|Alex Patient, Datamonitor analyst|
UTILITIES in the U.K., Sweden and Germany are currently facing declining retail margins for residential customers, while at the same time standards of service are raised. They therefore face a double squeeze upon their profitability: falling prices and increasing demands for customer service.
In contrast, suppliers to the non-competitive markets in Italy and Spain (likely to deregulate in 2003) and France (2007) are in a more comfortable position. Constant prices ensure constant returns, but the specter of competition -- and competition with the increasingly efficient utilities that have developed in the U.K., Sweden and Germany -- must drive them to fundamentally reassess the way that they serve their customer base.
With this in mind, Datamonitor examines one aspect of CRM in the context of the utilities industry to establish a business strategy that is directed at ensuring that every customer is handled effectively, according to their own profile, and that management decision-makers are empowered with timely and appropriate information. At present, few decision makers are sufficiently aware of the specific costs to serve a residential customer in their respective national markets, and consequently are failing to take the initiative. The key to reducing costs for suppliers, while retaining a high level of service, is balancing the demands of each.
Many utilities have taken the plunge in buying costly CRM technology to integrate the front and back office, allowing the transformation of the call center into a contact center. The result of an integrated IT structure opens up many doors for suppliers wishing to raise service and reduce costs, but too many suppliers are regarding integration as the end result. In most cases, CRM technology should only be regarded as the means to an end, rather than the solution per se.
Failing to reach full potential
A good example of this can be seen in the way that utilities handle customer queries through the call center. IT integration has allowed the development of contact centers in most utilities, so that customer support representatives (CSRs) can receive calls by phone and the Web, and have the ability to view a customer's profile upon contact. This may well improve the level of customer service, but fails to maximize the full potential of the technology. It may now be possible to track which customers are calling and how often, which is a useful guide in judging the success of the "one-and-done" goal -- where customer queries are resolved in a single contact. However, Datamonitor research shows that across Europe, 1.86 contacts are currently required to resolve a query.
So where are utilities going wrong?
The answer lies in the way that CSRs are trained and motivated. CSRs are commonly given incentives to reduce call duration per contact with a view to reducing costs. However, these incentives are having a negative effect upon the bottom line, as customers repeat their queries at a later stage either through the call center again, or through more expensive communication channels such as the post or face-to-face at a company's offices. CSRs must therefore be given an incentive to provide a quality service that both the customer and the bottom line appreciate, while paying attention to the length of call.
Nevertheless, the call center manager should not assume that customers enjoy the experience of calling the call center, or that they would not prefer to serve their own needs given the opportunity. CRM technologies can identify the most common customer queries in any given month, and then management can take this information and act upon it to significantly reduce costs. By placing this information on the Internet, where the customer pays for the cost of the call, suppliers can dramatically reduce overheads at the call center. Indeed, Datamonitor estimates that utilities can enable customers to answer 19.2% of queries currently being made to the call center. These include address changes, meter submissions, tariff queries and changes to payment plans.
Where customers do need additional help, they can e-mail the supplier rather than using the phone. The respective average costs per contact incumbent upon the supplier are radically different, at 70 cents for e-mail resolution and $19.36 by telephone.
So why haven't utilities taken advantage of these cost savings? Part of the reason is that they have been slow to collate and act upon the information that CRM technologies can compile. Secondly, too many utilities are using the Web site as another means to advertise their own products and services, rather than taking the customer-centric attitude and addressing the customers' own wants and needs.
Overall, therefore, utilities need to step back and analyze from the customer's perspective what is needed to keep them content, but also have a firm understanding of what the provision of each service costs.
Alex Patient is an energy analyst with the U.K.-based research firm Datamonitor.