Marketing of Electricity Distribution
Although Electricity does not qualifies to be a product, a commodity or even a service in totality (Electricity generation being an infrastructure sector), in the current ‘fight- to – survive’ milieu, it becomes increasingly important for the companies in this business to market their output in a manner to
- Attract more number of consumers,
- Retain the consumers
- Be profitable in the business.
Earlier people could not think of usage of electricity for purpose other than that of lighting. The equipments and appliances manufacturing companies had to devise innovative methods to market their products to the customers so as to break the conventional usage of electricity and in turn generate profitable business for themselves. People were reluctant to part with their money in exchange of these appliances. So ,it was a mammoth challenge for these companies.
They tried to reach the customers offering their products in several attractive packages, at times holding exhibitions to display their product range or still more, directly marketing at doorstep.
Focused attempts of enticing women consumers with kitchen products, or office going people with products providing some or the other utility in an office corner seemed to be common those days.
So, with the objectives almost similar to that of any other product sale, an analysis of this service is commensurate to that of any other product or event.
In the subsequent paragraphs, I’ve made an effort to do an analysis of marketing strategy of Tata Power’s Electricity distribution in Mumbai.
The Tata Power Company Limited (TPC) is a company established in 1919, which undertakes the supply of energy to the pub lic in its Mumbai License Area and to supply energy in bulk to Licensees, under a license by the Government of Maharashtra(dated July 12, 2001). Currently TPC provides electricity to the three distribution Licensees viz. REL, BEST and TPC itself, through own generation and power purchases from external sources using the transmission lines owned by TPC. Also, TPC, as a distribution licensee, distributes the power so received through its distribution network to retail consumers. The generating entity is making power available for the area from own generation and power purchases
Direct Marketing – Power Supply to Mumbai Consumers
The Company supplies power directly to bulk consumers as refineries ,Central and Western Railways, Mumbai Port, textile mills, fertilizer factories, BARC, Municipal corporation and other major continuous processes industries requiring uninterrupted power supply. The latest addition to the list of consumers is the commercial district at the Bandra-Kurla Complex and major commercial and residential complexes in the suburbs.
Tata Power Marketing Strategies
- Most Economic Power Tariff (in Mumbai and its suburbs) – This is due to the fact that its power procurement is met by its own generation units in Trombay Power Station which has been in operation for many years.
- Reliable Supply- TPC has been emphasizing on providing a reliable supply . Tata power has also provided for ‘islanding’ in Mumbai region, which secures Mumbai against the Grid Failures (like the one that happened on July 30th, 31st 2012.)
- Prompt restoration of power supply and Efficient Billing Services – TPC has provided mobile van for issues resolution and timely bill collection. Credit and online bill payment facility in effect.
- Help to minimise energy costs through value-added services in areas of Energy Conservation, Energy Audit and other electrical support services
- Prompt connections at desired voltages from 220 V to 440 V / 230 V single phase- The company adheres to the time limit set by regulations for providing new connections. In a recent case (for Tata Power’s Delhi wing) ,when it was not able to provide for the same, it paid due penalties to the consumer.
Long term strategies include several other initiatives :
Tata Power has been at the forefront of propagating energy conservation and efficiency in the country. The company launched several attractive DSM (Demand Supply Management) schemes for its customers in Mumbai under its special initiative, ‘My Mumbai Green Mumbai’, introduced last summer.
The following DSM schemes are currently active for its Mumbai customers and are approved by MERC(Maharashtra Electricity Regulatory Commission):
For Residential Customers:
- The company has launched a ‘ceiling fan exchange’ programme by joining hands with Havells India for BEE 5-star rated energy efficient ceiling fans. These fans are offered only at Rs.924, which amounts to a 50-percent discount on market price, and the fans consume only 50 Watts of energy, which is 30 percent less than the conventional fan.
- Tata Power is also coming out with a new programme of 5-star refrigerators for residential customers. Under this scheme, the company aims to offer the most efficient refrigerators at a good discount so that the customers would be able to replace their old energy-guzzling refrigerators.
All DSM programmes for this category of customers are the one which provide energy-efficient electrical appliances to participant consumers at a subsidised rate. The company has tied up with major consumer appliance manufacturers to provide these appliances at a very heavy discount over the current market rates. Moreover, a portion of the cost is also borne by Tata Power.
For Industrial and Commercial Customers:
Since industrial and commercial customers have high consumption, a wide range of DSM programmes have been designed for them. These programmes are a mix of both — schemes where the consumer is provided solutions at a discounted price and schemes where they are incentivised for participation. Current programmes being conducted by the company are as follows:
- Energy audits: Under this programme, the customer’s premises are audited by a certified energy audit agency and recommendations are provided by this agency for achieving further reduction in energy consumption. The consumer pays only 25 percent of the fees, while the remaining is borne by Tata Power. Tata Power has so far carried out these audits for over 45 consumers and cumulatively provided recommendations for reduction of over 12 million units. The audit, conducted by professional and specialist energy auditors accredited by BEE(Bureau of Energy Efficiency), enables consumers to undertake a studied approach towards energy saving by mapping their unique power consumption pattern and identifying several opportunities to save energy.
- Thermal storage technology for air conditioners: This technology has been introduced for industrial / commercial customers having large central air conditioning systems. The chillers are run in night hours to convert water to ice and in daytime the energy stored in ice is used to cool the premises. The advantages of using this system are:
- Since the chiller plant is run in the night, the customers pay for night tariffs which are lower than day tariffs.
- The maximum demand is not charged in the night; hence the customer gets the opportunity to shift his demand to off-peak and also saves on demand charges.
Tata Power ,under this programme, is incentivising the customers who shift their peak loads using thermal storage technology.
- Demand response: Tata Power is the first utility in India to carry out this programme.
Utilities the world over typically carry out these programmes to ward off high cost of external power purchase, in case of transmission constraints, emergency conditions arising in the system, etc. Here, the consumer is asked to voluntarily reduce their load at a pre- determined time as required by the utility. Their actions involve changes in temperature settings of AC plants, shifting of work times, staggered switching of lighting supply, shift in pump operations, load curtailment using building management systems, and switching on the standby generation. Incentives are then provided to participating customers based on the quantum of load reduction achieved. Tata Power has already enrolled a capacity of 10MW load under this programme and has carried out several load curtailment events in 2012. Tata Power incentivises such customers by paying them an amount of about Rs2 per unit saved.
The company endeavours to roll out several innovative initiatives which would help customers to save power from time to time under this initiative.
To implement the above DSM initiatives, Tata Power has carried out extensive load research which involved studying the consumer behaviour, load variation patterns and determining peak load contributors by gathering information on various high energy consuming equipments used by consumers. Based on this load research conducted, Tata Power has designed specific DSM programmes and classified them according to the various consumer categories ie, residential, commercial and industrial.
Tata Power’s Safety awareness during this Ganesh Utsav
Tata Power undertook several initiatives to promote and ensure safety not just at the workplace but also in its neighbouring communities. During this year’s festival of Ganesh Utsav, Tata Power conducted a special safety awareness drive at various locations under their Jan Jagruti Abhiyan initiative. The drive spread awareness about the dangers that are involved in having pandals close to Extra High Voltage (EHV) lines and the precautions that need to be undertaken to avoid any accidents.
With the onset of Ganesh Utsav several pandals are erected around the city of Mumbai and the risk of electrical accidents increase. Keeping this in mind, Tata Power began a special safety awareness drive by conducting special sessions with Volunteers of all mandals .Apart from these sessions, huge awareness banners were also set up at various prominent locations such as the pandals and the water bodies where the immersion has been taking place. Jan Jagruti Abhiyaan is aimed at increasing awareness amongst citizens of the hazards of carrying out dangerous activities under/in the vicinity of High Tension (HT) Lines.
The impact of all the marketing initiatives of Tata Power
- With a consumer base of around 3,00,000 ,Tata Power daily receives around 300-350 consumer applications for migration from Reliance’s network.
- In 2011-12 alone, around 1,20,000 customers changed over to Tata Power.
- At the end of 2011-12 ,the no. of consumers with Tata Power stands at 4,87,378 against a figure of 23,630 in 2008 whereas that of Reliance is at 28,05,000 against 26,30,000.
- TPC registered an annual growth rate far greater than 200% .
Tata Power has literally pulled the rug from under Reliance Infra’s Distribution Wing with an unprecedented increase in its no. of consumers. With a commitment to provide better services viz. Smart Grid applications, Green Power etc. ,Tata power has indeed outclassed its competitor in that regional distribution market. There are some issues associated with Green Power marketing
Marketing and promoting your green electricity is not as easy as it looks.
Corporates —————————– Improve Corporate image
Achieve CSR targets
Consumers—————————- Willingness to pay
The consumers have a subdued will to use RE but it needs to be spurred by some forces. A differentiated segment targeting approach is required to market green electricity. Higher income, higher education level, affiliation with an environment conscious organization are the few factors that need to be emphasized upon while marketing green products.
Basic reasons for failure may be cited as failure in marketing research, overestimating hypothetical consumer willingness, poor communication about the products.
For sustainable green market penetration ,it would become important to target clients as govt. institutions, high income groups having capacity to influence others in the vicinity. Marketing campaigns should highlight the other benefits of green electricity making them to be as personal as possible. Also the organization has to be persistence in marketing efforts, as it might take time for the benefits to become visible.
So effective marketing tactics that not only spread the awareness about a product/service but also deliver what is being promised, lead to astoundingly positive outcomes in any kind of product or service business.
The same applies to Electricity Industry . With the kind of scope available for improvement in the sector dynamics, hereafter ,competition is poised to only increase in the sector which would induce the requirement of more innovative strategies to market one’s business and carry it out more efficiently.
National Power Training Institute,
Sources: tatapower.com, “Splintering urbanism in Mumbai”,2007, Marie-Helene-Zerah.