Improvements in CRM could significantly increase profits for utility companies

NEW YORK, Oct. 2, 2002 — An average utility, with $2 billion in revenue, could increase its pretax profits by $250 million to $360 million simply by improving key customer relationship management (CRM) capabilities, and the profit increase could be even greater for larger utilities, according to a study of utility companies by Accenture.

The study, Reaching New Heights in Customer Relationship Management: What Every Utility Should Know, is one of the first to quantify the value and impact of CRM capabilities on financial performance. As such, it offers a practical tool for identifying CRM opportunities and efficiently prioritizing business investments to enhance profits.

Among the key findings: CRM is a key differentiator between average and top performers in the utility industry, and the right investment in CRM capabilities could have a direct impact on a utility company’s bottom line, generating hundreds of millions of dollars in additional profits. In addition, the research found that 80 percent of the difference between high and low pretax profits among the study participants could be explained by the emphasis these companies placed on capabilities in the three key CRM areas: customer service, marketing, and sales.

“As utilities unbundle services, many are looking for new ways to differentiate themselves and provide better services at lower costs,” said James Etheredge, global managing partner for CRM for Accenture’s Resources operating group. “One of the key areas companies are looking at is CRM – either by improving their own CRM capabilities or, more recently, through outsourcing these capabilities.”

The research, which examined 58 CRM capabilities across the three key CRM areas, found that improvements in 31 of these capabilities helped increase pretax profits. The two CRM capabilities within each of the three key CRM categories that were shown to have the greatest impact on profit improvement were:

* Marketing: Channel Strategy and Promotion Strategy
* Customer Service: Customer Service Execution and Building People
* Sales: Sales Strategy and Sales Execution

For example, the research demonstrated that if a $2 billion utility company were to move from “average” to “top performing” across all of the 13 marketing capabilities, it could increase its pretax profit by approximately $190 million. For larger utilities, the profit improvement associated with such a move could be even greater.

The study cautions that CRM investments are not just about technology, but also about strategy influenced by competitive dynamics and jurisdictional market rules in the utilities industry. Companies must therefore focus on all of their capabilities — from strategy and business processes to technology and workforce issues – to excel in marketing, sales and customer service.

“While CRM has historically been a low priority for utility companies, the marketplace today is tougher, the environment more complex, and customers more informed and demanding,” said Stu Solomon, a partner in Accenture’s Utilities industry group who specializes in CRM. “In the wake of industry restructuring, executives must change their expectations about CRM and understand that now is the time to look for ways to optimize existing CRM investments, not only to attract and retain customers, but also to fuel additional profits.”

Methodology:

Accenture surveyed 41 executives in 31 companies in both the regulated and non-regulated sectors of the industry in the United States, Canada, Australia, South Africa, Italy, Spain and Germany. The survey consisted of more than 400 questions on marketing, sales and service, covering the strategy, process, technology and human performance components of CRM. The findings were client-tested and also validated by executives.

About Accenture:

Accenture is a management consulting and technology services organization. Through its network of businesses approach — in which the company enhances its consulting and outsourcing expertise through alliances, affiliated companies and other capabilities –Accenture delivers innovations that help clients across all industries quickly realize their visions. With approximately 75,000 people in 47 countries, the company generated net revenues of $11.44 billion for the fiscal year ended August 31, 2001. Its home page is www.accenture.com.

Source: Accenture


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