Revenue Issues, Part 2: Pricing for managing customer behavior

Originally I thought that I would keep this as the last topic to be addressed in this series of blog posts about revenue issues due to its slightly more complex nature. However, a couple of Tesla-related pieces of news have popped up recently and therefore I thought that it would make sense to address this now. A couple of good examples of the Tesla-related posts are below:

Tesla Owners Frustrated by Recharge Waits (Wall Street Journal)

Tesla Sends Out “Don’t Use Superchargers All the Time” Letters (Autoblog.com)

The challenges related to managing the customer behavior are relevant for all EV charging service providers, not just Tesla. Tesla has particular issues though, since they provide a free service. A small consolation is the fact that they provide a service only for the Tesla owners, therefore limiting the scope of the issue at hand. One of the advantages of the other service providers is that they can (and should) make the service chargeable, rather than free.

However, the discussion on this highlights two important things in my opinion:

  1. As the number of EVs grows, maintaining customer satisfaction becomes more challenging as the likelihood of a charging station being occupied is higher
  2. The original reasoning for a charging station installation might not be entirely correct (e.g. Tesla intending to provide a service for highway travel but that being used for other purposes in Amsterdam)

The first issue can be addressed by providing different levels of service for the users and expanding the capacity of the service with optimized investment in new charging stations. There is no need for all charging to be DC-based, but unless there is a difference in the service, people will you use the best (in this case, quickest) service available to them by default. One DC charger might cost as much as 10 Level 2 chargers, but building Level 2 chargers in locations where that service level is appropriate multiplies the number of available charging locations at a more reasonable cost.

This is a situation where pricing works very effectively on managing customer expectations and satisfaction. A much better solution can be reached by incentivizing the customers that do not need the DC charging service to choose use something different at a lower price. This keeps DC charging reserved for the users that need it while also keeping the other users satisfied. An added benefit is that the charging station investment is a lot more cost-efficient than simply building DC chargers for every location.

The second issue can be managed with pricing as well. The charging station geograhical coverage planning needs to take the different service levels into account. Overlapping coverage for quick, fast and normal charging should be providedespecially in urban areas and pricing should be used to direct people to use the most appropriate charging outlets. Expressed very simplistically, there needs to be Supercharger and DC quick charging along the highways, fast AC for retail locations and normal (=Level 2) charging at office/residential locations. In practice this is a bit more complicated, but the basic idea is to differentiate the offerings and then provide the right incentives for the users to “make the right choice”. This leads to an efficient use of the infrastructure as well as to higher customer satisfaction.

One response to “Revenue Issues, Part 2: Pricing for managing customer behavior

  1. Pingback: Revenue issues, Part 4: It is not worth replicating the “pumping gas” service | AC2SG Software - IT Solutions for Smart Grids·

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