Why isn't my Utility Marketplace Making Money?

Utilities that launched marketplaces often expected them to become self-funding and even turn a profit, but most aren't set up for that kind of success.

Did you start your utility marketplace with plans for making a bit of money selling lots of products to your customers? Most utility executives did, only to find after several quarters, even years, that their marketplace programs remain a cost-center, failing to reach revenue performance that pays even basic costs after inventory, licensing, and support.

Let's dig in to find out why your marketplace may not turn a profit, and offer some helpful hints to adjust performance to a higher revenue trajectory.

Reason #1 - It May Have Been Set That Way

The troubling challenge for making money on a utility marketplace remains that most sites were set up as cost centers, exclusively. The vast majority of legacy marketplaces still only deliver a few Energy Efficiency (EE) products to utility customers. These marketplaces usually "sell" LED bulb and smart plug kits at no charge to new customers, or process orders for smart thermostats with a hefty rebate from the utility. EE marketplaces deliver great value to customers and provide important data to the utility for EE scoring and regulatory credits, but mostly serve to process "orders" for free or reduced priced devices to a very specific customer segment, instead of offering a wide catalog and marketing to all of the customer base.

Tip: Consider shifting your model to something more than Energy Efficiency to break out of the cost-center framework.

Reason #2 - The Catalog Lacks Customer Appeal

Do your best selling products appeal to the widest array of your customers? For most utilities, the smart thermostat is their best selling device on a marketplace. But, most of their customers can't even take advantage of that product. Renters aren't usually allowed to put their own thermostat in an apartment or rented home. Customers with only modest energy bills won't save enough over three or four years to pay for the cost of a smart thermostat. And, not all of your customers have energy efficiency as a priority. If your marketplace catalog doesn't include a variety of products and services that appeal to more of your customer base, how can you attract more interest and sales?

Tip: Consider expanding the catalog to include more "smart home" or home automation products and services. The category applies widely to an array of customer interests and inspires a lot of repeat purchases as their needs change. "Tech Savvy" customers like voice assistants like Google Home or Amazon's Echo. "Aging in Place" customers like a video doorbell or outdoor camera to reduce the number of trips to answer the door. Pet owners love streaming cameras to check on their pets while they are at the office. Smart Home catalogs broaden appeal and increase options for your marketplace engagement.

"A dynamic catalog appealing to a wide array of customers delivers a lot of interesting offers that inspires new visits and purchases across the entire customer lifecycle, not just the Energy Efficiency customer journey." – Mark Wilkinson, SVP Ibex Digital, Utility eCommerce Specialist

Reason #3 - You Don't Get Enough Traffic

Check your data to see how much traffic your site gets. If your marketplace vendor doesn't give you this report, find a new vendor. We have a helpful series of Marketplace Vendor Tableaus in our CX Tools and Workbooks section if you need it. Understanding your traffic is essential to developing a high-performing marketplace.

At minimum, check Google Analytics for traffic analysis reports to see the daily/weekly/monthly traffic reports. Over time, utilities should see a generally growing traffic volume to their marketplace as new customers visit and past customers return to check on information or offers. If traffic on your site remains roughly proportional to the volume of new energy starts in your system, we'll bet that you don't have much repeat traffic. If your marketplace doesn't have a healthy percentage of repeat traffic after 3-6 months of operation, either your catalog doesn't appeal to your customers or your outreach isn't giving them a reason to return to shop. Either way, you have a problem that needs a fix.

Tip: Make sure every new customer gets introduced to your marketplace soon after their energy enrollment, then be sure to have a regular campaign to nurture their interest and inspire return visits. A once-monthly email to all customers who've opted in to receive marketplace email will help to grow your repeat traffic, which is essential to your marketplace performance.

Reason #4 - Your Best Products Aren't On The Marketplace

Utilities with service plans like Repair and Protection plans from HomeServe or Fortegra generate the best revenue performance "Beyond the Meter" because of their appeal to different types of customers and their recurring revenue model. But, most utilities don't include their repair and protection catalog on their marketplaces. We can't think of any successful marketplace that intentionally leaves its most valuable and best selling products off of their eCommerce sites. Imagine what could happen to your marketplace performance if you could bundle Surge Protection plans to customers who just purchased a new virtual assistant and some smart home gear, or wanted to add a repair plan for tech support for their expensive home electronics during checkout.

Tip: Check with your vendor and see if they can add the utility's repair and protection plans to the catalog. If their platform won't support it, consider finding a new vendor that offers products AND services including your own service plans to your marketplace. After all, customers visit a marketplace with expectations to shop and buy, so you can't afford to leave your best performing products off of your destination portal.

AMP Up Your Marketplace Performance

Be sure to visit your own utility marketplace with the eyes of a customer and check to see if your site falls into any of these traps. If so, it's time to refresh your catalog, your outreach, or even your vendor. Customers generally will visit a utility marketplace to check out a special offer or value interesting to them. Provide them a catalog of products and services that. appeal to their needs and interests, and be sure to invite them back every once in a while, and we're sure that your marketplace can achieve the kind of performance that builds lasting value for your customers and the utility.