providers can not only prevent upstarts and newcomers from stepping in to provide services consumers want, but also can decrease customer churn and reduce the risk of those upstarts cannibalizing services that ESCOs have traditionally provided.

Some potential bundling opportunities include:

  • Storage solutions
  • Smart demand solutions
  • Alternative production solutions
  • HVAC monitoring and maintenance
  • Appliance monitoring
  • Home security
  • Internet
  • Video streaming
  • And, more…the list can be as long as your imagination allows.

Smart Energy service providers should consider product bundling as a means to offer more options to their existing customers. This evolution has the potential to create new revenue streams and to solidify an often less than loyal customer base. Some potential bundling opportunities are near-neighbor offerings such as increased use of renewables (including storage solutions, solar panels and installation, etc.), while others may be more of stretch (i.e., monitoring the elderly and including free HBO). However, this evolution could be just the growth solution that ESCOs are looking for to stay ahead of the curve.

Note: At the Energy Marketing Conference in New York City on Tuesday, September 20, there will be a panel entitled, “How to Make Money on Bundling and Cross-Selling.” The panel will be moderated by Jack Doueck, CEO of LED PLUS, and David Steinberg, CEO of Nextility. Directors from Constellation Energy, Direct Energy, Just Energy, Spark Energy, Con Ed Solutions, Infinite Energy and Znalytics will participate in this much anticipated discussion.

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