Case study: how a utility focused on customer value to ward off competition
Faced with imminent customer choice for electric supply at all levels of the customer base, a US electricity and gas company examined its positioning relative to customer relationships and found itself lacking.
Its sales force has been too focused on immediate gains in incremental revenues. Its call centre has been directed to maximise its attainment of regulated service levels. Its products and services have remained focused on activities that utilise competency-based resources whether or not the offerings were of differentiating value to the customers. And on top of all this, it has allowed and even encouraged market share wars between its electric and gas units.
A thorough assessment of market positioning showed the company was poised to lose more than 30% of its electric load to competitors, many of which already operate offices and provide speciality services within the utility’s current territory.
The utility decided its approach to electricity deregulation would consist of two major thrusts. The first was to re-examine its processes, skill-sets and technologies for customer service. The second was to rethink customer information held about past, present and future customers and to establish processes and an information base to support competitive success.
Service processes spanned areas of field operations, call centre interactions and sales activities, as well as provision of sales and services by business partners acting directly for the utility. Through customer analysis, it determined it lacked basic capabilities to provide competitive service and support. Through market analysis, it determined it was not positioned to offer a portfolio of products and services that would win new customers, much less retain current customers when choice occurred.
To set a proper framework, the utility used a technique called customer value management. This method is based on starting with the customer’s view of what characterises “ideal outcomes” in dealing with a supplier. The supplier then determines the capabilities it must have to produce these ideal outcomes for its target customers.
Using this approach, the utility determined the basic process, skills, and technology enablers it needed to support the capabilities necessary to deliver the ideal outcomes. The work lead to redefining sales, call centre, and some service activities. It implemented changes using business process re-engineering and new IT systems.
The results demonstrate the value of gathering customer information proactively, integrating customer information with potential products and services during call centre conversations, and restructuring field service processes to satisfy customers.
Customer information in IT systems suffered from characteristics found in most monopolies. The utility had most of the information needed to direct planned activities based on limited service and guaranteed returns. It had hardly any information needed to analyse, target, plan and deliver differentiating products and services to discerning customers.
The utility is improving availability and value of information in two ways. The first is to develop a customer information system that supports “moments of truth” — critical contacts which make or break the customer’s view of the utility.
The second is to establish marketing processes and an underlying “data engine” so the utility knows which customers represent most value, what customers expect, and which targeting criteria optimise market share and profitability while enhancing customer satisfaction.
Even though these two initiatives are still under way, the utility is already reaping gains in customer satisfaction, revenue and competitive positioning. Success is not yet guaranteed but the utility is now positioned to compete with more than 30 competitors that will attack its customer base. More importantly, it is better equipped with processes, skills and technology to serve selected customers as they wish to be served while “selectively losing” others to eager competitors.
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