Utility Customer Relationship Management - How Much Do You Really Need?

Posted on October 16, 2003
Posted By: Connor Gray
Customer Relationship Management (CRM) is the strategy and tactics deployed to maximize the lifetime value of the customer asset - customer equity. CRM is defined by Elizabeth Roche at META Group as "an ecosystem that must drive bottom-line revenue by applying the right CRM treatments, to the right customer segment, at the right time."

In other businesses, the drivers to maximize customer equity center on improving your acquisition rate, retention rate, and add-on sales rate. For a utility, however, the focus is to drive cost out of the process without sacrificing the effective and efficient service that customers demand. That's because the regulated nature of the utility business provides little marginal opportunity to impact or benefit from acquisition, retention, and add-on opportunities that other businesses have - the benefit of marginal reduced cost exceeds the benefit of marginal revenue.

Utilities are Different
Consider 1-800-FLOWERS. When a person calls, it's a selling opportunity. The company wants to sell, they want to "up sell," and they want the customer to call again. It pays to extend call times and call frequency.

With a utility, it's the opposite. While a utility wants to provide the customer with a positive and consistent experience -- as well as using the opportunity appropriately -- the best call is the one that never gets made. The next best call is the one that ends the fastest, with an appropriate response so the customer does not need to call again.

Essentials for Utility CRM
This fundamental difference in business drivers and the resulting business focus demonstrates the need to consider the key differences between utilities and other businesses. For utilities to deliver superior customer relationship management, they need to consider three key aspects of supporting systems: (1) the capabilities required, (2) the role of CRM versus CIS, and (3) the role of CRM with other key systems.

Rick Nicholson, vice president and director of META Group recently observed, "The bottom line is that utility companies have to match their CRM solutions to their business requirements. One size does not necessarily fit all. And despite the fact that there are many vendors that would like to sell you a full CRM solution designed for a competitive market, this may very well be overkill." The bottom line: Most utility companies do not require all of the functionality covered by horizontally-focused CRM vendors - it's just not relevant to the utility's business.

By examining the functional areas covered by existing customer management software illustrated in the figure below, it is relatively easy to pick out the key capabilities a utility requires.

Figure 1: Functional areas covered by existing customer management software

CRM features such as customer analytics, contact management, Web self-service, marketing automation, and field services provide essential capabilities for utilities. However, these applications still require a distinct orientation to utilities and interoperability with other applications within a utility enterprise to enable a utility to achieve breakthrough performance and lower costs.

Another key aspect of how the CRM solution fits within the utility's business is its relationship with CIS. "In the Energy industry, you cannot talk about CRM without discussing the mission-critical nature of CIS -- they are the utility company's system of record for customer and meter data," said Allison Bacon in the AMR Research Report, December 2001. "The bill has always been a utility company's main form of communication with its customers. CRM applications will never manage that aspect of the customer relationship -- that belongs to CIS. Therefore, the CRM applications are already secondary to CIS applications."

AMR correctly frames the need for effective CIS/CRM roles and interaction. Most CRM products assume they are the system of record for customer information, interacting primarily with the ERP system - a key revenue cycle system for order fulfillment in many other industries. However, more than 90% of the contacts a utility receives directly impact or require information from the CIS - the key revenue cycle and order initiation system within a utility. And CIS is entirely unique to the utility industry and difficult to separate from CRM to manage customers.

The final aspect of CRM for utilities is the relationship of the CIS/CRM footprint with other key systems within the utility enterprise. Which is more important: improving customer service or reducing the cost of service delivery? Traditionally, utilities could not satisfy one without sacrificing the other. Given the asset-intensive nature of a utility, the key system in the execution and fulfillment of work is Enterprise Asset Management (EAM), including work management, resource management, asset management, and supply chain management.

The CIS/CRM component should act as the conduit through which critical customer data flows to the necessary systems. Together, the CIS/CRM and EAM components provide the operational backbone of a utility. By using these systems in tandem, utilities can reduce service delivery costs while maintaining an intimate customer relationship. Using integration framework technology to link these critical operational systems, the utility's service delivery personnel have unprecedented knowledge of affected customers, and call center personnel have a much-needed view into delivery activities. Utilities with systems that provide the right knowledge to the right people at the right time have the necessary platform to achieve operational excellence.

A Different Approach
These key aspects of CRM for utilities--the capabilities required, the role of CRM versus CIS, and the role of CRM with other key systems like EAM--require that utilities adopt a different approach and mindset. CRM needs to extend CIS to make it more efficient and effective, provide a 3600 view of the customer, automate business processes, and capture key facts for future analysis. CRM does not need to replace CIS as the key system of record for customer information, and the utility should not attempt to maintain redundant databases.

By providing key business applications like external contact management, targeted communication, scheduling, and workflow, CIS operations are made more efficient and effective. A robust e-business framework provides pre-built capabilities for self-service interactions required by residential as well as commercial and industrial customers. It provides the analytical model to support continued process monitoring, analysis, and optimization. Indus calls this CRM EssentialsTM.

CRM Essentials provides the key elements to make CIS more valuable, without the high cost and risk of other approaches. Indus is the only customer management solution provider to take this approach, the only CIS provider to provide utility-focused CRM pre-integrated with CIS, and the only company with CRM specifically designed for the real needs of utilities. Moreover, the Indus CIS/CRM footprint optimizes the business flows for critical interactions with the other key operational system of a utility -- EAM.

"Everything you need and nothing you don't!"

Authored By:
Connor Gray currently serves as Indus’ Vice President of Solutions Strategy. In this role, he is responsible for creating the vision and definition of the products, technologies, and solutions to meet the dynamic needs of the industries we serve. Connor Gray's extensive career encompasses all aspects of company operations. He is widely recognized for his skills in management and execution of complex unstructured efforts such as launching new businesses, developing

Other Posts by: Connor Gray

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