Utilities: Towards Greater Customer Centricity

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Utilities: Towards

Greater Customer

Centricity


Agenda

Introduction

Background and Methodology

Customer Centricity Today and Tomorrow

Improving Customer Centricity

Conclusion

1

2

3

4

5


Introduction

Relevance of Customer Centricity in a Changing World


Socio-Economic Landscape

Change is being forced upon utilities industry in an evolving macro-landscape

Technological

Mobile and social technologies have

increased the number of channels

Changes Affecting the Utilities Industry


Utilities Industry Evolution

• Funding, incentives, penalties linked to customer satisfaction

• Frameworks, processes and mind-sets need to change

• Consumers have more power and choice than ever before

• Marketing and brand management becoming a priority

• IT programmes will help utilities get closer to their customer

A Radical Shift

• Utilities have abstract understanding of IT

• They have not been known to translate ideas into IT success

IT Constraints

Utilities in the UK are going through a maturity phase

They need to be organized around their customers rather than infrastructure


Background & Methodology

Why and How of the Survey


Utilities will undergo massive changes in 2014/15:

New roles like customer service director and customer relationship manager

Assess and adopt customer-management technologies

New risks associated with customer centricity ,e.g., viral ridicule on social media

UK’s Utilities Industry

Energy Suppliers

• Deregulated market

• But political and regulatory intrusions exist. E.g.:

• Mandate to roll out smart meters

• Edict to pare down tariff options

• Ofgem imposing ‘fairness’ obligation

Regulated Energy Networks

• Ofgem introduced RIIO:

• To reduce carbon footprint

• Upgrade networks

• Impose price controls

• Penalties up to 1% of allowed revenue for poor service

Regulated Water

• Ofwat continuing SIM for 2015-20

• Cos. have set up consumer-challenge groups like CCWater

• Customer satisfaction up from 4.19 (2010-11) to 4.44 (2012-13) on 5

Regulatory Changes Pushing for Customer Centricity


Methodology

Objective

Evaluate current state of affairs and future

trajectory of utilities vis-à-vis customer centricity

Target Firms

Regulated water and gas and electricity

companies

Survey Group

Chief execs & senior managers – 23 in all

Survey Details

Timelines: Survey conducted in autumn

and winter of 2013/14

Confidentiality: Responses reported in

aggregate; quotes are all anonymous


Customer Centricity Today and Tomorrow

Current Practices and Projection for Next Year


Current Performance

Past 5 years:

Public scrutiny for water

Scorn for energy companies

For 90% respondents,

customer centricity has

become more important

No one rated themselves 1

on 5 on current performance

Utility bosses aware of

importance of customer

centricity

But they have much to learn

about loyalty management

and customer segmentation


Little negativity: No one rated themselves 1 or 2 out of 5

Respondents may have been mindful of portraying their

companies in a positive light

Responsiveness


Clear areas of investment identified:

Technologies related to loyalty, mobile services,

segmentation, etc., are necessary

Performance by Functional Area

More confidence in operational

areas than in purer customer

functions

Emergency management: 4.1

Field services: 3.9

× Customer segmentation: 3.1

× Customer loyalty management: 2.8


Average ratings for next year – Electricity: 4.9; Gas: 4.6; Water: 4.4

Reality check: Even if everyone improves, there will be winners and losers since regulators use comparative methods

Key to achieve best results: Seeking lessons from other sectors and geographies through appropriate partnerships

Future Outlook: Optimism

Ambitious Expectations


Drivers of Customer Centricity

Utilities driven by doing the right thing for business and customers, rather than

external stakeholders (government, regulators and investors)

Regulatory incentives

important for water

Cost control least

important for gas

Market events that provide

opportunities to change

customer centricity:

Mobile technology

SIM (water)

Smart meters


Competing Priorities

Financial constraints

pose biggest challenge

Final acts of PR14 and

ED1 will make funding

harder to come by

Customer projects like

CRM tools will need

upfront investment

Regulatory demands

third most important

competing area

This is directly at odds

with regulatory goals


Improving Customer Centricity

The Way Forward for Utilities


Areas of Improvement

Business process and

technological

improvements stand out

as the top two

Utility bosses clearly feel

they are leading the

charge for customer

centricity

Specific areas that utilities

should target:

Multichannel offerings

Predictive analytics

Mobile communications


IT and business process optimization again the top two

Less need for investment on the softer side – training and recruitment

Water cos. have already made large customer-side IT investments,

hence less important compared to regulated energy networks

Planned Investment


Customer facing IT applications are most in need of improvement

Unexpected confidence in applications to manage new connections

Investment should not be hasty - returns should justify investment

Partners familiar with technologies in customer centric sectors can be of help

Focus on IT


Customer Centric Corporate Culture

Utilities are traditionally

asset focused

Cultural transformation

required

Customer centricity

initiatives already have

executive sponsorship

Recruitment needs the

most attention

Question to be asked:

How can technology

make these changes

easier?


Meeting Funding Needs

Regulatory incentives

scored lowest

In line with earlier finding

on regulatory incentives

being weak drivers for

customer

Funding through business

efficiency initiatives:

Water: 100%

Gas: 100%

Electricity: 0% – due to

20 years of regulation

Caveat: Respondents may

have markedly different

interpretations for funding

routes


Conclusion


Conclusion

Contrary to inflammatory political speeches, UK’s utility bosses are

well-aligned towards customer centricity

Over-optimism: 62% expect to rate themselves 5 on 5 in 12 months

Significant scope for improvement in non-traditional areas:

Customer-facing functions for energy network companies

Mobile, social, self-service areas for water companies

Improvements will be based on:

Dedicated tools and functionalities – CRM systems, etc.

Corporate culture – attention to customer feedback, staff training

Message to regulators and government:

They need to incentivize customer centric initiatives


Customer Centricity and the Big Six

Mixed reports on customer centricity

Website developer Mando says energy suppliers devote more

management-level staff to customers than high street and online retailers

Customer champion ‘Which?’ criticised suppliers for the high number of

complaints

Changes in emphasis:

All respondents said that organizations’ outlook to customers had

changed in recent years

This was driven by customer feedback and regulatory changes

Technology seen as lynchpin for future change

Despite poor reputation, UK’s biggest energy suppliers have customer

interests in mind

No one questioned the importance of customer centricity

“We have a single-minded focus on putting customers at the heart of our

business” – Quote from a big six supplier


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