All change in channels to market for heat?
In my last blog I talked about the five factors that are starting to drive disruption in heating markets, which we’ll be unpicking at our European Heat Summit in early June. Now I’m going to focus in on how these five factors will drive changes in the traditional route to market of manufacturer -> wholesaler -> installer -> customer.
This route to market has dominated heating markets for decades – with installers usually holding the most power, following the old adage that power is held by those closest to the customer. If you need a new heating system, you call your installer, and it’s the installer that will typically specify the product and brand. Wholesalers compete for the installer. Manufacturers do deals with wholesalers, and influence installers to pick their product off the wholesaler shelves.
It works well, so why and how will it change?
There are three ‘whys’:
- Digitalisation and connectivity is the biggest factor, and is starting to impact the sector in a number of ways. A smart thermostat provider will have intimate knowledge of how a customer is using their heating system. With data analytics (using a variety of data sources to gain insight into the customer) companies will be able to propose the right heating system at the right time. They have the advantage that the customer will typically be interacting with them a number of times a week – a radically different relationship to interaction with an installer, boiler manufacturer or energy supplier.
- Customer power. More and more customers (our forthcoming research will quantify how many) are seeking to make choices themselves – or to be part of the process. So, they no longer rely on installers to specify the product and brand. Some will do this through their own research. Others will use online digital platforms provided by a range of players that help them select the best system for their home. There is a race on to win the ‘digital platform’ battles. Installers themselves, boiler manufacturers, existing service providers, and new entrants are all seeking to win this battle.
- Provision of services. This is probably the newest and most uncertain area. Very few customers currently buy heating as a Service (HaaS). There are some exceptions, with some innovators (featured in our ‘New Energy’ Business Model Service) emerging, as well as mainstream companies such as, the German utility, EWE. If these companies can succeed in unlocking customer interest with compelling propositions, then customers will increasingly buy from them. Our market research shows there is clearly customer interest in this – but unlocking it is not easy.
We’re realists at Delta-ee – we know that changes in the heating market are rarely rapid. The traditional route to market has existed for many decades and will continue to do so. So the title of this blog, “All change…?” is too strong. But we are clear that the traditional route to market will decrease over time. Evolution rather than revolution – with the rate of change ultimately dictated by how well industry players meet customer needs in new and innovative ways. We love our job of analysing how it is and how it will change, and working with the industry on this topic.
Please do get in touch (at Delta-ee we always enjoy exchanging views and opinions), follow our blogs and research highlights, or come to our European Heat Summit. At the Summit, in our home city of Edinburgh, we’ll be hearing views from a range of companies on these topics - Thermondo, Viessmann, E.ON, ENECO, an installer’s first-hand experience – and enjoying some lively debate and discussion as well.