The Customer-Focused Utility

THE CHANGING DYNAMICS OF CUSTOMER RELATIONSHIPS

The utilities industry is in transition. External factors – including shifts in governmental policies, a globally felt sense of urgency about conserving energy, advances in power generation techniques and new technologies – are driving massive changes throughout the industry. Utilities are also under internal pressure to prevent profit margins from eroding. But most significantly, utilities must evolve to compete in a marketplace where consumers increasingly expect high-quality customer service and believe that no company deserves their unconditional loyalty if it cannot perform to expectations. These pressures are putting many utility providers into seriously competitive, market-driven situations where the customer experience becomes a primary differentiator.

In the past, utility companies had very limited interactions with customers. Apart from opening new accounts and billing for services, the relationship was remote, with customers giving no more thought to their power provider than they would to finding a post office. Consumers were indifferent to greenhouse gas (GHG) emissions and essentially took a passive view of all utility functions, only contacting the utility if their lights temporarily went out.

In contrast, the utility of the future can expect a much more intense level of customer involvement. If utilities embrace programs to change customers’ behaviors – for example, by implementing time-of-use rates – customers will need more information on a timelier basis in order to make educated decisions. In addition, customers will expect higher levels of service to keep up with changes in the rest of the commercial world. As consumers get used to checking their bank account and credit card balances via mobile devices, they’ll soon expect the same from all similar services, including their utility company. As younger consumers (Generation Y and now Generation Z) begin their relationships with utilities, they bring expectations of a digital, mobile and collaborative customer service experience. Taking a broader perspective, most age segments – even baby boomers – will begin demanding these new multichannel experiences at times that are convenient for them.

The most significant industry shifts will alter the level of interaction between the utility grid and the home. In the past, this was a one-way street; in the future, however, more households will be adopting “participatory generation” due to their increased use of renewable energy. This will require a more sophisticated home/ grid relationship, in order to track the give and take of power between consumers as both users and generators. This shift will likely change the margin equation for most utility companies.

Customer Demands Drive Technology Change; Technology Change Drives Customer Demand

Utilities are addressing these and other challenges by implementing new business models that are supported by new technologies. The most visible – and arguably the most important – of the new technologies are advanced metering infrastructure (AMI) and the technical components of the smart grid, which integrates AMI with distribution automation and other technologies to connect a utility’s equipment, devices, systems, customers, partners and employees. The integration of these technologies with customer information systems (CIS) and other customer relationship management (CRM) tools will increase consumer control of energy expenditures. Most companies in the industry will need to shift away from the “ratepayer” approach they currently use to serve residential and small business customers, and adapt to changing consumer behavior and emerging business models enabled by new network and generation technologies.

Impacts on the Customer Experience

There are multiple paths to smart grid deployment, all of which utility firms have employed to leverage new sources of data on power demand. If we consider a gradual transformation from today’s centralized, one-way view to a network that is both distributed and dynamic, we can begin to project how technological shifts will impact the utility-consumer relationship, as illustrated in Figure 1.

The future industry value chain for grid-connected customers will have the same physical elements and flow as the current one but be able to provide many more information-oriented elements. Consequently, the shift to a customer-focused view will have serious implications for data management. These include a proliferation of data as well as new mandates for securely tracking, updating, accessing, analyzing and ensuring quality.

In addition, utilities must develop customer experience capabilities in parallel with extending their energy information management capabilities. Taking the smart grid path requires customers to be more involved, as decision-making responsibility shifts more toward the consumer, as depicted in Figure 2.

It’s also important to consider some of the new interactions that consumers will have with their utility company. Some of these will be viewed as “features” of the new technology, whereas others may significantly change how consumers view their relationship with their energy provider. Still others will have a profound impact on how data is captured and deployed within the organization. These interactions may include:

  • Highly detailed, timely and accurate individuated customer information;
  • Interaction between the utility and smart devices – including the meter – in the home (possibly based on customers’ preferences);
  • Seamless, bidirectional, individual communication permitting an extended dialogue across multiple channels such as short message service, integrated voice response, portals and customer care;
  • Rapid (real-time) analysis of prior usage, current usage and prediction of future usage under multiple usage and tariff models;
  • Information presented in a customer-friendly manner;
  • Analytical tools that enable customers to model their consumption behavior and understand the impact of changes on energy cost and carbon footprint;
  • Ability to access and integrate a wide range of external information sources, and present pertinent selections to a customer;
  • Integration of information flow from field operations to the customer call center infrastructure; and
  • Highly skilled, knowledgeable contact center agents who can not only provide accurate information but can advise and recommend products, services, rate plans or changes in consumption profiles.

Do We Need to Begin Thinking About Customers Differently?

Two primary factors will determine the nature of the interface between utilities and consumers in the future. The first is the degree to which consumers will take the initiative in making decisions about the energy supply and their own energy consumption. Second, the amount and percentage of consumers’ disposable income that they allocate to energy will directly influence their consumption and conservation choices, as shown in Figure 3.

How Do Utilities Influence Customers’ Behavior?

One of the major benefits of involving energy customers in generation and consumption decisions is that it can serve to decrease base load. Traditionally, utilities have taken two basic approaches to accomplishing this: coercion and enticement. Coercion is a penalty-based approach for inducing a desired behavior. For example, utilities may charge higher rates for peak period usage, forcing customers to change the hours when they consume power or pay more for peak period usage. The risks of this approach include increased customer dissatisfaction and negative public and regulatory opinion.

Enticement, on the other hand, is an incentive-based approach for driving a desired behavior. For example, utilities could offer cost savings to customers who shift power consumption to off-peak times. The risks associated with this approach include low customer involvement, because incentives may not be enough to overcome the inconvenience to customers.

Both of these approaches have produced results in the past, but neither will necessarily work in the new, more interactive environment. A number of other strategies may prove more effective in the future. For example, customer goal achievement may be one way to generate positive behavior. This model offers benefits to customers by making it easier for them to achieve their own energy consumption or conservation goals. It also gives customers the feeling that they have choices – which promotes a more positive relationship between the customer and the utility. Ease of use represents another factor that influences customer behavior. Companies can accomplish this by creating programs and interfaces that make it simple for the customer to analyze information and make decisions.

There is no “silver bullet” approach to successfully influencing all customers in all utility environments. Often, each customer segment must be treated differently, and each utility company will need to develop a unique customer experience strategy and plan that fits the needs of its unique business situation. The variables will include macro factors such as geography, customer econo-graphics and energy usage patterns; however, they’ll also involve more nuanced attributes such as customer service experiences, customer advocacy attitudes and their individual emotional dispositions.

CONCLUSION

Most utilities considering implementing advanced metering or broader smart grid efforts focus almost exclusively on deploying new technologies. However, they also need to consider customer behavior. Utilities must adopt a new approach that expands the scope of their strategic road map by integrating the “voice of the customer” into the technology planning and deployment process.

By carefully examining a utility customer’s expectations and anticipating the customer impacts brought on by innovative technologies, smart utility companies can get ahead of the customer experience curve, drive more value to the bottom line and ultimately become truly customer focused.