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The first step for an electrical contractor that is considering entering or expanding its presence in the energy services market is to identify the target customers. Many ECs skip this step, believing that, if they try to define their customer base too early and narrowly, they may exclude potentially profitable customers.
The problem with this logic is that energy services is a broad market that not only encompasses energy conservation, efficiency, production and reliability services, but also serves a broad spectrum of categories that includes residential, commercial, institutional, manufacturing, industrial and infrastructure market segments. All of these market segments have unique needs and expectations that can’t be met efficiently with a shotgun approach.
For example, a developer’s motivation for installing a photovoltaic (PV) system at a commercial building site is different than the motivation for a city to install a similar system at a wastewater treatment plant. Variations in customer needs and expectations affect all phases of project delivery, including initial marketing by the EC. A clear identification of the EC’s energy services customers is the key to effective marketing and efficient delivery of energy services that will lead to success in this market.
Success requires customer focus
Offering energy services to all segments of this broad market and hoping that a customer base will emerge and define itself is both inefficient and risky. Even though customers may emerge, servicing a diverse customer base with finite resources is not a sustainable business strategy. The EC only has so much expertise and resources, and it should focus its efforts on specific energy services and customer classes. By zeroing in on specific target customers, the EC can develop effective business and construction processes that are tailored to their unique needs. The EC also can improve process efficiencies that will lead to increased revenue and reduced expenses, resulting in increased profits. In addition, ECs that aren’t focused are vulnerable to competitors that are more in tune with target customer needs and expectations.
Energy services is a niche business
For most ECs, energy services is related to diversification, which means entering or expanding into this market builds on its existing core competencies and customer base. Related diversification is safer than unrelated diversification. In the latter form, the EC goes into a completely different direction, such as vertically integrating by purchasing an electrical distributor.
Energy services for most ECs is at the intersection of three core competencies: project management, service work and design/build project delivery. Without a clear understanding of your customer, it is difficult to determine what services your firm should provide and to know how these services can best be marketed and delivered to the customer. Determining how energy services are conducted is very important; it is not just about the physical installation, but also helping the customer acquire the needed services through financing or leasing. Therefore, the EC should treat the energy services market as a niche where it can hone its business development and project delivery processes and optimize its return on investment.
Start with your existing customers
If you are entering or expanding in the energy services market, start with your existing customers. Target those your firm has worked for regularly and particularly those for whom you perform a lot of service or negotiated design/build work. Existing long-time customers that have confidence in your firm’s capabilities will be easiest to market to because they know your firm and trust what you do. Your project managers and service personnel know these customers, including their decision-makers, facilities and operations. With this knowledge, you can identify which specific energy services that these customers will be most interested and how best to market these services to them.
Seeking new customers
As you expand your sphere, plan a marketing trajectory that builds on your existing customer base. When seeking new customers to expand your energy services offerings, your firm should look for potential customers that have similar needs as your existing customer base. This method of market expansion is safer and allows you to leverage existing customer goodwill, marketing approaches and experience to a new group. While a new customer category may have somewhat different needs than your existing base, the changes will be incremental, allowing you to successfully expand into this market with minimal time and energy investment.
About The Author
Thomas E. Glavinich was an associate professor in the Department of Civil, Environmental and Architectural Engineering at the University of Kansas. His tenure as one of Electrical Contractor's most trusted and reliable source of industry research ended in 2014 when he passed away. Click here for more about Tom.