Utilities Face the Dot-Com Frontier

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"Good Morning America" recently took two twenty-somethings and placed them in an empty apartment for a week, with nothing but a computer and a $500 per day budget. While the two might have gotten carried away with their expenses, one thing was certain by the end of the week - you can get just about anything you need online.

An interesting social experiment but with perhaps not-so-surprising results. More and more people are doing more and more online. Busy schedules and a rapidly increasing comfort level are just two of the factors contributing to this exploding distribution channel. Utilities are not immune, and deregulation has made cyberspace fertile ground for energy providers to reach out and touch their customers.

Many utilities have already begun, and the industry has spawned new businesses. For example:

• Energyguide.com, which allows consumers to compare rates of competing companies, can be at least partially credited for the increase in the number of residential power suppliers in New Jersey (from one to fourteen) during the last quarter. Some industrial customers are taking advantage of real-time, online bidding from competitive utilities.

• Utility.com, the first Web-based utility company, has attained full participant status from the New England Power Pool organization and plans to offer services in the first half of 2000. (Utility.com was an Anderson Consulting top pick from its 1999 Evaluation of Utility Web Sites.)

• Essential.com announced 100 percent monthly customer growth since its inception.

• Reliant Energy has named Brian Landrum vice president of Internet and e-business, reporting directly to the CEO.

• A recent survey from the META Group Inc. estimates that 30 percent of utility customer service and bill paying will be done on the Internet by 2004. With news and numbers like these - numbers that are sure to grow - it is clear that all utilities must have a well-defined Internet strategy that takes into account growing popularity, growing competition and rapidly advancing technology.

Certainly, the vast majority of utilities have a presence on the Web, a place where consumers and businesses can go to obtain information about rates, pricing plans, community activities, etc.

A small subset has entered Phase Two - the transactional arena - where there's not much interactivity but where information retrieval is possible and customers can obtain account information and conduct online bill payment. For instance, Avista Corp. (according to American Gas, September 1999) recently developed e-billing with Check-free and has not only received a positive response but has saved 30 cents to 40 cents per customer bill each month, according to Dave Heyamoto, marketing manager. Columbia Gas, ConEd, Consumers Energy and Nicor Gas are among the other players in this arena.

Phase Three, or true e-commerce, includes all the benefits of Phase One and Two but, in addition, establishes a link to a database marketing strategy that offers the potential for personalization, cross-sell and up-sell opportunities. Part of the reason that this step has not yet been tapped by utilities is that most still have not yet implemented a database marketing strategy that provides this type of information for a Web site or, in fact, for use by any other media.

In addition, however, part of the reason for this hesitation is that not only is cyberspace an unexplored frontier, but for many utility marketers accustomed to a regulated environment, competitive marketing is a new experience as well.

The result is that the Web is still a virtually untapped media that can and must be used to reach customer acquisition and retention goals - just as print, broadcast and direct mail would be used to reach those same goals.

Successful Web sites do more than offer an image - they tie into an overall strategy by:

• Establishing clear site objectives.

• Tailoring the site to key target audiences and customer types.

• Engaging the site visit.

• Fostering customer loyalty.

This is not a small task, but it is one that must be met by utilities that hope to service cyber-savvy consumers in a deregulated world.

It will also be necessary for utilities to be a part of the brokering process, taking their part in the commodity market and adding their name via electronic links to the lists that offer consumers a look at competitive pricing. At the same time, however, they will need to work even harder to distinguish themselves from their competitors - on and off the Web - via brand marketing and through targeted acquisition and retention efforts.

The Internet is a vital part of this strategy. It is Phase Three - the ability to conduct true e-commerce that is based on timely and accurate customer information - that will ultimately determine a utility's success on the Internet.

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