In competitive utility markets, there are primarily two types of retail energy suppliers – incumbents and new entrants, writes Kirill Rechter, CEO of LogNet Billing, a business unit of UK-based LogNet Systems, a carrier-grade customer care and billing company.
By Kirill Rechter
September 22, 2015
Incumbents are large, well-established former monopolies that were once generically referred to as the ‘gas company’ or ‘electricity company’. New entrants are significantly smaller and are typically focusing on specific customer segments.
Despite lacking the financial strength and infrastructure of incumbents, new entrants tend to be more agile as businesses and are creating competitive alternatives previously unheard of in retail energy markets.
Competition for market share among incumbents and new entrants is very strong. Some utilities companies have begun offering value added services, such as smart homes related applications. Despite the additional sources of revenue that these value added services provide, gas and electricity remain low margin, commodity services.
Instead, retail energy suppliers must look to how services are delivered and how customers are engaged to build competitive advantages, create loyal customers and win market share.
Energy billing and customer satisfaction
Energy billing along with service delivery and customer support are operational areas in which a retail energy supplier or any other type of utility company can leverage to differentiate itself and gain competitive strengths.
As customer expectations change as a result of influences from the telco and other digital service markets, both incumbent and new entrant retail energy suppliers must leverage the following three operational areas to grow their businesses.
Automated service delivery – today’s generation of customers want to order their utilities services in the same zero touch capacity as downloading an application to a smartphone.
Business processes must leverage cloud-based infrastructures and flows from all self-service technology platforms. Manual intervention on the side of the utility company or involvement from a customer service representative should be minimised. In addition to meeting customer expectations, automating service delivery will free internal resources to handle more complex and demanding customer needs.
Simplified customer support – customers now have alternatives is a fact that all retail energy suppliers must internalize. Service channels must extend beyond the traditional call centre and now incorporate behavioural and transactional data on consumers. All service channels must equally provide a positive engagement by quickly providing customers with access all necessary information and effectively resolving all issues.
Transparent billing – customers of gas and electricity services today have no tolerance for confusing rate plans, difficult to understand invoices and deceptive telemarketing and sales practices. This too is a result of the availability of newly competitive alternatives and the influence of digital services in other vertical markets.
Service plans and invoices must be as straightforward and easy-to-understand as possible. Traditional postpaid customers paying with through the postal bank, direct debit or a credit card must be extended to include new prepaid and hybrid customer types that want to make payments through new web-enabled ecosystems.
Meeting customer expectations
Long gone are the days of when customers would be willing to accept long wait times to receive services or speak to a service representative. Previously, this along with confusing tariff plans and invoices were the norm as incumbents had no competitive pressures.
At the same time and for similar reasons, the BSS systems and operations that were used by incumbents had limited capacity as customers had no alternatives. There was simply no incentive to invest in improving processes or support systems. Today, these practices are no longer acceptable and will quickly result in customer defection and loss of market share and revenue.
At the base of building competitive advantages is a modern BSS operation and systems. This covers the business processes and systems used to delivery services, provide customer support and bill customers. Many incumbents and new entrants have made progress towards automating service delivery, simplifying customer support and making transparent energy billing activities, although few can yet claim that these are helping them grow their businesses.
Service delivery framework
The following are important parameters for executives at retail energy suppliers to consider for turning BSS operations and support systems that provide the baseline framework for service delivery, customer support and billing into competitive advantages.
Strategic – business supports operations and systems must facilitate implementing the top level decisions taken by a retail energy supplier’s executive team or board. An example is the decision to rollout smart meters. Another example is to diversify energy sources and incorporate renewable energy into a service offering. Both these examples have large impacts on how services are priced, delivered and supported. In order to achieve the benefits of any strategic decision, the business support processes and systems must quickly adapt and facilitate pursuing the strategic decision.
Holistic – streamlined operations are one of the keys to success in any newly competitive market. This is especially true for the retail energy supply market. Accordingly, business processes must be carefully constructed in order to remove unnecessary manual processes and connect all departments in an organisation to minimise operational bottlenecks.
To make this happen, the business support systems in place must allow a retail energy supplier to efficiently define, configure and implement business processes that support the operational workflows of the organization. Ad-hoc processes or cumbersome workarounds will only be a drag on the business.
Empowering – market conditions are constantly changing, even commodity markets. In the retail energy supply space, competitive alternatives with new value propositions are entering the market, while regulations, especially relating to the delivery of energy services, are constantly being updated. An energy retailer must have the organisational agility through its business support systems to quickly adjust itself to ever changing market conditions.
Direct – whether a retail energy supplier is implementing a new strategy, defining holistic business processes or adjusting to new market conditions, the company must be in the position to directly implement any changes to its business support systems independent of any third party. Dependency on system integrators or vendors is an expensive and time consuming process that often causes the service provider to miss important market opportunities.
The conclusion is that retail energy suppliers and other utilities companies as well as any service provider should implement business support systems that are a match with the organisation’s long term vision and strategy and not just immediate functional needs. This will enable a retail energy to leverage standard operation activities – service delivery, customer support, energy billing – as business enabler and part of its growth engine.
Kirill Rechter is CEO of LogNet Billing, which designs and implements customer management and billing solutions for communications service providers and utilities worldwide. LogNet Billing’s primary product is the MaxBill billing solution.