Now is the time for utility companies to capitalize on their newly expanded success or they will miss a business opportunity of unparalleled magnitude.
Utility companies must start partnering with other companies to take advantage of their hugely expanded client databases if they want to keep and expand their market share. Creating partnerships is the most enterprising way to use the systems they already have in place to create greater profits.
With federal laws that regulate and the utility industry changing on a state-by-state basis, allowing utility companies to compete for market share, many utility companies are growing exponentially. In addition to being able to compete with each other for energy clients, some utility companies have created their own competition by setting up subsidiaries. Customers receive more options for energy delivery, and utility companies increase their customer databases with unprecedented speed.
Similarly, large water companies have used the more stringent federal laws that regulate the water utilities to their advantage. When municipalities were faced with purchasing additional and expensive filtration equipment to meet new EPA regulations, larger water companies were right there, offering to take over the water supply system. This saved towns money and allowed utility companies to grow into new areas, broadly expanding their customer base.
It is now time for utility companies to use that growth and entrepreneurial spirit to expand even further, creating profit centers where cost centers currently exist and taking advantage of the systems they already have in place to expand with partnerships.
Utility companies have two of the essential systems already in place to take advantage of this huge market. Most importantly, they have large client databases that offer fine details about the household demographics. Further, they have the trust of their clients — or a brand name — to offer. Most people have been using the same electric company for as long as they have been paying electric bills. And before they owned their own homes, their parents paid the same utility company twelve months each year.
It's hard to beat that kind of brand loyalty. Consumers are not used to having a choice about which utility company to use. Like Ma Bell, utility companies were the only game in town and they became a part of peoples lives. Now utility companies can use that to their advantage by marketing the wares of their partners to their huge databases of clients. By directly marketing to their clients each month, utility companies can create a gold mine out of their existing database.
Utility companies need to create profit centers from cost centers. Billing is expensive, and the more clients a company has, the more billing they have to do. To keep the cost of invoicing down, utility companies need to use the billing function as a way of making money.
If a utility company invoices 1 million people each month, that translates into 1 million times they can try to sell another service. Each month that goes by that they don't market additional offerings to their customers equals 1 million missed opportunities to earn greater profits.
Some utility companies chose to outsource their statements to lettershops because they do not have the machinery and staff needed to support the expanded business. In addition to handling the billing function, lettershops stuff the statements with direct mail pieces. These direct mail offerings can be ways for customers to increase their usage with the company by adding extra services or by purchasing complementary services. One water company offers pipe insurance to their customers by sending information in their bills.
Utility companies need to take this a step further and partner with, for example, Internet providers or credit card companies and offer their services to the utility customers.
Telecommunication companies are already using their billing cycles to market directly to the customers. Offers ranging from Internet services to video store coupons are sent to customers in their phone bills. Utility companies should be doing the same thing. They can take a percentage of the profits earned by the partnering company with each bill sent.
Furthermore, utility companies can add Web sites, set up to accept bill payments online, in addition to mailing traditional bills. People can pay their electric or water bill online with a credit card. The utility company can then sell advertising space on their Web site, turning a cost center into a profit center. Then, the utility company can earn profit in two ways: first by offering a utility company credit card, for example, and then by allowing their customers to pay their electric bills with the credit card on their Web site.
In addition, the utility company Web site could have links to their partners' Web sites. The site could offer customers 20 percent off all Crate & Barrel purchases for example, and hyperlink utility clients to the corresponding home page.
Lettershops and database management companies can help utility companies implement these ideas by setting up billing cycles and Web sites.
With large, well-managed databases of clients and information at their disposal, utility companies make a choice each time they contact their customers. They can choose to make more money than they already are, or they can choose to stay at their current level of profit. Enterprising leaders of utility companies will choose to use their systems and databases to their advantage by creating partnerships with other service industries.
Leon Roomberg is the director of database technologies and network administration at Marketing Communication Systems. Tom Rigney is regional director of Communication Concepts Inc. Both firms are subsidiaries of the Communication Concepts Group, Ivyland, PA.