Case study: Horizon Utilities

DATA ANALYTICS | Case study: Horizon Utilities

Saving energy and money with analytics-powered marketing

Everybody likes to reduce their energy bills, right? Well, not exactly, as Horizon Utilities recently discovered following a recent direct marketing campaign. But by switching gears and utilizing cutting-edge analytics, they were able to uncover many more energy saving champions and turn the campaign into a success story.

Horizon Utilities, which provides electricity to 240,000 customers in St. Catharines and Hamilton, Ontario, figured that programs designed to help consumers conserve electricity and reduce their energy bills would be an easy sell. But when the company launched a direct mail campaign to promote its peaksaver Plus® energy conservation program, the response was puzzling.

The program offers consumers a free programmable thermostat and an in-home energy display showing energy usage—the better to encourage households to dial down their power-hungry appliances, such as air conditioning units. The utility’s marketing team expected the best target audience for the program would be classic greens: twentysomething Canadians interested in reducing their energy consumption in an effort to protect the environment. In the fall of 2013, they sent out a mass mailing with an offer to save energy to 90,000 residential customers who, based on their electricity consumption, were likely to have central air conditioning.

“The DM piece featured a young, hip cartoon character in a green shirt and an environmental message,” says Cory Slinger, Market Development Manager at Horizon Utilities. “We assumed that the people who participate in the program were interested in environmental issues.”

The marketing team also assumed the campaign would yield a sign-up rate of 1 percent. Instead, only 0.84 percent of customers joined peaksaver Plus®. “I didn’t know why the campaign had underperformed,” Slinger recalls thinking.

Recognizing that they needed to better understand the utility’s customers if they were going to improve the program participation numbers, the marketers turned to data analytics. Undertaking a pilot project through the Ontario Power Authority’s Conservation Fund, Horizon Utilities established an “energy mapping database” to determine where customers were using the most electricity and why they were using so much. Enhanced with information from multiple sources, the database included dwelling metrics, property attributes and geospatial data along with energy consumption data from Horizon Utilities.

But one of the key features of the database was the ability to visualize the utility’s various customer segments, as developed by Environics Analytics (EA), the Toronto-based marketing services and data analytics company. Using EA’s PRIZM segmentation system, which classifies Canadians into 66 lifestyle types, analysts divided customers into groups based on lifestyle and social values. The analysis revealed that Horizon’s customers were a diverse group with over 30 different PRIZM segments among its high energy users.

The Horizon Utilities marketing team and EA analysts then looked at who among the utility’s customers had signed up for the peaksaver Plus® program and classified them into five target groups based on their lifestyles and values. The resulting groups were tagged with names like Sensible Seniors, Downscale Renters and Young Comfortable Families—giving marketers their first clue as to why their initial mailing didn’t reach their expectations.

“Seeing the analysis was kind of a ‘Eureka!’ moment,” recalls Slinger. “The young, hip, environmentally conscious were only one part of the market. In general, the most engaged peaksaver Plus® members tended to be more downscale than upscale, and there were a lot of middle-aged people whose biggest concern was cost savings.” By relying on a green appeal to promote the program among younger customers—instead of touting the cost savings to older customers—the marketers had overlooked a strong motivator for a large segment of customers.

Armed with the analysis, last February Horizon Utilities launched a new marketing campaign, this time mailing only 30,000 brochures targeted to the top-performing customer segments, as defined by PRIZM. Reflecting the values research, the new mailer emphasized saving money rather than conserving energy, with artwork showing real people pursuing leisure activities enjoyed by their demographic group. One piece depicted a thirtysomething woman wiping out on a ski slope. The cutline read: “Jenny may not be the world’s greatest skier. But she is an energy savings champion.” The call to action urged consumers to save both money and energy by signing up for the program.

The targeted approach worked. In one wave, the company sent 17,638 mailers aligned to the target groups and achieved a 2.86 percent sign-up rate—more than triple the non-targeted rate. As part of an outbound call campaign to 3,000 people considered most likely to respond based on the data, some targeted segments yielded an astonishing 18.1 percent response rate. And though overall marketing costs remained flat, the company’s return on investment climbed. “The new work changed our perspective on what is possible with data,” says Slinger. “When we dove deeper into the data, we got better results.”

Currently, more than 11,000 customers belong to the peaksaver Plus® program. And Horizon Utilities is now using PRIZM and the analytics-based marketing approach to identify new customers for expanded services like upgrading their heating and cooling system, and exchanging their outdated refrigerators and freezers for more energy-efficient models. Around the company’s headquarters in Hamilton, staff members talk about relating to customers through the prism of, well, PRIZM to promote the utility’s various services and programs. And its marketing team is optimistic that it can engage more customers to conserve energy through cutting-edge analytics.

“We pride ourselves on being innovative,” says Slinger. “What we learned is that you need to understand your marketplace to really be effective. Assumptions can be dangerous.” And while a green appeal may always be part of the utility’s marketing mix, Horizon Utilities learned the power of the pocketbook message is undeniable.

Rupen Seoni is vice president and leader of the government, energy, health care and not-for-profit practice at Environics Analytics.

Caption for the two direct mail pieces:
After analyzing customers who’d signed up for its energy conservation program, Horizon Utilities used PRIZM segmentation and other data to classify them into five target groups—and then dispatched targeted brochures that emphasized saving both money and energy. The sign-up rate for the targeted approach was more than triple that of the non-targeted rate.