Utilities continue to treat their customers like taxpayers or “connection points” instead of really engaging with them and rebuilding trust, says Alain Bollack, Director of Global Power and Utilities Centre, Ernst & Young, in an Engerati webcast Creating a Customer-Centric Utility to Drive Value and Profit. It is time for this traditional viewpoint to change. Mr Bollack explains why utilities need to take better care of their customers and prioritize their needs.
The success of capital investment depends on the customer-Approximately US$18 trillion is needed to invest in infrastructure over the next two decades in order to meet the significant increase in energy demand needs in emerging markets and the growing middle class.
Mostly, the customer carries the cost of upgrades and it is therefore important to consider customer values during the cost-benefit analysis. There has been significant resistance to tariff increases in countries such as Venezuela and Bulgaria. At the end of the day, customers will pay for their electricity but it is up to the utility to explain why there is an increase. A higher level of transparency is needed because customers’ resistance can be very damaging.
The global trend of deregulation increases pressure on customer retention-There is a downward pressure on tariffs as customers demand value for cost. A culture of price comparison is growing and it is becoming easier to switch utilities. Regulators look to customer satisfaction as a key indicator of value. Therefore, customer satisfaction has become critical for the utility.
Urgency to improve the customer experience and service-A trust deficit exists between utilities and customers. In some parts of the world, there is a lack of relationship between utilities and customers because customer expectations are not being met. This is not a good place for the utility to be in so the utility must rebuild the relationship by improving customer service.
The customer is changing faster than before-The pace of technology change is increasing. Consumers are constantly connected and have rising functionality and response expectations. Social media use is rising significantly and it’s up to the utility to respond to that.
Strategic options for utility companies
Mr Bollack lists three strategy options to choose from. He says there isn’t a “correct” option. Each utility must focus their attention on one option based on the current market, utility assets, capabilities, and position and where they want to play in the value chain of the energy sector. The utility can draw from the other two strategies but shouldn’t try and approach all three strategies at once. “You can’t be good at all three at the same time,” explains Mr Bollack. He lists the strategies as follows:
- Bring innovation into the sector and create partnerships with other players in the industry to enhance innovation
Integrated energy services value proposition with an improved customer relationship
Varied pricing tariff structures
Use of smart meter roll out to cross-sell services
Greater need for strategic partnerships where services are outside traditional core areas
- Everything is about customer relationship
Value proposition tailored to the individual
Tariffs and communication channels based on customer preferences
Cross channel sales/marketing strategy
Consumption/benchmarking data available
Focus on customer relationships may lead to business takes on a facilitator role rather than delivering energy services directly
Quality of operations and service efficiency
- No frills value proposition,
Simple tariff structure
Reduce contact (potential move to digital-only customer interaction)
Potential outsourcing of non-core business functions
A customer-centric utility to drive value and profit
The utility will need to reset the customer experience by re-establishing a positive customer experience. The utility needs to win back the customer’s trust and work towards customer excellence. “If you can’t do this, the utility of the future will fail-you must have a strong relationship with the customer.”
Innovation will broaden the customer reach. It is an opportunity to compete for a share of the home and provide non-traditional services, the shift from energy-only relationships to seamless service across all channels. However, you cannot do this unless you have a strong customer relationship. Today’s consumer is more receiving of new technology and utilities need to respond to this. There is a great deal of competition in the market (for example, Google) and innovativeness will keep the utility from losing its customers.
Utilities should explore the value of data and technology by converting big data insight into customer value, driving performance and service improvement across the distribution chain. “Can you afford not to explore the value of the data?” asks Mr Bollack.
How to win back customer trust
Deliver on expectation in every interaction with the customer - Build a track record of successful delivery. There should be consistent and predictable outcomes in every interaction with the customer. Queries need to be answered promptly and complaints resolved swiftly. Bills should reflect correctly.
Openness and transparency in every interaction - Communicate clearly (tariff, price increase, new services)
Empower customers to make their own decisions - Enable customers to make informed decisions.
“With positive intent and flawless execution, customer trust can be regained.”
Converting big data insight into customer value-the case for data
Utilities have a wealth of terra data insights:
- Customer interaction data (billing data, contact history, consumption data, for example, the smart meter feed)
Customer and household data (personal and financial data, and home infrastructures)
Behavioural data (preferences, for example, time spent at home, non-utility in-home data eg. White goods, energy performance, for example, boiler diagnostics)
Utilities should use this information to carry out the following:
- Enhance customer interaction through deeper knowledge of energy consumption
Predict what their customers will do next and tailor a response in advance of customer action
Predict customer indebtedness and manage it proactively
Anticipate needs of fuel poor and vulnerable customers and propose appropriate solutions
Identify customer appetite for new services and improve cross-selling success.
Utilities need to find ways in which to improve customer relationships through the use of data and its analysis.
“If utilities can do this, they will have created a sustainable business.”
Converting big data insight into customer value –the value of data
The global rollout of smart meters will generate more information about customers than ever before. Utilities can use this data to improve the customer relationship. How the utility tests it will demonstrate its real value.
The wide range of available data has the ability to provide the utility with invaluable insight:
- Customer value management (customer profitability and cost to serve, determine the next best action, lifetime value management, product profitability analysis based on usage and wholesale price)
Customer segmentation( attitude, behavior, needs-based, value-based and energy consumption patterns),
Demand forecasting (forecasting on actual consumption, new customers forecasts and incorporating external data)
Customer experience analytics (customer feedback analysis, nett promoter score, finding insight in unstructured data, call transcripts, and social media),
Predictive behavioral analytics (behavioral propensity modeling-predict churn, missed payments, and up-sell opportunities),
Energy usage analytics(profiling based on customer attributes, identify trends and patterns, identify anomalies in consumption
Armed with big data, the utility can take numerous actions:
- Protect revenue (detect fraud and abuse, manage debt and delinquency)
Improve smart customer journey (provide smart specific customer service, use smart customer feedback, use existing customer insight)
Better customer experience in the smart world (basic energy advice, use enhanced insights from smart)
Optimize deployment (prioritise smart deployment to maximise value, use customer insight for effective deployment campaigns)
Build new markets (consumer insight data, info for DNOs),
Smart commercial (calculate profitability, demand forecasting and hedging),
Smart sales and marketing (target marketing to customers, better understanding of profitability and more effective retention campaigns)
Smart customer propositions (align products to individuals, conduct energy usage analytics, provide detailed energy advice, provide customized alerts, monitor appliance usage)
Utilities will gain much value from this data if it is used effectively:
- Lower cost-to-acquire
Reduced deployment cost
Higher customer profitability
Third party sales
There are definite shifts in the market and competition from serious players like Google and Microsoft should drive utilities towards innovativeness in order to keep their customers.
Mr Bollack concludes: “Both fear and opportunity is driving the customer engagement market. But, the utility should place most of its focus on the opportunities as there are many. Utilities can learn from other sectors, they should explore the available data, build relationships, be innovative, focus on their customers’ needs and make the utility relevant to the customer. The time is now to engage with the customer.”