It’s common knowledge in the energy industry that small- and medium-sized businesses (SMBs) have historically low rates of participation in utility initiatives. While SMBs represent 90 percent of a typical utility’s commercial customer base and consume 40-50 percent of commercial energy, fewer than two percent are enrolled in their utility’s energy efficiency program.
Finding ways to better engage these customers has important benefits, namely, increasing satisfaction among a huge segment of locally-owned constituents and preparing utilities for the changing energy landscape. As our industry shifts away from conventional energy efficiency programs and kWh savings and toward demand response and complex grid management efforts, SMB participation will be a vital piece of the puzzle. The time for utilities to get ahead of the curve and launch effective SMB programs is not after this shift occurs—the time to act is now.
To understand the essential components of a successful SMB program, we must first understand why driving SMB participation has been so challenging in the past. The most significant market barrier remains resource constraints. SMBs typically have lower capital than large commercial customers, so the higher incremental cost of efficient equipment is a deterrent. SMB decision-makers, often the business-owners themselves, also have little time to address building performance and resource conservation—they’re just trying to keep their businesses running. But it’s also true that the SMB segment hasn’t been a focus for most comprehensive C&I programs or participating trade allies. The high-touch approach required to engage SMBs, coupled with the small scale of their projects and subsequent energy savings, results in a high cost of customer acquisition with relatively low return-on-investment.
Informed by Ecova’s experience implementing utility programs and working with business clients of all sizes—bolstered by market research, industry reports and our powerful Retroficiency data analytics—we’ve created a roadmap for the SMB programs of the future.
Start With the Right Messaging
Program outreach and promotional materials must engage SMB customers at the right level, responding sensitively to their unique challenges and avoiding presumption about the sophistication of their systems and equipment.
Give Them Actionable Information
Utilities have access to more data than ever before—making it easier than ever to create customized analyses. SMBs are more likely to engage in energy efficiency measures when presented with data that is truly relevant to their type of business and building, illustrating exactly where they’re overspending in energy costs.
Keep Entry Costs Low
The capital constraints of SMBs make initial costs a major obstacle to participation. Offering low- or no-cost measures upfront can help ease the way. Including an easily-managed financing solution—like balance-sheet-neutral Managed Energy Service Agreements (MESAs)—is even more critical.
Ensure Rapid Rewards
Money and time are both limited resources for most SMBs. Utilities can increase customer satisfaction and continued participation by addressing both factors: providing immediate cost benefits from upgrades and streamlining program requirements to create the easiest possible participation experience.
Segment by Vertical
The SMB market is incredibly diverse, with different needs depending on business size, ownership structure and vertical. A grocery store manager may be motivated to upgrade refrigeration systems, while quick-service restaurants may be more concerned with dining room lighting. Conveying the direct benefits of energy efficiency and its business value for each target vertical makes program participation more compelling.
In future posts, I’ll be exploring some of these key components in greater detail and sharing lessons learned from Ecova’s current delivery of SMB programs. You can also watch Ecova’s recent webinar, which explored some of the key secrets to successful utility engagement of SMBs.