Customer analytics = customer value
Utilities cut costs, improve customer service
Utilities are operating in an era when their customers are surrounded by new levels of engagement everywhere they turn, as other industries leverage analytics to improve efficiency, customer service metrics and bottom line performance.
Fortunately, many utility leaders are proving to be just as agile in adopting new processes and technologies that enable them to also show measurable improvements in their internal customer operations as well as engagement with external customers.
These advancements rely on leveraging data to create value across multiple functions. The goal is to move from basic data management to achieving business intelligence, and from "BI" on past events and trends to predictive applications.
Today I'll address analytics as they apply to external customers. Utilities are engaging in customer analytics to improve their internal operations that serve those customers—such as call centers, credit and collection practices and demand response programs—as well as to improve their engagement of customers to increase customer participation in a variety of programs.
Here are a few examples of how utilities are applying analytics to external customers in ways that demonstrate tangible improvements to business processes.
- Call center operations: Analytics applications are changing how incoming calls are processed—traditionally a costly, labor-intensive activity—in ways that lower costs for the utility and resolve issues more swiftly for the customer. Voice recognition software, for instance, can bring order to the unstructured data inherent in customer trouble calls. Detecting patterns among keywords enables customer service managers to improve how billing information is presented, even shorten payment cycles.
- Credit and collections: This is also an expensive function, but one in which analytics applications are enabling customer service operations to identify different customer profiles and define the best form of communication to move more customers to payment in less time. One utility has reported annual savings of $4 million, a gain made by leveraging analytics for this function.
- Demand response program design: High levels of participation in demand response programs can create a significant benefit. Analytics can be applied to define customer segments and improve program marketing. A family of five living in the suburbs probably won't elect the same demand response program as a college student living in a studio apartment, working the night shift. Analytics can help utilities identify and target these disparate customer groups.
These initiatives are not isolated examples. We are on the front end of an analytics-driven revolution in utility customer service. According to the Utility Analytics Institute's Market Outlook & Forecast published in December 2011, planned customer analytics spending in the United States and Canada is projected to grow from about $180 million in 2011 to nearly $719 million in 2016, a compound annual growth rate (CAGR) of nearly 32 percent.
This growth rate reflects the needs of the utility industry as well as the efforts of analytics solution providers, which are bringing expertise to our industry gained in other vertical industries. Applying customer analytics experiences in industries such as hospitality, financial services and online retailing to utility customer operations, of course, is not a simple overlay. But the lessons from those other industries are being successfully applied to ours.
The next five years will see utilities manage their internal and external customer operations in increasingly intelligent ways, creating value for both the utility and its customers across a number of critical operations.
Mike Smith will present preliminary results from the Utility Analytics Institute's forthcoming Customer Analytics Report at CS Week in Dallas, April 30 - May 3.
Vice president, Utility Analytics Institute, a division of Energy Central.