Players combine energies to focus on customers

Players combine energies to focus on customers

The days of the single energy provider are numbered, says CosimaDuggal, and the new multi-utilities will be forced to change theirapproach to customer service in order to maintain profitability

You dread the morning when your monthly and quarterly bills arrive, but the thud of envelopes coming through the letter box is set to change.

No longer will you be faced with a deluge of separate bills, but one single large one covering your water, gas and electricity.

Consultants are saying that the days of the single energy provider are numbered and that opportunities will grow as competition toughens.

New entrants to the deregulated domestic gas markets will be forced, as part of a move to ensure continued profitability and success, to become multi-utilities, and to change their approach to customer service.

“New entrants to the gas market will be looking to be total energy providers.

The days of consumers buying gas, water and telephone services separately are fast coming to an end,” says Robert Dunkley, oil and gas director of computer services company Hoskyns, the UK arm of Cap Gemini Sogeti.

According to Vicky Pryce, chief economist and partner at KPMG Management Consulting, utilities will be forced to provide additional services to maintain profitability. UK domestic gas margins are much lower than predicted and there are too many players. She thinks the market will become dominated by a small number of large players.

“In the industrial and commercial market there are over 60 suppliers competing, which is the value of half the total market, but there are only 10 that have been really active,” she adds. “Firms that will do reasonably well will be the larger ones that will go on the backs of other energy providers, mainly Regional Electricity Companies (RECs) and water companies, and provide a combination of services to customers.” She adds: “Cost has to be the major issue for them.

“Firms like British Gas may have to sell electricity, or move into other areas. They will have to cut their costs as well if the present margins are true. Either that, or they will raise prices for supplying services to the domestic sector.” She adds: “We may end up with an oligopoly in this sector with British Gas being very dominant.”

Mike Jeans, global director of change management at KPMG Management Consulting, points out that utility firms in the post-downsizing, post-commercialisation and post-privatisation phase will have to go a stage further.

The move to a multi-utility demands clear directives on promotion and recruitment policies for management and staff, combined with the introduction of clearly defined performance measures and performance management practices.

What firms need help with is how to consciously redefine management processes.

“If you are going to adopt a directive approach, you need to be clear on style, but if you don’t have the clarity, you will have a very unhappy bunch of employees,” says Jeans.

“In a multi-utility you are creating a brand new company – putting two different companies together is culturally very difficult,” he adds.

“In the commercialisation stage, firms had time on their side because the market was not fully developed. Now time is no longer on their side and they will have to be more directive about the way they address change.”

Customer service-related projects offer the greatest opportunities for change. This is seen by the industry as the competitive weapon of the future – a make or break tool – for keeping existing customers and bringing new ones on board.

“Customer care will differentiate new entrants to the gas market from those that fail. What will keep customers loyal is customer service,” says Dunkley. “Utilities need to make sure that the customer is appropriately serviced, that there is corporate memory access to customer information, a one stop-shop approach.”

Computer-integrated telephony systems, which have the ability to provide a comprehensive customer service, is where demand for consultants to link up existing technology systems is high.

Dunkley emphasises that the key is not to replace existing systems, but to have state-of-the-art telephony systems in place, underpinned by comprehensive databases and integration systems linked up to previous legacy systems.

“If you have a customer on the telephone and you have turned your customer database into a comprehensive knowledge base, you have considerable competitive advantage – that’s a very powerful tool. You can identify and market additional services. The kernel in the middle gives you corporate access and you can turn that contract information into a real marketing tool.”

Staff retraining is considered by Dunkley as an intrinsic part of gaining market edge and retaining customers. Current trends show a reactive rather than a responsive service. How firms go about giving customers a responsive service and the information they require will be the deciding factor of who remains in the market.

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