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Modeling Customer Service Segments
in the Utilities Industry
By
Joel Mincey
Introduction
The utilities industry has seen a great deal of consolidation, restructuring,
and deregulation of late. Any one of these events has the possibility of negatively
affecting the level and quality of service a utility provides to its customers.
Customer service ratings in this category have a very strong influence on the
overall performance of utility companies, including market growth and stock
price.
In addition, utility providers have to do more with less (as do most companies
these days). Specifically, they are trying to reduce customer service costs
while at the same time trying to increase customer satisfaction, provide incremental
sales, and assist with collections.
Utility companies that identify and implement solutions to these challenges
will prosper in the future utilities market. In particular, companies that understand
their customers will be in a much better position to provide specific services
to maintain high levels of customer satisfaction, as well as those actions that
produce the best results, thereby optimizing the service efforts of the utility
provider.
Background
Customer satisfaction scores have remained fairly stable (within a ten-point
range) in the utilities industry since the mid-1990s. However, this overall
stability belies widely varying scores among companies in the industry.
The data, from The American Customer Satisfaction Index (ACSI) located at the
University of Michigan, showed that in 2008 the scores for individual utility
companies in the index ranged from a high of 81 to a low of 64. Given that this
is a commodity market, with each company selling roughly the same product, a
smaller divergence of scores would be expected.
However, even in a commodity industry, customer satisfaction matters, and as
ACSI data shows, can have a dramatic impact on the overall performance of a
company. Data from ACSI has shown that for every 1% improvement in customer
satisfaction scores for a utility provider, there is a 4.6% increase in market
growth.
ACSI data also shows a strong correlation between a public utility’s
customer satisfaction score and its stock price. Therefore it is clear that
monitoring and improving customer satisfaction is an integral part of a successful
business plan.
The different levels of customer satisfaction are an important element for
a utility provider to understand in order to better respond to customer service
requests, as well as to identify those actions that produce the best results
for the least amount of effort.
Methodology
The results from this paper were generated using a series of research studies
among a range of utility providers. Each survey consisted of a series of questions,
including a battery of service attributes questions related to the experience
of the survey respondent with the utility provider. A series of statistical
techniques was used to analyze the data and to produce the customer service
segments.
The Segments
The first objective was to identify the number of customer service segments
that existed, and to understand the size that each segment represents within
the customer base.
The first segment identified was classified as “introductory”
and it represents nearly 50% of the customer base, meaning that roughly half
of customers are satisfied by a minimum level of service. Service items associated
with this segment include being courteous to customers, interacting in a professional
manner, and being knowledgeable and informative when responding to a customer
issue or request.
The second segment identified was classified as “involved” and
represents a quarter of the customer base. The customers require slightly more
involved customer service that focuses on more transactional services like setting
clear expectations, helping a customer understand the actions taken, and following
up with the customer after the issue or question has been resolved.
The third customer segment identified in the analysis of the data was classified
as “advanced,” and it represents approximately 15% of the utility
customer base. Customer satisfaction for this segment clusters around the handling
of a customer inquiry or issue specifically a through investigation of the issues,
resolution of the issues as quickly as possible, and a clear explanation to
the customer of actions taken to resolve the issues.
| Segment |
Introductory |
Involved |
Advanced |
Intensive |
| Size of Customer Base |
50% |
25% |
15% |
10% |
| Makeup |
Minimum Level of Service |
Transaction Service |
Handle Inquiry |
Resolve Issue |
The fourth and final segment was classified as “intensive” and
it represents roughly 1 in 10 customers. This segment requires a much higher
level of involvement or attention. For this segment, customer satisfaction means
having the issue or inquiry resolved by a representative who has the authority
to resolve it as soon as possible.
Specifically, customers need to believe that their issue has been assigned
to a “supervisor” (a higher level authority) who will resolve the
matter, communicate the outcome of the inquiry, and, finally, explain in detail
how and why the issue was resolved.
Conclusions
From the data analyzed, nearly three-quarters of utility customers would be
satisfied with either “introductory” or “involved” levels
of service from their utility providers basic levels of service that center
on being professional and courteous, helping customers understand the actions
taken, and following up with customers to make sure their issues have been resolved.
The remaining customers require higher levels of customer service centered
on resolving their issues as quickly and easily as possible, namely in the form
of having access to a higher level representative with greater authority.
Customer satisfaction is an equation of expectation and fulfillment. In the
utility category, customer expectations are very low, which accounts for the
fact that 75% of customers can be satisfied by a minimal amount of effort. Most
other categories are not similar, in that customers have higher expectations
and failure to meet or exceed those expectations will result in a dissatisfied
customer.
Regardless of the category, improving and maintaining customer satisfaction
is critical for a business to remain viable. As this paper has shown, it is
also critical to understand the different customer segments and the level of
attention required to maintain satisfaction. In doing so, a company ensures
that the right amount of attention is paid to each customer service segment.
Endnotes
- Claes Fornell, American Customer Satisfaction Index – ASCI Quarterly
Commentaries, May 20, 2008.
Copyright © 2009 by Decision Analyst, Inc.
This article may not be copied, published, or used in any way without written
permission of Decision Analyst.
About the Author
Joel Mincey (jmincey@decisionanalyst.com)
is Senior Vice President at Dallas-Fort Worth based Decision Analyst. He may
be reached at 1-800-262-5974 or 1-817-640-6166.
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