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UTILITY WEEK | 18TH - 24TH SEPTEMBER 2015 | 23 Customers Market view U tilities are under increasing pressure to build customer relationships. Evi- dence suggests that those who get customer engagement right are seeing higher returns on equity and reduced churn as their customers participate in more programmes, share information more easily, and recom- mend their utilities more oen. However, those who get it wrong suffer. The latest UK customer satisfaction index gave utilities a score of 71.4, the lowest in 13 sectors of the economy, and a report from Citizens Advice last month found that complaints have risen for five of the big six energy firms by almost half in the first quar- ter compared with last year. Jo Causon, chief executive of the Insti- tute of Customer Service, commented recently: "If customer service is not treated as a strategic business concern… there is a risk that customers will turn to competitors in search of better service. Strong customer service isn't just nice to have, it is central to the success of a business and a key competi- tive advantage." So how do utilities drive transforma- tion and build customer engagement? The answer lies in customer-centricity, and this begins with throwing out the view of custom- ers as "bill payers". This is not an overnight process. While engaged customers are an incredibly valuable asset, genuine engage- ment takes time, effort and insight to create and maintain. Innovative utilities understand that, fun- damentally, a customer-centric business must deliver the right offer, to the right per- son, at the right time, with the right mes- sage. They realise the benefits of this, not least in enabling more efficient use of mar- keting budgets and increasing the number of satisfied customers who view their util- ity as an energy adviser rather than just an energy provider. Eon's Saving Energy Toolkit is a case in point, and customer segmentation is key to this. Segmentation helps utilities iden- tify who to target, with which service, using which messages and across which communi- cations platform. But successful execution of segmenta- tion is challenging: historically, utility cus- tomer segmentations are demographic or psychographic rather than needs-based and, as a result, do not provide necessary clarity around the right offer or the right timing for targeting customers. Furthermore, customer data lives in a vari- ety of different locations in a utility, includ- ing in meter data management, customer information and customer relationship man- agement systems, making it difficult to build a unified view of a customer. As a result, even with expensive retrofitting, systems struggle to deliver the results that utilities need to meet today's customer expectations and tomorrow's business model. Utilities must look for customer engage- ment solutions that bridge the gap between IT systems and the customer experiences they have to deliver. They must be able to quickly segment customers by hundreds of behavioural, demographic, and psycho- graphic variables. For example, if a utility could segment a customer group defined by low income, high energy use and a tendency to use utility call centres, they could target that group with a winter bill that promotes budget billing. To create the segment, however, the utility has to dovetail its own data – for example, pro- gramme enrolment data – with third party data (income), and customer analytic, which show winter use patterns and call propensity. A good customer engagement platform will combine all these data sets to create a 360-degree view of the customer. It should also monitor how customers respond to dif- ferent types of communication and auto- matically adjust their experiences based on their behaviour. This approach to segmentation identifies customers that have the greatest motivation and ability to act, and then provides them with the appropriate triggers to do so. This serves a number of different purposes. From the customer's perspective, they receive a more personalised experience. For example, if a customer is trending towards a higher than usual bill, they receive an alert that estimates their upcoming bill, explains the reasons behind it, and gives personal- ised tips on how they can reduce their use in the remainder of the month. Some cus- tomer engagement platforms also offer the customer the option to get more detailed information online and to provide specific information about their home. This informa- tion can be used to target future use tips and promotions based on an even more granular understanding of the customer's energy use profile and the devices in their home. The benefits that this kind of sensitive customer engagement bring to a utility are tangible. Opower has seen investments from its clients pay off in terms of significant, uplis in brand value and overall customer satisfaction, and falling churn rates. As in any industry, there are always early adopters. If you can identify this early adop- ter segment, you have an ideal opportunity to test new offers and roll out or tweak new products and services. Doing this will require randomisation to enable message testing. Technology advances are opening up the opportunity to automate this process, identifying target cus- tomer populations for new products or pro- motions with speed and rigour. John Webster, vice-president, marketing and strategy, EMEA & APAC, Opower Divide and conquer John Webster explains how customer segmentation can help utilities identify who to target, with which service, using which messages and across which communications platform. A segmentation tree created by Opower All relevant customers 979,232 Utility is UTIL 979,232 Everyone else 783,386 Everyone else 193,020 Everyone else 42,300 Everyone else 75,400 Everyone else 37,660 Random 50% 37,660 Has valid email is true 75,320 Year built <=1995 150,720 Owner renter is R 2,826 Top 20% average daily winter elec 195,846