London, November 28, 2001 — As utilities across Europe struggle to reduce the costs of serving residential customers as a means to increase profits in a tightening market, new research from Datamonitor finds that too many utilities are handling the management of the customer on a department by department basis.
They would be better advised to take a holistic approach, responding to the customers' needs in their entirety, rather than by piecemeal responses to individual contacts.
In the competitive market, best practice service of the customer involves their needs being efficiently met at the lowest cost whilst not jeopardizing the customer relationship. This involves examining all points of contact with the customer, from metering through to customer service.
Datamonitor's new report, "Best Practice in Residential Customer Relationship Management" examines this issue.
Key findings to emerge from this report include:
* A cross-departmental approach to customer management is essential to maximize benefit to both the supplier and the customer;
* Customer service should form the backbone of this integration.
* A cross-departmental approach to customer management will benefit both the supplier and the customer
Most utilities are currently divided into separately defined departments for metering, billing & payment, and customer services, each with their own budgets for operations and improvements to the service that they provide.
However, Datamonitor believes that the departmentalized nature of operations is not best suited to exploit the natural synergies between them, resulting in ROIs that are lower than their full potential. In some cases, costs may actually be transferred from one department to another, without overall benefit to either the customer or the supplier.
For example, some utilities in Europe have examined the possibility of reducing the frequency of meter readings to lower costs, but these savings were more than countered by a corresponding increase in the number of metering related customer queries and complaints.
Datamonitor proposes that by taking a cross-departmental approach to the management of the customer, business cases can be made that were deemed to be too costly when assessed by each individual department. The example of Enel rolling out the first major AMR project is testament to this.
"Automated meter reading may at first glance be an issue just for operational metering, and yet the business unit managers across Enel were able to overcome the high costs of technology to save costs throughout the business," commented Alex Patient, Utilities Analyst at Datamonitor.
"Metering could point to a reduction in fraud and the size of fleet required to read meters; billing could show an increase in bill accuracy; customer services could highlight the reduction in billing and metering queries; and the shareholder could enjoy the impact of these on profits. It is clear that a concerted business approach may reveal similar potential for gains in other areas of utility operations."
Datamonitor believes that at present, the fragmentation of skills along departmental lines has progressed too far. As such, links between them need to be strengthened in order to maximise the value of each customer. Customer services in particular need to take the lead in this due to the fact that they are the repository for the most valuable customer-centric information. Indeed, it is hard to identify a project that does not impact upon the way that the customer is treated by the supplier.
As a result, one Scandinavian utility has proposed placements for customer service personnel through the rest of the business to inculcate a customer-facing and cross selling business response to the growing demands of the customer.
"Until top management takes up the challenge of linking departmental units, and providing the incentives for this to be accepted by the units themselves, it is difficult to conceive of how utilities can avoid the knock-on effect of their actions upon the customer," Patient said.
"In a business where the customer is king and their needs complex, rigidity must be replaced by flexibility, and departmentalization by co-operation."
