Booz Allen Hamilton. Digital Migration for Electric Utilities

Transcription

1 Digital Migration for Electric Utilities

2 EMBRACING A DIGITAL WORLD Digital technology has become integral to our lifestyles. We buy our clothes, read our news, reserve our taxis, and check our bank accounts all from the web and sometimes we do it all from our phones. However, many of us still get our utility bills in the mail, and pay by phone or check. Utilities lag behind retail, communications, and even government in the adoption of digital technologies. Barely 11% of social media users reported using social media services to communicate with their utility companies. 1 Furthermore, a 2014 Booz Allen investigation of utilities found that only 26% of those sampled had mobile applications. Regulations have historically reduced utilities incentives to compete in digital technology. However, rising costs and competition have begun to push utilities toward digital operating models. Utilities have sought to expand digital migration, the movement of customer interactions away from traditional channels and into the digital space. This lowers costs while improving customer satisfaction. For example, customers receiving e-bills are 64% less likely to call live customer service than paper bill recipients, saving the utilities money. 2 Unfortunately, even utilities that offer digital channels have not succeeded in convincing customers to use them: at one utility Booz Allen interviewed, only 10% of customers used the available mobile application. Here, Booz Allen offers a three-pronged approach of technological, operational, and incentive-based strategies to spur utility customers digital migration. The strategies will help improve collections, customer service costs, customer loyalty, and regulator relations. Only 26%... of electric utilities have mobile applications -Booz Allen Research 2014 Only 10%... of customers at one large utility used the mobile application -Booz Allen Interviews 2014 E-bill recipients are 64% less likely to call live customer service... -Fiserv 2011 By: Lauren Bleakney // Catherine Schaefer // Sahal Kango The authors would like to extend their gratitude to those who contributed to this work, with special thanks to Jacob Thomsen and George Kataoka. 2

3 Utility Website Traffic Per 100 Customers Booz Allen Hamilton PLAYING CATCH-UP On the whole, utilities digital integration remains poor. The South lags most, with mobile applications for only 9% of utilities sampled (see Figure 1), and no mobile apps among surveyed Southern large Utilities. However, driven by desires to improve customer service and reduce costs, some utilities have made the jump to digital. They are willing to reach outside their comfort zones, knowing that digital will save money and improve users experience. In the midsize block of utilities in the East, 69% have mobile applications, and 44% of all East utilities have apps (midsize and large segments). Figure 1: Percent of Utilities with Mobile Applications And Application Functionalities Booz Allen analysis of utility mobile applications. Segments based on J.D. Power 2014 Electric Utility Business Customer Satisfaction Study SM Figure 2: Unique Web Traffic for Utility Websites, per 100 Customers * hits per 100 customers difference between most and least advanced utilities Many utilities recognize the growing importance of improving customer satisfaction through digital technology. In a 2014 Utility Week and WIPRO survey, only 14% of respondents rated their own utilities as excellent on customer centricity, but 62% expected to be excellent in a year s time. 3 Leading utilities are poised to reap the rewards from digital strategies, and are pushing the curve forward on customer expectations. While virtually all utilities have websites, they vary widely in impact only 20% include advanced features like usage monitoring. These little advantages make a big difference. Booz Allen research found that the top 20% of utilities by web traffic accounted for 56% of unique hits per customer, while the bottom 20% accounted for only 4%, with increasing differentiation over time. While utilities started at a common (low) point for per-customer web traffic indicative of digital maturity in 2010, laggards have stayed there while advanced utilities have risen to 17 visits per 100 customers (see Figure 2). What makes a utility a leader or a laggard? And what can a company do to catch up? * Traffic estimated using Google-sourced visits, and is normalized by customer base. 3

4 WHAT S CHANGING? New entrants, rising compliance costs, and changes in customer expectations are rewriting the utility business model. We have identified three C s of electric utilities, Competition, Customers, and Cost, driving the changes. These are the issues to which utilities must respond to succeed in the new environment. Competition Distributed generation and deregulation of electric utility markets open the door for disruption. Utilities increasingly risk losing customers to competitors (in deregulated markets) or distributed generation providers. With greater competition, utilities can use their digital offerings to vie for customers and for customer participation in programs. Customers Digitally proficient users make up an increasing chunk of utilities customers. Utilities customers range from retiring Baby Boomers to young adults, who all increasingly expect the companies they use to keep up with them in the digital space. Companies that do not risk being found outmoded and unwieldy. Furthermore, even customers who do not explicitly demand digital interactions are more satisfied when companies connect with them over digital channels. Costs Tightening environmental regulations and oversight are squeezing utilities margins. Increases in fuel costs and requirements like the 2014 EPA rules on CO 2 emissions will bump electricity prices. With rising prices for consumers, regulators pinch pennies on utility margins. Economic regulation ranks among utilities top concerns, according to a 2013 Black & Veatch survey. Digital communications can help utilities cut costs, and improved customer satisfaction will decrease customer aversion to price increases. While this new environment poses challenges for utilities, utilities can thrive with the help of a robust digital strategy. Digital technologies can help utilities compete by cutting costs, moving from commodity to branded services and revolutionizing the customer experience. 4

5 WAYS TO WORK IN DIGITAL To adapt to the new environment, Booz Allen has identified three areas of strategy to help utilities originate and expand their digital portfolios, attract customers to these digital offerings, and improve each interaction. These strategies, focused on Technology, Operations, and Incentives, will help utilities cut operating costs, increase customer satisfaction, and improve relations with regulators. In the technology space, utilities first need multiple and high-quality digital offerings across mobile, web, and social media channels. Operations strategies focus on integrating these digital offerings within the utility and marketing them effectively. Incentives strategies focus most directly on how to get customers to use the available digital platforms. Incentives Operations Partnerships Targeted Advertising Customer Awareness Communities Discounts Technology $ Passed-on Savings Channel Functionality Content 5

6 TECHNOLOGY-FOCUSED STRATEGIES Utilities will need to focus on how to best use the expanding digital technologies available to them. To improve the quality of their digital offerings, utilities should approach the wide variety of technological options from a customer s perspective. Three interactive factors maximize impact of these digital offerings: Channel Offer a wide variety of functionalities across web, mobile, and social media channels to suit different needs, and allow for easy transition among them. Make sure that traditional channels are still available if desired, or for complaints and emergencies. Think about the what users need and how they communicate when deciding what capabilities to include in each prong of the multichannel customer service approach. Content Keep messaging consistent across channels and think about likely customers questions. Consider smart FAQ s and place most-trafficked content in highly visible locations. Utilities should be judicious in communications to avoid spamming customers, and should focus on actively engaging customers instead of Mobile talking at them. Functionality Customers will embrace digital channels because of ease of use and seamless integration with their lifestyles. Integrate channels to allow for fast transfer among them. Utilities should employ simple interfaces and navigation. Social Media Perception monitoring Outage communication Online Communities Mobile App 2-Way Texting Nest synchronization Outage Alerts Website Program Ads Outage Reporting Bill Pay Service Questions Smart FAQ Technology Channel Content Functionality 6

7 OPERATIONS-FOCUSED STRATEGIES In addition to developing top-tier digital offerings, utilities need strategies for deployment and advertising. Digital offerings cannot thrive without strong operating models to support them. Partnerships Utilities can partner with banks on automatic bill pay and tracking, while partnerships with online financial organization platforms like Mint can integrate mobile bill-pay with their financial tracking. Utilities can make service start/stop/transfer easy by working with the U.S. Postal Service to sync it with changes of address. Telephone companies can enable pay-by-text. Customer Awareness Once a utility has platforms such as online chat and mobile applications in place, each customer interaction, such as help desk calls or bill notices, must ensure that customers know about these offerings and their benefits. Customer education marketing decreases uncertainties and increases familiarity with digital channels. Operations Partnerships Targeted Advertising Customer Awareness Targeted Advertising With customer segmentation, utilities can advertise their cutting-edge technology and user-friendly brand on regional and segment-specific platforms on the web or in print. Segmentation reduces costs by allowing for surgical advertising. Tailored, thoughtful messages improve customer perceptions and relationships while spreading knowledge of new, branded digital offerings. 7

8 INCENTIVE-FOCUSED STRATEGIES Even with easy-to-use digital platforms and advertising pushing customers towards digital channels, customers may need an additional pull to make the leap. Financial incentives will pay for themselves in reduced operating costs. Passed-on Savings When switching to online bill pay and start/stop/transfer saves the utility money, a portion of this can be given back to customers as an incentive. Discounts Incentives to refer a friend to apps or online transactions incur only one-time costs and help generate a critical mass of digital customers. Pay early discounts thank customers for cutting down on utilities average accounts receivable time and allow the utility to keep less operating cash on hand. Online communities Besides financial incentives, utilities can reduce costs, empower customers, and gather buckets of data with an interactive online space for customers to answer each other s questions, learn ways to save, and chat with members of their community. Communities Incentives $ Passed-on Savings Discounts 8

9 REAPING THE REWARDS The digital strategy investments articulated here across technology, operations, and incentive spaces can help utilities adapt to the rapidly changing energy environment. These approaches will help improve collections, customer care costs, customer loyalty and regulator relations. Decrease Average Accounts Receivable Time Utilities found that e-billing options led to increased ontime payments. In a 2011 study for ConEdison, customers receiving e-bills were 22% more likely to make on-time payments than paper bill recipients. 2 On-time payments reduce average accounts receivables time, and help maintain a sustainable cash flow. Reduce Call Center Volume Customers receiving e-bills are 64% less likely to call live customer service per month than are paper bill recipients. 2 Better online customer care through dynamic FAQ s and chat features can further reduce call center volume and help utilities capture cost savings. Decrease Defections In a world of increasing energy options, utilities need to become full-service energy solutions. Improving the customer experience through digital channels will drive down customer defection and ultimately improve the bottom line. Improve Rate Case Outcomes Digital investments that improve customer ratings can be used to increase goodwill with customers and with regulators in future rate-cases. Digital customer engagement strategies are winning opportunity for utilities. This is a time for utilities to take advantage of a challenging environment, to rebrand, adapt, and emerge better than before. 9

10 About Booz Allen Booz Allen Hamilton is a leading provider of management and technology consulting services to the US government in defense, intelligence, and civil markets, and to major corporations, institutions, and not-for-profit organizations. Booz Allen is headquartered in McLean, Virginia, employs more than 23,000 people, and had revenues of $5.76 billion for the 12 months ending March 31, For more information contact: Stephen Brevig Senior Associate [email protected] Leo Simonovich Lead Associate [email protected] Nicholas Nahas Lead Associate [email protected] Sources: 1 Charul Vyas and Neil Strother. Social Media in the Utility Industry Consumer Survey. Pike Research. 1Q E-Bills Linked to Timely Payments, Reduced Costs According to Fiserv and Con Edison Study. Fiserv. August 23, Centre Forward: Utilities Progress Toward Customer Centricity. Utility Week and WIPRO. April

11 Booz Allen Hamilton th Street NW Suite 400 Washington, DC Copyright 2014