By Bob Cooke, Bass & Company, and Ted Nolte, PA Consulting Group
Address credibility is a bigger problem than most utilities realize. While utilities typically have a valid premise or service address for meter placement, these addresses may not be the correct addresses for billing and customer correspondence. As a result, critical customer mailings, such as bills and disconnect notices, may not reach the customer. This leads to poor customer service, delayed collections and increased costs.
According to PA Consulting’s 2009 Polaris Customer Service Benchmarking report, on average over 1.5 percent of all outgoing mail from utilities is returned each month. On a percentage basis this may seem small, but for the average utility, it equates to more than 20,000 returned mail pieces each month. While about a third of utilities in the survey report that they work these items each month, most never complete the backlog of work, or, worse, they let it stack up and eventually shred it. Even those that work returned mail never address the source of the problem, address credibility.
Although some return mail may be considered a standard part of doing business, bad addresses negatively affect every stage of the customer life cycle, wasting considerable resources. In addition, with multiple strategies available for dealing with return mail, it is important to consider the benefits and risks inherent in each approach.
Address credibility begins during customer account set-up when utilities validate customer identity and make sure accurate contact information enters their systems. Customer service representatives (CSRs) depend on customers to provide accurate addresses and utilities depend on these agents to accurately input the information. Common address issues include inaccurate abbreviations, missing prefixes or suffixes, misspelled street names, or simply missing information.
Because CSRs are usually measured on contact handle time, speed often takes precedence over accuracy, creating data quality problems. When entering customer information into a customer information system (CIS), CSRs attempt to enter as much information as necessary to complete the transaction as quickly as possible. In the case of a service request, CSRs enter address information which is validated against existing information in the system. Unfortunately, this information may or may not be an accurate mailing address.
Addresses in most utility CIS are service addresses populated in the system by way of the meter installation process. For most customers, the service address and mailing address are one and the same. But some have different service and mailing addresses, and CSRs may not realize the difference.
In other cases, the system may only have partial street names, incorrect abbreviations or missing information. In this instance, the system returns what it believes to be the correct address and the CSR commits the address without further verification. The bottom line is that there is little time for the CSR to do any manual validation.
As the customer moves into account maintenance, utilities become concerned with mail delivery related to billing. Addresses are sent through the billing stream where some utilities may have an application that can recognize incorrect postal addresses pre-mailing. With this process in place, billing teams will correct addresses at the time of billing. Unfortunately, if this corrected information is not updated in the CIS, the address will have to continuously be changed month over month once the billing process has started. Worse yet, that bad data also manifests itself when utilities send out letters or dunning (delinquent user) notifications outside of the billing process.
Where Return Mail Shows Up
Mail is returned in different stages of the customer life cycle. The different types of communication include welcome letters or welcome kits to new customers, first invoice or any subsequent invoices that go out, as well as the final bill invoicing and dunning notices.
Utilities commonly have returned mail directed back to the same post office box. This practice makes it difficult to discern what type of mailing the utility sent to the customer. As a result, the billing process is rendered ineffective as bills and collection notices are returned and regulations prohibit disconnection without notification. Justified customer complaints could reach local regulators when the utility attempts to disconnect for non-payment.
Dealing with Returned Mail
As noted previously, about a third of utilities in PA Consulting’s Polaris benchmarking program completely work returned mail each month. Oftentimes, this requires a back-office staff dedicated to opening the mail and correcting addresses directly in the CIS. This method is relatively effective, but is time consuming and extremely costly.
The remaining two-thirds partially complete returned mail using available staff during down time or they ignore return mail until something is done to clean it up.
More than half of the respondents reported partially completing the workload during the month, indicating that a fair amount of work continues to build month over month. These utilities tend to use existing staff during slow periods to work the pallets until something more important comes along.
About 6 percent of the respondents reported that returned mail is not worked at all, leaving pallets of unopened mail or requiring that it be shredded it as quickly as possible before the next pallet arrives.
Other Impacts of Returned Mail
In addition to the cost of working it, returned mail directly and measurably affects cash-flow, collection agency performance and customer service.
According to the 2009 PA Consulting Polaris Customer Service Benchmarking report, invoices made up 68 percent of the returned mail, equating to more than 20,000 pieces for the average utility. Figuring an average commodity bill of $150, the impact to cash-flow would be about $2.4 million dollars per month of delayed payments.
Further, collection agencies estimate that 40 to 60 percent of the addresses for utility customers referred to them are bad addresses. Because of this, the first action typically taken by agencies is to correct addresses and mail invoices. Because low risk customers make up 65 percent of the customer base and 90 percent of those customers typically pay an invoice within 120 days, collection agencies are cream skimming these customers at a minimal cost while the utility pays commission on a customer that would have likely self-cured.
In the customer service area, when a customer fails to receive an invoice or is disconnected for non-payment after not receiving communication, inbound customer service calls are sure to follow. Because inbound calls on average cost between $5.00 and $7.50, the cost of returned mail continues to ripple across the utility.
Lastly, the cost to correct returned mail, whether worked by a dedicated team or part-time through available resources, is expensive. Based on a five minute time estimate for looking up and manually correcting a single piece of mail, multiplied by the average number of returned mail pieces mentioned above at an average wage rate for a CSR, the cost estimate to work through 20,000 pieces per month is approximately $35,000 a month. Even if representatives become efficient in processing these return pieces quickly, utilities still see substantial costs.
Correcting the Address Process
Returned mail is clearly expensive, an efficiency drain and damaging to customer service. To avoid these serious issues, utilities should improve their address collection by making sure customer information is accurate before committing the address to the CIS.
One way to do this is to use services that provide the ability to look up valid U.S. Postal Service (USPS) addresses and copy this information into the CIS without the need to retype. Tools, such as those provided by Experian QAS, offer the ability to enter address and partial address information into a data entry screen on the CSR desktop. The tool provides fast and efficient look up that takes the guess work out of the CSR’s hands.
Once identified, CSRs can quickly and easily cut-and-paste this information directly into the CIS address fields with the click of the mouse. No rekeying necessary. Address information is standardized and validated, saving problems on the back-end in conforming to the latest USPS addressing standards and requirements. Further, information such as apartment numbers, which are generally lacking in many utility CIS, are available to ensure direct delivery of invoices, welcome kits and collections notices.
These tools not only correct address issues at the front-end, they can also shorten call handling times as the system easily integrates with any CIS and desktop environment. Address verification gives utilities a standardized, correct address that ensures consistency, reduces key strokes and decreases set-up time. This saves from five to 10 seconds per call and help eliminate returned mail.
Cooke is the director of customer operations at Bass & Company. The firm provides consultancy services in the utility and energy industries. Cooke leads the firm’s customer operations practice.
Nolte is a managing consultant with PA Consulting Group, a global consultancy delivering leading-edge solutions to clients worldwide. He delivers meter-to-cash operational solutions to the energy and utilities industry with a particular focus on credit risk management.