The utility industry has been virtually stagnant when it comes to introducing new products. Many say electricity is the ultimate commodity – true. One cannot distinguish whether an electron was produced from a clean source like solar or a dirty source like a super polluting coal boiler, or an internal combustion engine or from a clean but potentially risky nuclear power plant. So for many, the end product does not lend much variation for companies to play and win on differentiation and uniqueness. As such the competitive forces have converged on the economics of production. Metrics such as levelized cost of electricity have been introduced to normalize comparison across the various technologies to get to apples to apples comparison, but it has limited use. Consumers don’t care much on the difference (or, very few do) and are more concerned about the reliability, safety and affordability of electricity. But does this mean there is no possibility for differentiation? If water can be sold in bottles that compete with the faucet, then can electricity do the same?
Perhaps we need to start looking at other commodities to get some insights on consumer behavior. Take for example, chicken or beef. Granted there are some variations with chicken and electricity. But these are commodities. When we go to a grocery store there are many kinds of chicken and beef. Free-range chicken and hormone free beef typically costs more. This provides some interesting cues to the way consumers care for what they buy. This allows companies to target the segment aptly. There are certain customers that care for how the product is made and not just the end product in itself. The how lends to the larger health issue.
Can this be relevant to electricity? Electricity that comes from clean sources may be better for you than the electricity that comes from dirty sources. Not because of the electron per se but how they were made. However, there is one fundamental difference between food and electricity production. Food directly has an impact on our body and what I eat has a more direct connection to my immediate well being than electricity. At least that’s what I am led to believe. Same with water. With the recent crisis in Flint, Michigan, such scenarios are quite clear even in a developed country. Water may have another dimension. Consumers may trust a big company for quality related to health rather than expecting every water fountain to guarantee safety and quality. The environment may be a close parallel with electricity. We can hold someone responsible for the quality of air we breathe, and conversely we can seek a premium for better quality air. But we are not there yet. Generational impacts are longer time impacts that hit our psyche slowly. For some it hits only after an adverse event. For example, I find it a lot harder to resist food that is a slow acting time bomb on the body. Foods that affect my cholesterol and heart, for example, compared to something that can cause immediate salmonella.
What does this tell us?
It tells us that consumer behavior, which like human behavior has something to do with the traits that we have never grown out of. Remember the famous Stanford marshmallow test. Unless we have an adult posture that can put aside instant gratification for future joy, there is not much hope. All the concerns for global warming and willing to pay a price today for future benefit have a timeframe that is outside our concern. But that’s not the case for our future generation. And there may be immediate impacts that we are not smart enough to measure or notice. That would be the starting point of creating something unique for branding electricity. Just as we did with smoking by creating social awareness and banning smoking in public places, using clean energy needs to be drawn from a public health standpoint. It is going to be a long ride, but an important one.