Utilities Work Their Way Into DM Initiatives as Deregulation Approaches

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Energy companies are developing direct or database marketing staffs and programs to guide them through the upcoming marketing opportunities. Others, like PP&L EnergyPlus, Harrisburg, PA, are outsourcing the two functions because it's a short-term and cost-efficient way to decide if it wants to build one inhouse.

Companies -- especially those based in states where consumers and businesses already have utility choices -- are relying on database marketing companies for programs. And companies such as Experian, Orange, CA; Harte-Hanks Direct Marketing, New York; and Nykamp Consulting, Lombard, IL, are meeting this demand by expanding their offerings to focus on utility markets.

PP&L EnergyPlus, the subsidiary of Pennsylvania Power and Light, hired Harte-Hanks' company DiMark, Langhorne, PA, last year to create and execute mailings and to develop a database marketing program. When Pennsylvania allowed utility choice late last year, the company launched a direct mail campaign highlighting its services.

"Outsourcing was beneficial and more efficient to us because it would've been very difficult for us to hire the amount of people we needed at the early stages of this market," said spokesman Paul Wirth.

The company has 10 marketing executives on staff, although it has yet to create a marketing department. "These employees are woven into the fabric of these organizations by market segments," Wirth said.

According to a study from executive search firm Spencer Stuart, Chicago, utilities are hiring DM executives.

"[Direct marketing] has at least been added to the skill portfolio that companies are looking for," said Robert G. Shields, the company's principal and managing director of utilities.

However, many of these utilities continue to decide how to organize their marketing departments and how direct and database marketing fit into the equation. Some companies simply are waiting for the utility wars to strike before going ahead. Others are waiting for deregulation before they launch any major campaigns.

"Many companies won't go to the doctor until they start feeling the pain," said Jerry Bernhart, president of Bernhart Associates, Owatonna, MN, a direct marketing and database management executive search firm.

It's taking others awhile because they aren't comfortable with the types of systems required for successful direct marketing programs such as customer databases, profiling and modeling capabilities and campaign management systems. But they are learning about them, and experts are hopeful.

"As they develop an information-gathering system for their customer base, beyond just simple historical billing information, they will realize the capabilities they have and be able to do much more targeted direct marketing," said Christopher Nadherny, senior director at Spencer Stuart.

Bernhart said utilities are experiencing what the telecommunications industry experienced for 10 years.

"They are looking for companies to build their databases and then they are looking for people to run their [database marketing]," he said.

Nadherny said most utilities are realizing that since they operate on thin margins, they will have to rely increasingly on the development of value-added products and services for specific customer segments. They also are bundling new products -- or whole new categories of products -- in efforts to keep customers.

Companies also understand the importance of direct marketing as a vehicle to get the word out about these new offers and the importance of putting together retention programs for their existing customer bases and to capture new customers.

"Targeted direct marketing offers a very powerful and efficient sales channel," Nadherny said. "As they segment, they will uncover new opportunities, develop new products and see the lifetime profitability of the relationship of customers."

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