Now that millennials are the largest U.S. generation in terms of population, their needs and wants will be increasingly influential in all areas of the U.S. economy in the coming years. In the energy industry in particular, where many utilities are just beginning to transition to more customer-centric operational cultures, millennials are bringing radically new values and desires to the table, especially when compared to baby boomers, the previous largest generation.
While assumptions about and stereotyping of millennials are prevalent both within and outside of the energy industry, the Smart Energy Consumer Collaborative (SECC, formerly the Smart Grid Consumer Collaborative) recently undertook a meta-analysis of three of its latest consumer surveys to get to the bottom of who millennials are and what they actually think about important energy topics, including energy efficiency, utility customer service, renewable energy sources, the smart grid, electric vehicles, common utility programs and more.
The “Spotlight on Millennials” report developed a vivid picture of who millennials are, insights that are particularly relevant for the more customer-centric energy industry of the future.
Digital natives come of age
As the first generation to come of age with routine access to the internet, millennials demand a seamless digital experience and easy access to information via websites and/or mobile apps. They're considerably more likely than non-millennials to own four or more digital devices and use apps for three or more purposes. They are technically adept and able to navigate today’s digital ecosystems to extract the value they want from their service providers.
According to SECC's consumer segmentation framework, millennials are most commonly classified as Green Champions, a tech-savvy cohort of consumers that are more likely to value the environmental benefits of the smart grid and grid-edge products and services. Although a plurality of non-millennial consumers also now falls under the Green Champions segment, nearly 40 percent of millennials are Green Champions, compared to just 28 percent of older generations (Figure 1).
Further, when we look at the older half of the millennial generation (aged 29-34 at the time of publication), we see an even higher proportion of Green Champions, likely due to their relative financial stability compared to younger millennials.
In fact, younger millennials (aged 17-28) are far more represented in the Saving Seekers segment, a group that is primarily concerned with how energy programs and products can save them money, when compared to older millennials and non-millennials. Older millennials, too, are slightly more likely to be Savings Seekers than non-millennials.
(As part of the “Consumer Pulse and Market Segmentation Study — Wave 5”, SECC, then SGCC, defined five unique consumer market segments: Green Champions, Savings Seekers, Status Quo, Technology Cautious and Movers & Shakers. Each segment exhibits distinct levels of awareness, interest and values around smart energy services and technologies, and survey respondents are classified into one of the five segments based on their responses to a sequence of 12 questions. More information on these segments can be found here and here.)
A generation with new values and preferences
Millennials clearly value digital experiences, easy-to-access information, environment-friendly products/services and saving money, and these core generational characteristics are important in determining how millennials prefer to interact with their energy providers, how they view the key energy issues of today and what kinds of energy products and services they're interested in adopting.
In general, millennials are more engaged with the companies that they choose to do business with and expect top-notch customer service, and when compared with older generations, they tend to want a more active relationship with their energy providers. They’re open to change and are ready to work with energy industry stakeholders to create a cleaner, more efficient energy future – if they will meet their expectations.
Based on the data from three consumer surveys with over 5,000 total respondents, conducted over the course of a year, we’ve determined four things that millennials want from their relationships with their energy providers:
1) Treat me like the individual I am.
While we've already mentioned that millennials are more likely to be Green Champions and Savings Seekers, in fact, millennials are well represented in all five of SECC's customer segments, including, surprisingly, the Technology Cautious, a group that doesn’t really see how technology can help them be more energy efficient and save money.
Despite the many general trends uncovered in this report, keep in mind that millennials are still not a monolith and often bristle at being lumped together as one, according to a Pew survey from 2015. Personalization goes a long way when engaging this cohort.
2) I like you and trust you, but don’t think I won’t jump for a better offer.
In general, millennials see their energy providers as trustworthy sources of accurate information on energy-related products and services. When asked if an endorsement from their energy provider would positively influence their adoption of a product/service, a majority of millennials (52 percent) said that it would, compared with 39 percent of non-millennials.
However, while this is good news for energy providers, it's important to note that millennials are typically savvy shoppers who are accustomed to more open marketplaces with clearly delineated options that have come with the Internet Age. Raised on e-commerce platforms like Amazon and eBay, they diligently read reviews and compare offers.
If another energy provider offers better value and/or better service, millennials are seemingly more likely to jump ship. They are more likely than non-millennials to express interest in purchasing energy through a solar installer, a telecommunications company or another electric utility (Figure 18).
3) I’m generally satisfied, but banks and online retailers provide me with better customer service.
In addition to seeing their current energy providers as trusted sources of energy-related information, millennials are also, for the most part, satisfied with their current energy provider, although a slightly lower number of millennials report being highly satisfied compared to non-millennials.
That said, millennials often compare their experiences with their energy providers to other service providers that they interact with, like banks and online retailers, and they're accustomed to the customer-first, digitally intuitive relationships that many of these organizations now offer. Compared with non-millennials, millennials rank utilities slightly lower in a list of best providers of customer service, and according to Accenture, nearly 80 percent of millennials would consider switching energy providers if a seamless customer experience was not provided to them.
4) I want renewable resources, and I am willing to invest in them.
Despite being called out in the media as “The Entitled Generation” or “The Me Me Me Generation” (71 percent of U.S. adults believe them to be “selfish”), at least when it comes to energy, this clearly isn't so.
Millennials are willing to put their money where their mouth is, so to speak. Not only do they indicate that they are more willing to pay for the environmental benefits associated with smart grid and smart meter implementation, they are far more willing to invest in renewable energy sources and programs that reduce greenhouse gas emissions, compared to non-millennials.
They are more likely to pay an additional $3-4 per month, indicating a higher willingness to support their energy providers’ shift to using more clean energy sources. They are even more willing than non-millennials to pay up to $15 per month for investments that would lead to a cleaner energy future.
Conclusion: An industry evolving to meet consumer needs
With new entrants already contesting in the energy space and other major U.S. companies potentially eyeing more involvement in the industry, options for energy providers will likely increase for consumers in the years ahead.
Overall, millennials today are largely satisfied with their energy providers and see them as trusted partners and sources of reliable energy-related information, notably more so than non-millennials. While this is good news for energy providers, research also indicates that this segment could contribute to churn as more choices become available. Adapting to serve the wants and needs of the millennial generation will be crucial for energy providers to retain customers.
The “Spotlight on Millennials” research shows that millennials, by and large, want to see an energy future powered by clean energy resources from organizations that are customer centric and offer intuitive digital experiences, and many energy providers and their partners today are already working diligently toward these goals.
For example, Xcel Energy has been aggressively shifting its generation portfolio to include more clean wind energy. With the recent announcement of a 300 MW windfarm in South Dakota, Xcel now expects to be the first utility to surpass 10,000 MW of wind generation.
Other utilities, like Commonwealth Edison and Georgia Power, have developed online marketplace platforms stocked with energy-efficient products and instant rebates as a first step to creating an easy-to-use digital channel that consumers want to engage in. These platforms offer many of the e-commerce features that consumers today are already familiar with and can serve as a “digital hub” for utilities as more and more features are added in the coming years.
Finally, in recent years, an increase in utility partnerships with companies like Tendril, Powerley, Whisker Labs and Bidgely has accelerated the rollout of new digital programs and products that offer consumers greater control of their home energy usage and the potential to save on their monthly bills. As utilities continue to focus on the core functions of maintaining infrastructure and delivering energy, these third-party partnerships will be crucial for the expansion of the digital-first, customer-friendly programs that millennials prefer and will come to expect.
In these cases and others, it does appear that many utilities are already moving to meet the needs and wants of millennials, but time will tell if efforts like these are enough to retain the loyalty and satisfaction of this exacting generation of consumers.
Patty Durand is President & CEO of the Smart Energy Consumer Collaborative