Utility Automation & Engineering T&D - Outsourcing can help utilities reap higher profits

Dec. 19, 2002 -- The utility business has been presented with a narrow window of opportunity to revolutionize its customer management amidst dramatic market upheaval.

Chief among these new priorities is customer service, which needs to be helpful, efficient and cost-effective.

In Destination Excellence's study of utility companies in deregulating markets, companies which provided significantly better customer service increased their customer base by more than 10% during the first year of deregulation.

By comparison, companies which provided average customer service lost 2% of their customer base to competitors, and companies providing inferior service lost a minimum of 4% of their customer base in the first year, the same study concluded.

After energy supply, the largest controllable cost to the average utility is customer service. Industry research reveals that customer service operations contain 75% variable costs.

The Brookings Institute reported that research on restructuring in five industries [other than utility] reveals that product/service prices fell 4% to 15% in the first two years after deregulation and at least 25% within 10 years.

Additionally, nearly 80% of the difference in utilities' pre-tax profits can be explained by differences in customer service, marketing and sales capabilities, according to the Accenture Institute for Strategic Change.

According to industry-analysis firm Aberdeen, "To succeed, utilities must become customer-centric, service-based enterprises. For many utilities, outsourcing customer care and billing is a viable means to better customer service. Outsourcing provides a way to optimize customer relationships while gaining protection from regulatory change, uncertainty and economic volatility."

According to a recent study by Power Perceptions, nearly one third of customers are dissatisfied with their electricity service, citing customer service, price and billing options as the top three reasons for dissatisfaction. Under the monopoly model, utilities have very little incentive to enhance the customer experience, as reflected in their historically poor American Customer Satisfaction Index (ACSI) scores.

Apart from airlines, whose rankings are affected by factors such as late planes and lost luggage, utilities consistently fall at the bottom of the ACSI industry list.

Research indicates that many utility companies struggle with staffing, training and fragmented, archaic applications that hinder business evolution and expansion. Utilities lag other industries in their access to enterprise-wide information and customer history as data is often trapped in a multitude of mainframe CIS systems.

According to utility consulting firm Chartwell, less than 13% of utility companies have a CRM solution in place to help their CSRs serve and sell to customers. Furthermore, many companies have several, if not dozens, of billing systems for various divisions or service offerings. This makes load forecasting a chore and providing seamless service nearly impossible.

Now is the time for utilities to embrace and address the elevated expectations of their consumers. Customers compare your company's service not only to that of other utilities, but also to the service they receive in other industries. Picture this: years down the road, customers' increased buyer power and access to information may lead to instant, easy utility switching, much as we see with long-distance telecommunications today.

* Fast, seamless service across divisions (acquisition, service, billing)
* Real-time status of pending work orders/service calls
* Real-time updates on outage resolution
* Multi-channel options for billing information and account status
* New payment options and flexibility
* Consolidated billing for multiple utility services

Keeping pace with evolving customer expectations and proliferating technologies requires a level of customer expertise that most utilities can't provide in house. One possible solution that's being increasingly relied upon is the use of process outsourcers. Outsourced companies are often better equipped with existing infrastructure, technology, human capital and best practices.

Whether your company is an investor-owned utility on the brink of deregulation or a municipally owned service provider in a regulated market, outsourcing offers an opportunity to deliver superior customer care while reducing costs.

Outsourcers can help utilities opening new contact channels, increase customer intimacy and anticipate customer needs. Utilities that partner with an outsourcer for customer management often also have access to integrated technologies like e-mail, chat, self-help, order management, billing, customer knowledgebase, warehouse management, call-tracking software and more.

Deloitte Consulting found that 55% of energy companies will buy or partner for a new customer management system to support deregulation.

Industry data has estimated that a medium-size utility will spend a whopping $110 per meter for new customer management systems.

Since these systems - much less the implementation and integration - cost millions of dollars, outsourcing can be an attractive, low-investment, high-ROI alternative.

A utility might do well to get started with a cautious approach, by starting small with low-risk functions:

* Overflow calls (outage)
* Credit and collection calls
* Back-office systems and support
* Outbound telemarketing
* After-hours calls
* Customer satisfaction surveys
* Bill printing/mailing/processing
* Remittance processing
* Sign-ups/inbound sales
* CIS hosting, support and maintenance

As a company's comfort with outsourcing grows, it could begin to explore options for transformational, strategic outsourcing relationships. Many outsourcers offer ways for a company to transition to lower, fixed costs through techniques like risk and gain-share pricing, including a flat support fee per meter or per customer.

Wise utilities are beginning to closely examine and manage all aspects of the customer experience to create enduring, rewarding relationships. As a company's outsourcing strategy matures, consider the following aspects of customer management as opportunities for true business transformation:

• Customer care. Caring for customers and nurturing relationships are vital to long-term profitability. Some outsourcers offer sophisticated technologies such as universal agent desktops, computer telephony integration (CTI), customer data repositories and product knowledgebases.

• Inbound sales. The inbound sales call (or chat or e-mail) is a pivotal opportunity to make a positive impression. The customer is ready to buy; thus, the experience should be smooth, easy, friendly and convenient. The integration of inbound calling systems with customer history and proactive profiling delivers superior opportunities for up-selling and cross-selling via dynamic scripting.

• Web Self-Help. Tight integration of self-help systems with back-end customer care and billing engines enables real-time service and updates. Thus, if a customer inquires online about his or her account status, the self-help application or customer service representative can instantly retrieve that information and provide informed, personalized service.

• Robust response management. Campaign management - vital in newly deregulated markets running sophisticated acquisition campaigns - requires tools and services to handle e-mail, direct mail, e-commerce, phone and advertising campaigns. With integration, utilities can manage all the multi-channel inquiries and orders that a campaign may generate, as well as perform in-depth return-on-investment and customer profile analyses to enhance future campaigns.

• Logistics and distribution. Often dismissed as a back-end or operational function, order and lettershop fulfillment is vital to customer management as a tangible touch of the relationship and commerce process. An integrated solution connects order and payment processing, inventory management, shipping and returns processing activities to customer care and sales.

• Marketing services. Customer acquisition and retention require knowledge about customer purchasing patterns, demographic and psychographic profiles, and more. Integrated customer management delivers greater effectiveness across a multitude of marketing efforts, including customer acquisition programs, database development and analyses, market segmentation and targeting, permission marketing, list management and customer value analysis.

Outsourcing a single customer management function may reduce costs, and outsourcing multiple functions could transform the enterprise, deliver improved business performance and enhance shareholder value. Exceeding customer expectations requires an integrated, end-to-end customer management solution to infuse customer intelligence into - and gather customer intelligence from - each and every interaction. Transformational outsourcing is a cost-effective, low-investment method for achieving a profound level of customer care sophistication.

Outsourcing is increasingly relevant to utilities: as the speed and regulation of business increase and competitors proliferate, companies are forced to concentrate on their core competencies and outsource non-core functions. The most efficient business model is one in which companies and partners focus on and provide services solely in their areas of core competency.

ClientLogic is an international provider of integrated customer management solutions, including customer contact, fulfillment and marketing services. A subsidiary of Canadian diversified company Onex Corporation, ClientLogic is headquartered in Nashville, Tennessee and operates in 47 locations in 10 countries throughout North America, Europe and Asia. For further information about the company, visit www.clientlogic.com.

About the Author: Channing Rollo, business intelligence manager and founder of thinkBIG at ClientLogic, is responsible for analyzing and reporting on customer management industry trends, fulfillment, eCommerce and the CRM competitive landscape. Rollo joined ClientLogic in March 2000 as an eBusiness Analyst before being named Manager of Strategic Marketing & Communications. Rollo can be reached at channrol@clientlogic.com.

Add RSS Feed