Customer Optimization When Preparation Meets Opportunity

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1 Customer Optimization When Preparation Meets Opportunity It s not about luck anymore. By Jan Moore Founder & President Direct Options 1

2 Customer Optimization Means Long-Term Customer Engagement & Satisfaction Utilities are in a unique position to provide and market products and services to a captive audience. Offering solutions that meet the customer s needs and preferences is the key to meaningful customer engagement. Introduction Ask ten utility professionals to define customer engagement and you ll likely hear a dozen different answers. Let s agree for today that customer engagement is as forthright as creating a relationship with customers and that the relationship is measured by the frequency by which s are opened, surveys are answered or by some other meaningful metric that provides valuable insights. Upon determining the engagement metric, the task is to explore pathways to the greatest result at the lowest cost. Customer optimization is the ideal route for utilities to take to develop those pathways on an insight-driven, systematic basis. This results-driven approach offers improved value to those invested in the utility shareholders, members or municipalities. Ultimately, long-term customer engagement and satisfaction mean sustainable long-term value for utilities. Changing the mindset In the past, utility customers received few product or service offerings from their gas and electric providers. And products that were offered oftentimes lacked targeting in terms of audience or messaging. One size fits all failed to fit most. Compounding customer confusion, conflicting program offers arrived simultaneously in mail boxes and inboxes. In most cases, the customer s response was silence. 1

3 Today s technology-savvy, energy conscious consumers demand more from their energy providers. Not only do they expect their energy company to be a trusted expert, they expect their utility to provide value beyond the meter. One size fits all failed to fit most. Providing that value, that level of engagement, requires innovative thinking and an understanding of customers wants not previously practiced by utilities. It requires establishing a relationship based on corporate reputation just as much as an in-depth understanding of how the customer uses energy. Reaching that level of engagement necessitates an optimized customer base. Though it gets used (and mis-used) as an industry catch phrase, customer optimization is an expansive and complex process that requires significant analysis, planning, monitoring and adjusting of multiple components through numerous marketing channels. Now for some good news: technology, tools and accessible expertise make the customer optimization process more efficient, effective and important than ever. With a strategic, intentional approach, utilities investing the requisite time and resources achieve longterm success as customers become more engaged and the relationships deepen. Why customer optimization Committing to customer optimization reaps substantial benefits for utilities, including: feeding valuable insights into the planning and forecasting processes reducing participation acquisition expenses delivering customer service from a customer-centric position meeting regulatory data requests rapidly and accurately reducing new marketing campaign design time from weeks to hours enhancing customer satisfaction The customer optimization process Launching the customer optimization process involves a thorough review and analysis of existing customer data and historical marketing efforts. Collecting data from disparate sources across the organization can be challenging but the effort can provide major payoffs. Gathering the data, standardizing and formatting it, cleansing it and then appending it with industry or third-party data provides the most complete customer view possible. Customer segmentation then becomes clearer. 2

4 Utilities that leave 40% of their customers on the table have left an abundance of opportunity there as well. Generally speaking, up to 30% of a utility s residential customers will opt in to energy efficiency, demand-side management programs or green-minded programs. Similarly, about 30% will use other non-commodity services such as home protection or optional billing enhancements like auto-payment, online billing or budget billing. Analysis of millions of customer records associated with a propensity toward non-commodity programs shows that the likelihood of customers changing or crossing over categories is unlikely. Therefore, this initial segmentation is crucial to placing customers on one of two pathways and acts as a primary guide for a logical sequence of engagement. That still leaves 40% or more customers in the commodity only category merely paying the monthly bill, primarily disengaged and, perhaps, unimpressed. Consider this comparison: If 40% of a fast-food chain s customers only purchased a hamburger would their leadership consider the customer base optimized? Certainly strategies for upselling fries, drinks and even desserts would be considered. Utilities that leave 40% of their customers on the table have left an abundance of opportunity there as well. 30/40/30 MODEL The 30/40/30 model demonstrates opportunity to increase penetration and the average number of products a customer buys. 3

5 Determining communication cadence This 30/40/30 model provides the basis for starting customer optimization initiatives. Once utilities understand where each customer is on the 30/40/30 spectrum they can begin to more meaningfully optimize marketing communication. The most effective companies leverage comparative profiles from other utilities to optimize communication strategies. The principal rationale for determining the cadence of customer engagement relies on the existing customer behavior as well as data accumulated in the initial phase of the optimization process. Considerations include customer profiles/models, program features and benefits, past promotional efforts and myriad other data. The most effective companies leverage comparative profiles from other utilities to optimize communication strategies. A common challenge arises when utility program managers functioning independently from one another vie for the same customers, often without knowing it. The result? Customers receive competing offers from the same utility, become confused and lose interest in further communications. In an attempt to coordinate marketing efforts between potentially competing departments, utilities typically use two approaches: 30-day rule: a customer can only receive one communication from the utility (aside from the bill) over a 30-day period, with the offer based on internal priorities. While this reduces clutter in customers mailboxes, the approach fails to consider customer needs or the programs with the best fit. Traditional segmentation: prioritize prime prospects and focus efforts on gaining their business. While this approach benefits the programs, it can overwhelm the targeted customers or worse, poison the relationship. Customer optimization takes a customer-centric approach rather than productcentric. Thorough analysis of data reveals customers needs and wants which become the priority for communication. Taking this customer-driven approach increases satisfaction as well as business results. When done intentionally, customer optimization initiatives reach across internal departments to take the big picture approach, allowing the utility to maintain consistency with message, brand and offers while increasing chances of success. Additionally, the holistic ing and insights from customer optimization typically opens doors to new product development and new ways to market. In simplest terms, customer optimization balances the benefits for the utility and benefits for the customer, by identifying what a customer is most likely to buy, and defining and prioritizing communication efforts accordingly. Continually meeting customer needs promotes long-term engagement. 4

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