Two-way Communication: The Key to Successful Transformation
By Jack King, Scientific-Atlanta Inc.
As deregulation continues to progress toward an open, competitive market, these three business principles will be crucial to electric utilities` ability to profitably retain existing customers and add new ones: become a low-cost producer; introduce new, value-added services; build customer loyalty and brand equity. All three of these goals can be achieved by establishing two-way, interactive communication with customers, while providing an effective interface between energy service providers and energy end-users.
Peak efficiency is key to becoming a low-cost producer. It cannot be attained simply by cutting staff or writing down stranded investments. Rather, peak efficiency also requires streamlining operations and focusing on the value chain`s key processes. Two-way, interactive communication can increase efficiency and cut costs by automating such labor-intensive tasks as meter reading, remote connect/disconnect and billing, while providing vital information for marketing.
To add value to their services and create new revenue sources, utilities must shift from tactical to strategic communications infrastructure use. For example, a utility could tactically use AMR as a way to decrease its monthly meter reading costs. But it could strategically use the same communications network to build a detailed picture of a customer`s energy consumption pattern and offer an energy pricing package that allows the customer to save money by permitting the supplier to manage power usage during high-demand periods.
By shifting more customer usage into off-peak, lower-price tiers, a market-savvy supplier could actually boost its overall profits by increasing high-margin, off-peak power sales and decreasing low-margin, high-cost power sales. Other strategic two-way, interactive communication uses include such value-added services as power failure notification and “smart” thermostats that adjust temperature according to electricity rates.
Value-added service offerings don`t have to be limited to energy management. Utilities can leverage their communications network to deliver home security monitoring, medical monitoring, community directories and home banking and bill paying, just to name a few. Marketing studies show that value-added services and choices lead to greater customer satisfaction. Customer satisfaction, in turn, builds brand loyalty (and brand equity). In a competitive marketplace, the primary way for a utility to maintain and grow its customer base will be to win customers` loyalty.
Loyalty hinges on much more than price. As telephone industry deregulation has shown, the basic service price may differ little among competitors, while such issues as reliability, information, ease of use and choice-of-service offerings distinguish one brand from another. Two-way, interactive communication has the power to build crucial brand loyalty by transforming the customeràƒs view of a utility from a commodity provider into a lifestyle-enhancing energy management partner.
By acting now to implement two-way, interactive communication and market their benefits to consumers, utilities can position themselves as leading brand names in energy management–before competitors gain a foothold in their territory. This requires choosing a flexible communications system that enables a utility to offer a range of value-added services over its communications networks. It also means educating consumers about the benefits of energy management and adopting an entrepreneurial, marketing-driven mindset overall. As wrenching as the transformation may seem, it`s nothing compared with watching your service area erode to competition.
Jack King is president of the Control Systems Division of Scientific- Atlanta Inc., a leading communications innovator and experienced provider of electric utility load management solutions. Prior to that, King was executive vice president at Entergy Corp.