May 1999

Facing Deregulation Head-On: Leveraging Call Centers For Competitive Advantage

BY JAMES H. DAHMUS, COVERGYS CORPORATION

As deregulation changes the utility market, service providers are facing a multitude of new challenges. In their regulated markets, they had virtually 100 percent market share, a percentage that can only go down with the introduction of competition. To make up for these losses, utilities must find other sources of revenue.

This significant challenge can mean equally large opportunities if utilities and energy service companies seize them. Utilities must defend their current markets while simultaneously penetrating new markets and offering new products and services to both. Companies attempting this are discovering that within both old and new markets, customer service can be the critical factor for success as consumers choose among competing utilities.

In the new battle for servicing customers, a critically important weapon is the call center. Wielded in the appropriate manner, a utility's call center is a powerful tool that can be used to retain existing customers while simultaneously reaching out to new ones.

The Evolution Of The Utility Call Center
Within regulated utilities, many call centers today are inbound only, addressing, among other things, customer questions about services, billing, outages, leaks and customer problems. Frequently, the representatives addressing these customer issues have limited information and are not prepared to handle the multitude of new issues that utilities will face in a deregulated environment. The successful utility call center of the future will need to be able to:

• Ensure agents can address questions regarding new services, new billing procedures and competition,
• Teach agents to upsell and cross-sell new services,
• Anticipate when calls will spike immediately following a mass mailing, advertisement or another event that drives people to call,
• Direct agents to make outbound sales calls as back-up and support to the direct sales force,
• Use database marketing and predictor modeling techniques to segment customers and prospects, and
• Use technologies such as integrated voice response (IVR) automated systems to answer frequently asked questions and cost-effectively evaluate levels of service.

Bringing these new services and technologies to market successfully will require utilities to have at their disposal highly trained, experienced professionals prepared to address all customer demands. Outbound call centers will become an especially important tool in pursuing new customers and enhancing communication to existing customers to help them understand new pricing and service options.

Customers Old And New
In a deregulated environment, utilities must act on opportunities quickly to maintain and grow market share. A high-quality call center can help in three ways: retaining existing customers, obtaining new customers and introducing new services to both.
Retaining Existing Customers. Customer loyalty is a looming challenge. As market competition drives down prices, utility and energy service companies run the risk of becoming commodities. Branding -- backed by superior customer service -- will be a key differentiating point for these companies. It is never too early to crank up the level of service to ensure that existing customers have no reason to consider a new provider when competitors come calling.

Obtaining New Customers. In addition to meeting the needs of their current customer base, utilities will need to discover innovative ways to obtain new customers in a competitive environment. As they move into new markets, utilities will need a comprehensive strategic plan for acquiring new customers in new markets. This plan should include a promotional campaign that drives prospects to an inbound call center for more information and an outbound call center program to reach new prospects.

Introducing New Services. Another hurdle for utilities to overcome will be how to sell new services. As these companies begin to offer new services -- such as telephony, cable TV or Internet access -- they will need to announce these new services to both their existing and new customer bases. Using both inbound and outbound call centers, utilities can introduce these new services to customers effectively and efficiently.

Call centers delivering superior customer service in these key areas will help utility companies bridge the gap between the needs of their customers and the services they can offer as they expand into other territories. The question that remains is, "Can existing customer service programs support the needs of the deregulated environment?"

For many utilities, the answer is a resounding "no." Current call center procedures focus mainly on inbound service and are not adequately equipped to handle the diversity of calls and the level of service needed in a new environment. In addition, not all call center employees have the experience and expertise to address the specific customer needs that will emerge as a result of deregulation.

Unfortunately, some utilities overlook the possibility of outsourcing as a solution to these problems. They often assume that outsourcing will not be cost-effective and that the service provider will lack the knowledge base that their current call center employees provide. However, as competition increases, utilities may find that outsourcing their call centers is their most viable option if they want to remain a contender in the battle for market share.

Reasons For Outsourcing
Essentially, utility companies provide utility services. When reevaluating customer service in a deregulated environment, utilities must determine how administering call centers fits into their core competency, if at all.

Today, many utilities and energy service companies are realizing that resources devoted to internal support of processes like customer service are expensive and difficult to execute well. Today's customers are demanding and meeting their various needs is a complex task. In deciding whether or not to outsource their call centers, there are several issues utilities need to consider:

• Teaming with a service provider can free up resources. This allows the utility to focus on its strengths and allows the call center provider to help care for customers' diverging needs,
• As utility call centers evolve to provide both inbound and outbound services, staffing requirements will fluctuate in new ways. Utility companies looking to meet these staffing challenges will find that outsourcing the call center -- and the staffing fluctuations that go with it -- can save money and increase efficiency. Because of economies of scale, the staff size of an outsourced call center can more easily ebb and flow with planned customer service programs, eliminating the need for utility managers to be concerned with staffing and training challenges, and
• Having customer service handled by an expert call center provider can go a long way to help utility companies retain existing customers and secure new ones. An established call center provider may have already handled similar deregulation experiences with telecommunications or other industries. Because of this prior knowledge, a call center provider can guide utilities through what might otherwise be a difficult process.

Conclusion
Deregulation will empower customers and put new demands on utility companies for services, price and attention. It will give customers the option of choosing a utility company just as they have done with long-distance telephone services. Utilities that are late in accommodating the changing market may lose ground to their competition.

Call centers will become an integral tool of communication for utilities. Effective use of call centers will give utility companies a competitive advantage in the new deregulated environment.

James M. Dahmus is president of the utility business unit for Convergys Information Management Group. He is responsible for all executive management, strategic planning and business development for the utilities industry. Convergys Corporation provides integrated customer care and billing services to help companies transform their customer relationships into a competitive advantage. Convergys, headquartered in Cincinnati, Ohio, helps companies leverage customer knowledge to achieve greater customer loyalty, reduce costs, drive innovation and increase revenue.