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Accenture

Customer relationships in the utility industry have dramatically evolved, aligning with other players in other key industries.

Mergers and acquisitions, convergence, competition, stock value focus and the effects of deregulation in today's utility industry are intensifying the need to better understand customers and their values, anticipate their needs, and exceed their expectations. This is why "winning the war for customers" is moving to the top of the agenda for most utility CEOs. Many utilities are turning to Customer Relationship Management (CRM) solutions for ammunition. Companies are evaluating the CRM strategies, organizational models, processes, and technologies employed in other industries, such as telecommunications and financial services. However, utilities are finding a confusing environment of success stories and failures with varying priorities and strategies, and competing technologies.

Some of the confusion stems from the term CRM, which means different things to different people. To some, it means sales force automation or call centers. To others, it is synonymous with doing business over the Web. And some define it as strategic, while others see it as technology that enables strategy. In Accenture's view, CRM is about achieving profitable growth by acquiring, developing and retaining satisfied, loyal customers and creating economic value in a company's brand.

Three Areas to Get Right

Around the world, we are seeing a shift in the strategic importance of CRM among utility companies as well as the specific capabilities within CRM that utilities need to succeed. The pace of CRM adoption is varying considerably by geography, type of business a utility goes into, and maturity of the competitive environment.

For privatized utilities following the U.K. model, it is the retailers who are most concerned about CRM. Their main objective is profitable revenue growth. This growth will come from expanding the customer base through customer acquisition and retention, and by increasing the "share of wallet" with the customer base. Achieving these goals will require superior sales and marketing abilities - not traditional areas of expertise for utilities but rather ones that utilities are quickly developing.

While critical, many utilities are not capable of increasing revenue because of monopolistic environments. Under these circumstances, companies can concentrate on specific CRM capabilities that allow them to better match service levels with the value of that company's customer to the organization, such as answering calls or dispatching work to crews in real-time based on the profitability and importance of a customer to the company.

For utilities in markets beginning to deregulate such as in the United States, retailers are generally small, start-up operations with little infrastructure. These companies are going through the early stages of the CRM growth curve and scaling capabilities slowly. On the other hand, U.S. distribution companies, especially in the Northeast and on the West Coast, are traversing a wave of merger and acquisition activity that is quickly forcing the need for new CRM capabilities.

The incumbents, who see their existing customer base as their crown jewel, are very focused on customer retention. They are concerned about the lack of brand recognition outside their region and want to leverage customer insight to really understand which customers are the most valuable in the event of losing some to the competition.

Then, there are the new entrants. Some of these companies already have a very recognizable consumer brand outside utilities. Their focus for CRM is on customer acquisition and leveraging their brand to take customers away from the incumbents. In addition, they see utilities as a break-even proposition and believe that profitability will depend on up-selling and cross-selling other consumer products and services.

Regardless of what market a utility is in today, business is about profits, and profits come from customers. Virtually every utility needs to look at the customer in a brand new way. In more advanced markets, three areas of focus are emerging as an essential foundation for CRM:

o Customer Insight

o Customer Interactions

o Brand Management

As utility companies build on these three key areas, scale becomes an important issue underlying all CRM efforts. In the United States, many utilities own relatively small customer bases and cannot justify making substantial investments to build on new CRM capabilities for significant anticipated growth. Many companies, however, are planning to acquire millions of customers and know they will need solutions that can scale fast. With the proper planning, it is possible to make prudent, smaller investments up-front in solutions that are configured for future growth. As growth occurs, additional investments can be made to scale quickly.

In Europe, the challenge of scale is different. It involves implementing CRM solutions at scale, across very large customer databases. This challenge means effectively implementing changes that impact millions of customers, and thousands of customer service agents and field employees.

Customer Insight: Leveraging Customer Knowledge to Provide a Differentiated Customer Experience

With substantial amounts of data, utilities are very well positioned to turn their information into insight through detailed analysis. Today, however, most utilities lack meaningful insight about their customers, because they have simply not had the need, tools, or capabilities to gather the necessary information. As a result, the industry is in a very immature stage in its understanding of which customers and what types of service lines drive different kinds of profit.

Customer insight is about strategically leveraging a company's customer data to provide a basis for offering the right products and services through the most cost-effective and efficient channels at the most appropriate time. For utilities, this means understanding your customers like never before - having a 360-degree view of each customer across products, departments, regions, channels, and time.

Achieving meaningful insight necessitates having systems and processes for maintaining a detailed understanding of each customer, and their values and motivations. It will involve integrating information, such as channel preference and history, field service, and profitability as well as sharing information with third parties.

The process of gaining customer insight is a continuous one that involves aggregating customer data and analysis. Segmentation is an essential part of this process. Instead of traditional segmentation around three or four major customer categories, as is often the case in the United States, utilities will find value in driving down to as many as 10, 15, and even 20 levels of refinement. While still a greenfield opportunity for U.S. utilities, some companies are already taking steps in this direction. The segments are driven by what customers value rather than by ZIP codes or other traditional means. With more detailed information, utilities can better define the customer experience.

To be of value, insight must be integrated with a variety of capabilities such as database marketing, data warehousing, data mining, campaign management and online analytical processing. The foundation for integrating these capabilities is a knowledge base that captures the appropriate customer information and effectively manages that information.

Armed with new insight, utilities can drive personalized offers, personalize interactions, and fulfill the brand promise. By personalizing products, pricing, promotion and message content through appropriate channels, utilities can optimize customer acquisition, development and retention.

Customer Interactions: Achieving Consistency across All Channels

Customer interaction spans all customer operations - ranging from any form of selling, sales and order capture to call centers, customer service, billing, and payment processing, field service contact and management, third-party channel operations, and electronic CRM (eCRM). eCRM includes Internet-based customer interaction and transaction systems, Web telephony, Internet markets, and exchanges for selling, customer self-service, and customer portals.

The number of ways customers can interact with a company today is exploding. Aside from traditional customer interaction channels, there is instant messaging, wireless access through mobile phones, personal digital assistants, pagers, the Internet, and more. Emerging channels such as interactive TV are growing in importance.

Brand promises customers expect today are convenience, choice, and control. No matter what channel a customer chooses, they expect consistency across the experience. Interactions with a customer also need to be seamless across all customer-facing operations and consistently personalized.

A consistent customer experience, however, often breaks down with mergers and acquisitions. The companies involved generally have several call centers with legacy customer information systems and applications that do not share information. Given this kind of environment, the companies struggle with how to effectively integrate customer operations. How do you build virtual call centers? How do you ensure that current systems can be "front-ended" to enable a common customer experience? Even building a common website can become a complex undertaking.

In any case, as a utility operationalizes its customer interactions, all its moves should be aimed at maximizing the lifetime value of the relationship with the individual - a utility's most important and delicate asset. For in the end, building loyalty among valued customers is the key to long-term success in an increasingly crowded market.

Brand Management:
Turning a Liability Into Powerful Asset

If there is one key lesson utilities can learn from customer experiences in more liberalized markets, it is the importance of effective brand management. A number of companies have withdrawn from the marketplace or sold their customer-based businesses because they lacked the appropriate CRM capabilities to carry out their brand promise, and they were not prepared to make the necessary investments in marketing and branding to become market leaders. The lesson is clear: customers no longer respond to a company simply by name. It takes the creation and maintenance of a powerful brand to claim a stake in today's marketplace.

For companies that have newly merged or been acquired, brand rises in importance and creates new issues, such as: which brand does the new company keep, and should the company come up with an entirely new brand? Recent experiences are demonstrating that utilities are doing both. For some utilities, their established image is an asset; for others, it is a liability. Regardless, most utilities are being forced to figure out how to reposition their brand as a customer-centric organization.

These changes are thrusting utilities into the creative marketing arena - yet another area not native to utilities. Consequently, utilities are grappling with such issues as brand positioning, brand strategy development and what makes an effective campaign.

Many companies new to branding commit investment errors that can undermine their objectives in brand building. For years, even the most sophisticated marketers such as U.S.-based Procter & Gamble have struggled with questions about how to invest in a brand. As one of the original Lever brothers famously stated "I know half of my advertising is wasted, I just don't know which half."

If this is a problem for traditional marketers, imagine the challenges to a new brand builder in the utilities industry. The solution is to turn to new techniques in the field of marketing science. Sophisticated econometric modeling techniques are now available that can generate data-driven platforms for marketing resource allocation. These systems have evolved only recently with the development of more powerful desktop computers permitting the analysis of huge databases. In combination with the creative skills of traditional advertising agencies, marketing science can provide the powerful analytical base that a new brand builder needs to succeed.

All these strategies point to the growing trend that customers expect and demand more value from brands in terms of consistent service experience. The lessons learned from brand development in the United Kingdom illustrate the importance and substantial undertaking of launching a brand and identity - an effort that cannot be underestimated.

The Customer Relationship Transformation

The transformation of customer relationships in the utility industry, in many ways, has only just begun. Utilities are evolving beyond their traditional products and markets, aligning with other players in other industries. They are cultivating new kinds of relationships and CRM capabilities. Many utilities, for example, are starting to position themselves as retailers who provide energy rather than utilities that provide retail products.

It is important to recognize, however, that CRM capabilities are not built overnight. Many utilities have made investments in key capabilities only to struggle to see a return. Today, there are ways to quantify the value and benefits of investments made in CRM capabilities that help determine where to invest further to reap the highest return or how to justify new investments. There are also ways to reduce the risk involved in implementing large CRM initiatives based on lessons learned from other industries.

In essence, taking an approach that reduces risk and measures value will enable utility executives to determine which improvements or changes to the plan should be made, and to capitalize on new opportunities to leverage CRM fir increased competitive advantage. If the trends in the United Kingdom are any indication of the future for utilities around the world, CRM capabilities for every utility will soon become a competitive advantage.