Database Companies Ready Their Utility Solutions
Metromail, Paragren Technologies, Epsilon, Harte-Hanks, Acxiom and IBM are poised to offer hardware, software and consulting solutions to meet the new needs of utilities. For although deregulation will introduce competition, there is one thing utilities have in common -- lack of marketing skills.
"These companies have never had to market before," said Scott Nelson, research director at Gartner Group, Stamford, CT, a marketing research firm. "It's not unlike where commercial banks were in the early 1980s. They are ill-equipped from the point of view of marketing strategy, so they need additional hand-holding and a broader array of products and services than many other industries require from some of these vendors."
One-third of the 108 utility conglomerates in the United States plan to aggressively grow market share, Nelson said. And many plan to have live database marketing solutions in place by the end of the year.
However, utilities have much to learn.
"Most are still stuck on identifying who their customers are and what products they currently have," said Annelle Routhier, director of business development, utilities industry, Harte-Hanks, Billerica, MA.
Most have built big data warehouses but do not have proper marketing tools, Routhier said. The databases typically contain information on payment method and history, usage and basic demographics. Much of it is in legacy systems and needs to be updated for marketing purposes.
Harte-Hanks began focusing on utilities a year ago when it hired six direct marketers to work specifically with the industry and arranged for additional servicing from its mailing, database marketing and response management departments.
"We are enabling our customers to improve their targeting," Routhier said. "We are showing them methods in which they can identify the customers most likely to defect, so they can be proactive and do some intervention. We are also pushing our clients to learn how to look for that next level of high-potential customer."
Other companies are offering a variety of solutions.
On Jan. 8, First Data Solutions, Naperville, IL, announced that IntelliQuest Information Group Inc., Austin, TX, will remarket First Data's database products to selected technology market segments, including the utilities industry.
Also, Metromail has established a team dedicated specifically to the needs of the energy industries and is dedicated to delivering total business solutions to utility companies.
Acxiom and IBM have been working for more than a year on an integrated solution called DecisionEdge for Utilities, which helps utilities better understand and segment their customers, identify the products and services they want and find niche markets.
DecisionEdge, launched in November, combines project management, data mining and data warehousing provided by IBM Global Business Intelligence Solutions, Somers, NY, with data components, data integration, marketing consulting and industry content provided by Acxiom, Conway, AR. The system also uses a utilities data model, marketing analysis application and predictive marketing application from Per-Se Technologies, Atlanta.
"The usage, history and building data that utilities have gathered over the years is vital to these companies, but keeping this data and leaving it at that will never give the utility companies a consumer view of utilities," said Juan Dominguez, solutions executive for utilities at IBM Global Business Intelligence Solutions. "Instead, they will have a rate-payer or meter view of the customers. The only way to get out of that mode is to be able to enhance and integrate what they already have with external data."
After it gathers more customer information, NIPSCO Industries, Merriville, IN, which serves 1.5 million electricity, gas and water customers a year in Indiana, Michigan and Ohio, will use DecisionEdge for an intense marketing program.
"While we have a lot of basic information about our customers, we do not have nearly enough to do any real marketing, campaign management or tracking," said John Dunn, NIPSCO's group vice president and chief technology officer. "In the future, we will use DecisionEdge to supplement the name, address and phone numbers we have with other demographic and psychographic information from data suppliers and marry that data in a server."
The company will use internal customer data; enhancement demographic data from Acxiom, such as age and gender and physical attributes of the homes in their areas; and outside data, including psychographic and campaign and promotion history.
DecisionEdge also will be able to determine the best form of marketing for each customer.
"With this system, NIPSCO will be able to take a customer profile and see from past history if [that] customer doesn't like to be [telephoned]. The company can instead mail her information," Dominguez said.
The information also can be used to create specific customized products and services for customers and target them through a direct mail campaign.
"All utilities are trying to find other products and services beyond gas or electric that we can couple to the bill, such as energy monitoring tools, home security systems or furnace repair," Dominguez said.
The Gartner Group's Nelson said IBM and Acxiom's marketing solution is different from other companies' offerings because it addresses specific needs of the utility industry.
"A lot of the other companies are saying, 'We've done things for telecommunications so we can do things for any utility,' and there is no attempt to customize the data model," Nelson said. "For example, there is the issue of regulated assets vs. deregulated assets in the electric-utility industry. Within the structure of the database, you have to have firewalls between this data and ways to keep track of what you can and can't use. Most of the systems, besides IBM and Acxiom, have not taken that problem into account."
As deregulation becomes the norm and utilities seek outside marketing help, competition may heat up among database companies.
"What it boils down to is that historically, utility companies have had captive markets and guaranteed, comfortable margins on their products," said IBM spokesman Rod Thorne. "And now they're no longer guaranteed of having those captive markets and are cutting their margins to stay competitive on their commodity products.
"To make up for that, they're going to have to sell new products that they've never had any experience with before, and they are learning how to market those products the best way they can."