With Deregulation and Competition, Energy Companies Embrace EBPP as an Effective CRM Tool

Deregulation and Billing

While customers in deregulated utility markets face a barrage of marketing
materials from new entrants into the marketplace and comprehensive educational
programs sponsored by utility commissions, industry trade groups, and
incumbent companies, their most significant source of information on deregulation
is likely to be their monthly bill.

When the direct mail and advertising programs end, customers will look
to their bills to determine if a switch to a new supplier translated into
any significant savings. Customers make that evaluation – and future choices
– based on a comparison of what they’ve paid for utility services in the
past and what they are paying under deregulation.

For that reason, monthly billing statements will take on a whole new
role from a simple statement of usage, cost per unit, and amount due to
a tool that can be used to manage business and personal financial decisions
that could include a choice of supplier or options that could reduce utility
costs.

Additionally, deregulation will increase the complexity of the bill itself.
A bill that had a single cost and single amount due in a monopoly market
will now add additional categories to reflect the products and services
available competitively. For local distribution companies, billing and
payment may also mean billing for a wholesale supplier, as well as collecting
and forwarding payments to that supplier.

Above all, even in markets saturated with advertising, direct marketing,
and public information campaigns, deregulation has brought uncertainty
and questions from customers. The monthly billing statement is often either
the place where customers look for information and communication or the
document that sparks questions and requests for information from customers.

The traditional paper bill and enclosures have an extremely limited ability
to address the issues raised by deregulation, but new technologies are
giving utilities the ability to revolutionize their bill presentment and
payment processes while building stronger customer relationships and customer
loyalty.

EBPP – What Is It?

Simply stated, EBPP – Electronic Bill Presentment and Payment – is the
presentment of bills to consumers and the processing of bill payments
over the Internet. Today, EBPP describes a broad array of technologies
and services that range from the simple scanning and electronic transmission
of a paper bill image to more sophisticated electronic billing services
that permit customers to sort and analyze data and offer online, telephone,
or autodebit payment options.

The key to the growing popularity of EBPP is the ability to transform
the information available in the traditional paper bill into a management
tool that can equip businesses and individuals with the ability to analyze
costs and operations and make decisions that can significantly reduce
expenditures.

For example, an EBPP solution developed by Princeton eCom for Verizon
Wireless, provides Verizon customers with a cellular bill that can be
sorted according to several formats, including the time of day calls are
made, calls to a single location, etc. Usage analysis is another tool
available to Verizon customers, where they can analyze their usage by
several criteria. Now a static bill becomes an analysis tool. A business
manager or an individual consumer using the Verizon electronic bill could
make educated decisions on their calling plan or their long distance carrier
based on how they or their company’s employees were using their cellular
phone.

For utility companies, the potential for analysis in deregulated markets
may be limitless as customers could make comparisons over usage times,
times of day, and supplier costs in order to determine if they had made
the correct plan choices.

EBPP and Deregulation

The first and most significant impact of EBPP in a deregulated market
is enjoyed by the incumbent utility because electronic billing services
mean more effective, more efficient, and less costly billing processes.

Industry estimates place the cost of producing and sending a paper bill
at approximately $1.25 per bill. The cost of an electronic bill is estimated
at about 40 cents per bill. Companies that adopt electronic billing could
cut the costs of their billing operation by as much as half or two-thirds.
According to a study by Killen & Associates, the U.S. utility industry
can save $1.2 billion per year by implementing electronic bill presentment
and payment.

In addition to the savings that result from lower costs of producing
and sending the bills themselves, companies will also reduce costs by
translating the enclosures that accompany bills today into electronic
marketing tools and eliminating the high costs of printing and increased
postage required to send printed material.

For regulatory commissioners, who relied on the small print on the back
of the bill and bill enclosures to communicate regulations with the public,
and for companies required to communicate regulatory information, the
translation of printed material into online communications has some additional
advantages. Customers could be required to acknowledge their receipt of
regulatory conditions or information with a click of the mouse in much
the same way as they indicate acceptance of the terms and conditions of
the software they download or install in their computers.

At the same time, the customers who pay bills online also receive the
benefit of convenience and time savings, not to mention the costs of postage
for sending payment.

EBPP also offers companies more efficient and effective operations on
the accounts receivable side of the business.

By their very nature, electronic payments are more efficient and faster
than paper bills. The traditional billing process involves creating and
sending a bill in the mail, having the customer receive it, read it, write
a check, and then mail the check back to the company. At any stage of
the process, a delay on the part of an individual or the postal service,
means delayed payment.

In electronic bill presentment and payment, the bill arrives electronically,
the individual selects a payment option, and the payment is processed.
No mail delays, no lost paper bills somewhere on the kitchen counter.

Two other services offered by some EBPP providers also speed payment
and increase cash flow.

The electronic lockbox increases the accuracy of bill processing and
posting by eliminating the most common exception items.

An electronic collection service streamlines the traditional collection
agency process by automatically debiting a customer’s checking account
or drawing from a credit card.

EBPP and Competition

The competitive stakes in utility deregulation are high. More than one-third
of the respondents in a recent survey said they would absolutely switch
providers for a 10% price discount.

That’s not good news for traditional utilities, whose cost structure
often reflects the high expense of large operations like billing, that
come face-to-face with non-traditional entrants who don’t have large overhead
and are looking for new and innovative ways to break into the marketplace
and attract customers.

Adoption of electronic billing by the incumbent utility not only helps
to reduce costs and improve operational efficiency, it also helps to put
a more up-to-date face on the traditional company and to meet its competitors
toe-to-toe on the competitive battlefield. Moreover, it eliminates the
competitive advantage that a competitor could claim by introducing EBPP
and provides another reason for customers to “stay home” with the company
they’ve known for years.

Adopting an EBPP Strategy

Utilities need to adopt an EBPP strategy now. While overall adoption
rates for electronic billing are currently low – an estimated 5 percent
of all utility commerce was conducted online in 1999 – it’s anticipated
that 30% of utility customers will either use the Internet to pay bills
or make customer service contacts over the next few years. Experience
tells us that adoption grows more significantly when companies implement
a billing system that provides value in terms of content and the ability
to sort and analyze data, and easily and quickly initiate payment.

In today’s competitive marketplace, an initial EBPP strategy should take
several factors into consideration.

Cost. The cost of investing in an EBPP solution is likely to drive
a number of related decisions. These include deciding on whether to build
a proprietary system at a cost of more than a million, outsourcing the
total EBPP process for as little as $30,000, or licensing an EBPP solution
and paying ongoing maintenance costs, which can cost several hundreds
of thousands of dollars.

Branding. The EBPP implementation should support and reinforce
the company’s brand image, in terms of the obvious prominence of the biller’s
logo on the bill to offerings that reflect the company’s core competencies.

Systems Integration. An EBPP solution should help solve financial
challenges – not create new ones. A system that does not integrate with
existing billing and financial systems is likely to be cost prohibitive.

CRM Interface. Viewing EBPP as only a means to send bills and
collect money limits its power and overlooks its most important value
– its ability to build a strong Customer Relationship Management platform
into and on top of the electronic billing process.

Ushering in a New Era in CRM

While streamlining the billing and payments process and increasing the
accuracy and speed of payments are powerful reasons to implement an electronic
billing and payment solution, the real promise of EBPP lies in its ability
to revolutionize utility CRM operations.

By marrying billing and information technologies, EBPP has the potential
to turn a monthly billing statement – often the only point of contact
between utility companies and their customers – into a powerful tool to
increase customer satisfaction and build all-important customer loyalty.

By using the information imbedded in a customer’s bill as the basis of
an analysis, the company produces targeted, personalized messages that
position it as a concerned partner interested in helping and empowering
individual customers to make smart business decisions.

As an example, if the analysis of a customer’s energy bill shows a sudden
and significant increase in energy usage that occurs at the start of a
winter season, that information could generate a message offering a free
energy audit or information about the utility’s equipment maintenance
and repair service. In this case, the offers are not merely seasonal marketing
promotions received by every customer, but messages targeted to and reflecting
the individual customer’s energy usage and bill.

Or, if an analysis of a business’s electricity bill shows most usage
occurring in the high-cost prime time hours, it might generate a suggestion
to cut costs by switching at least some operations to the less expensive
night hours and provide a cost-analysis of savings.

Beyond information and analysis resulting from an indivdual customer’s
usage, the utility bill of the future is likely to provide more significant
and valid comparisons and to draw more informed conclusions. For example,
a future natural gas bill might contain comparisons with other natural
gas users in a neighborhood, housing development, or zip code. This would
enable customers to determine if their gas usage is out of line with neighbors
or just the result of abnormally high or low temperatures.

By providing more detailed information and comparisons in billing statements
as well as related links, it’s likely that companies can eventually reduce
more expensive call center operations.

Redefining Customer Service

Online billing is also expected to redefine the way in which customers
interact with utility companies on routine requests for service or service
changes. It stands to reason that fewer and fewer customers will accept
waiting on the telephone for a customer service representative when they
can conduct routine business and make routine purchases as fast as a mouse
click.

For that reason, it’s very likely that successful utilities will incorporate
routine service and billing change requests into their EBPP solution.
Rather than holding on the line waiting for the next available operator,
customers will have an online ability to change addresses and arrange
for service, and schedule routine maintenance visits online.

As an added advantage, incorporating routine service requests into the
EBPP solution also places that information into the company’s billing
system.

Experience-Based Marketing

In deregulated markets, incumbent often find themselves attempting to
build their competitive position by marketing new and higher margin products
and services under their familiar brand name.

Electronic billing makes it possible for the companies to cross-sell
and up-sell products and services more efficiently and effectively by
targeting offers to customers based on their current billing experience
as well as the demographic and financial information.

Differentiation – Content is a Competitive Advantage

When the World Wide Web experienced its explosive growth in the mid-1990s,
companies differentiated themselves from competitors merely by having
a presence on the Web. Eventually, however, customers began to differentiate
competitors and give their loyalty to companies whose websites offered
them the utility and interaction they expected.

Today, companies can distinguish themselves from competitors by merely
offering electronic bill presentment and payment services. But not for
long.

As more and more companies find that EBPP is no longer an option, but
a requirement, customers will make decisions about them based on what
their EBPP solution contains and whether it offers the content or options
they expect.

The companies whose EBPP solutions offer the most content, the most features,
and the most targeted messages will find themselves holding a significant
competitive advantage.