Future of I&C Sales & Marketing: Segmentation

Publication Date	August 2006
Publisher	Datamonitor
Product Type	Report
Pages	16
ISBN Number	not applicable
Product Code	DAT00449

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Summary

Introduction

Prior to liberalisation, and particularly within energy markets that are fragmented regionally, buyer motivation is difficult to understand as their portfolios are divided. As markets open, buyers become more visible as they begin to group their sites together.

Scope

Insight into the changing nature and focus of segmentation as energy markets liberalise
Segmentation structures developed by Datamonitor to allow companies to build their own internal framework
Descriptions of the variation in needs and priorities of different buyer segments as they buy energy
Understanding of the likely target markets of utilities according to their structural positions

Highlights

Market openings are typically staged progressively, with larger sites able to switch before those with lower consumption. This has the effect of splitting the sites managed by individual buyers into multiple contracts which become challenging to re-unite in the future as contracts are out of step with each other.

To effectively identify and market to new customers, it is important to know where the most attractive customers are and what sites and volumes that they hold. An effective segmentation model is crucial as this allows buyers with similar needs and priorities to be grouped and then targeted.

As markets liberalise, it is typical for suppliers that have historically had a regional focus to turn their attention to particular customer segments in which they feel that they have commercial or strategic advantages. This is assisted by the development of effective Third Party Access (TPA) rights that begin to break down geographic barriers.

Reasons to Purchase

Develop entry strategies within new regions as governments liberalise their energy markets
Understand the motivations both of current, as well as prospective future, utility customers
Target the customer groups that are the most commercially attractive for each utility

Content

Catalyst
Summary
Methodology
Analysis
- As markets liberalise, demand segments are created which do not represent buyers
- Markets are liberalised progressively, with the largest buyers able to switch first.
- The portfolio of sites with any one buyer is split by both geography and consumption.
- Price differentials between markets are evidence that significant structural and market barriers to pan-European competition exist.
- The geographic spread and site size mix of buyers must be matched by the suppliers that wish to serve them.
- Only a single EU energy market will reveal the true purchasing scope of the largest buyers.
- If liberalisation is able to remove geographic barriers, buyer portfolio and company structure will determine their needs.
- For example, Datamonitor divides UK power buyers into 5 categories.
- Datamonitor segments buyers within the UK to group together organisations that have similar buying priorities.
- Suppliers will compete for the buyer segments that they believe have the greatest future value.
- Incumbents facing customer losses in their home market must both retain, and market to, their chosen buyer segments.
- In choosing their preferred buyer segments, suppliers must decide on their core competencies.
- As a result of regional/national boundaries, buyer segments are shared equally between suppliers prior to liberalisation.
- Specialisations develop as markets mature and new entrants target specific buyer segments.
Appendix
- Ask the analyst
List of Figures
- Figure 1: Sample portfolio of pan-European sites
- Figure 2: Average spot power prices and interconnections within the EU
- Figure 3: Customer Identification Matrix
- Figure 4: Contracting of energy buyers with pan-European portfolios
- Figure 5: Datamonitor segments buyers within the UK to group together organisations that have similar buying priorities.
- Figure 6: Different buyer segments contract for their energy in their own way.
- Figure 7: Buyer Segments also play a role in determining levels of Third Party Intermediary (TPI) assistance.
- Figure 8: Buyers have different service priorities from their suppliers.
- Figure 9: Supplier positioning within liberalised markets
- Figure 10: Market shares within buyer segments with regional segmentation
- Figure 11: Market shares within buyer segments after supplier specialisation