Utility Week

UTILITY Week 15th January 2015

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Page 26 of 31

UTILITY WEEK | 15Th - 21sT JanUarY 2016 | 27 Customers Market view M anaging customer churn in power and gas utilities is a top priority in most European markets. Utilities are faced with increasing challenges because of shiing customer preferences, new offerings and new competitors with different business models. The situation calls for a new look at how well customers are being served. Customer churn rates currently sit at 12-15 per cent in many European markets, and much lower in others. This is important – aer all, churn is expensive. In addition to customer preference, the evolution of cus- tomer churn is influenced by many parame- ters such as changing wholesale prices, entry of new value propositions driven by new ser- vices, better customer engagement and new suppliers that are more attentive to customer needs. In some markets, add in push factors such as poor quality customer interactions, inaccurate bills and unresolved complaints. Many sub-segments of the customer base are receptive to, and actively seek- ing, new offers to meet their preferences, be they based on the best rates, green energy or maintenance packages. Some want fully digital services, while others prefer human interaction. From the supplier perspective, not all segments are equally valuable – in fact, some are unattractive. Today's technologies add several layers of complexity, as well as opportunity. Avail- ability of customer information grows expo- nentially when digital channels are used and big data analytics tools and real-time iteration come into play. With the ability to identify new patterns of customer prefer- ence, consider information from non-struc- tured sources, and update segmentations in real time, energy retailers can identify and act on customer segments that would have gone unnoticed a few years ago. In short, the dynamic, digital customer needs more and instant engagement, but carries with that more potential value for the supplier – if the supplier can get to grips with both elements. Tailoring offers to match the needs of the identified customer clusters is the next step. Today, this must include customer experience, personalisation and engage- ment to provide an enduring value proposi- tion and increased attractiveness to valuable customers. Customer experience includes many ele- ments, from the usability of channels for everyday transactions to increased digi- tal content and related services, creating an increasingly attractive and meaningful experience. Personalisation of offers works with clustering to tune into a customer's prefer- ences and connected potential needs. Across Europe, we see elements ranging from remote home energy control, to e-mobility and "prosumer" energy sales, to payment management and contact options. Customer engagement must become bilat- eral, ubiquitous and immediately respon- sive, which is a massive shi from the utility mind set of the recent past, in that customer interactions should be avoided as unneces- sary cost. The more customers are engaged, the more they expect from suppliers. Targeting minimum standards, regulatory or internal, is no longer good enough. Regulation might not have changed, but customer expecta- tions have, particularly in the most valuable and dynamic segments. Because the offer- ing to customers is based more and more on digital content, services, and communica- tion that pursues customer engagement, key metrics of quality need to evolve. The user experience from company websites, apps and other channels is as significant to a good perception of service as the product delivery, if not more. Many utilities still use the "rank from 1 to 5" or "would you recommend" type of scoring on samples of customers who fall into different segments or use different ser- vices. However, as sub-segments and service offerings multiply and channels transform to digital, these measures will need to be complemented by other, more tailored approaches in order to make quality man- agement actionable. A thorough and honest assessment of where a company stands and where it should be is the base on which to build a new model or adapt an existing one. Starting from the company's ambition and priorities, the three elements discussed in this article – customer needs and attractiveness, tailored offer- ings, and good quality service – need to be thoroughly reviewed. These elements are typically supported by a number of enablers. For example, analytics and propensity mod- els facilitate improved understanding and prediction of customer cluster preferences, dynamic segmentation and micro-campaign management. Organisational enablers, such as clarity of responsibilities, silo removal and an end-to-end perspective of the teams involved, as well as the objectives and key performance indicators used to measure per- formance, are just as critical. Although each situation might be dif- ferent, it is not uncommon to achieve a 2-3 per cent reduction in churn in the first 12-15 months and further improve it in the two to three years thereaer. Failing to adequately and actively manage customer retention is simply not an option anymore. Kirsty Ingham and Javier Serra are principals and David Borras is a partner at Arthur D Little management Managing churn With sophisticated analytics and the will to provide good customer service, you can retain your customers. Kirsty Ingham, Javier Serra and David Borras explain how it works. Key points Churn rates in many European markets stand at 12-15%. Some customers are attracted by a better proposition elsewhere, but others are driven away by poor customer service. New technology and analytics allows sup- pliers to address customer subsets that would have previously been ignored. Offers can be tailored to subsets. Customer engagement is key and custom- ers expect efficient digital communication. An honest assessment of your capabilities and ambitions is the essential first step.

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