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Sales 3.0: Rethinking retail strategy in the German electricity market

Market analysis on positioning of utilities in consumer retail business

While the transition to renewable energy (Energiewende) and the liberalisation of the electricity market is reshaping the German electricity market dramatically, some utilities continue to rely on their old business models. But ongoing, destructive competition, rising retail prices and a tendency among consumers to switch mean electricity suppliers must develop new retail strategies. So how should the next evolution of modern retail strategy – ‘sales 3.0’ – look?

To survive and prosper, suppliers in the German electricity market must develop a retail strategy that is targeted, efficient and digital.

At the end of 2013, we conducted an analysis of the 28 largest German power suppliers and their 11 discounters in eight big cities in Germany to understand how different businesses are responding to this challenge.

Our study covered the business models and retail service offerings of each of the 39 companies. We asked:

  • How are electricity suppliers positioning themselves? What kind of image are they conveying?

  • In which sales areas are the suppliers and their discounters active? Which products do they offer and at what price?

  • How modern are their service offerings? What innovations are electricity suppliers using to make themselves more attractive to consumers and to boost future business?

To download your free copy of our report on the German electricity market (available in German language only) enter your details. >

Developing a targeted offering for the retail market

Clear positioning is one of the most important strategic elements of retail strategy for electricity suppliers seeking to differentiate themselves in the marketplace. All aspects of customer communication must be directed at reinforcing this positioning, encouraging customers to associate certain characteristics with a particular utility and to select their electricity supplier accordingly. The supplier’s image, based on its product and service offerings, must appeal to the selected customer target group. Our study found that 75% of companies analysed are already using web content to strengthen their image in this way.

Rethinking retail strategy in the German electricity market

Prioritising process efficiency

Currently, household customers are looking predominantly for the cheapest energy. But not knowing how to switch supplier and ungrounded fears of power outage during the switch mean many customers stick with their basic supplier. However, the number of customers adopting this approach will fall considerably as switching electricity supplier becomes easier and more commonplace. As a result, the market segment made up of basic suppliers – where margins are currently highest – will crash. Electricity suppliers that want to compete successfully for this segment must therefore make process efficiency top of their agenda, using economies of scale to drive costs down and protect margins.

Making the transition to energy service provider

We expect to see the number of power suppliers in the German market decreasing in the mid-term. The survivors will be those able to differentiate successfully, pick up on consumers’ priorities and offer benefits through new services and product innovations. Technical trends around power supply are changing the way consumer think about and use energy. Decentralised (customer) generation, smart meters and smart home solutions are part of a future where energy companies will become more energy service provider than supplier. Suppliers will differentiate themselves from discounters by providing clear benefits built around offerings in e-mobility and energy efficiency.

Building a firm foundation for future retail strategy

Suppliers must underpin their selected retail strategy with:

  • distinctive and consistent positioning and sharper brand definition

  • profitability calculation for products/ tariffs, customer segments, sales areas and communication channels  

  • a radical efficiency regime for processes and IT

  • rigorous make-or-buy analysis in relation to vendor selection for processes and IT

  • development of added-value elements during the transition from energy supplier to energy service provider.

PA Consulting Group works with utilities throughout the German market to develop and implement new electricity retail strategies.

To download your free copy of our report into the German electricity market (available in German only) enter your details.

Ron Norman
Energy and utilities
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Liz Parminter
Energy and utilities
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DOWNLOAD the 'Sales 3.0 – targeted, EFFIcIENT, DIGITAL' REport (In German)

To download your free copy of the full report (available in German only) or to arrange a personal appointment, enter your details here:

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