Good customer service is a key factor for success in a competitive electricity market. Call centres play an important role in this respect, but can be costly to operate. Salman Wasti of Datamonitor examines the cost-service dynamics of utility call centres.

Residential electricity and gas customers have poorer perceptions of utility customer services than the utilities deserve. However, service excellence is a difficult prospect to promise and deliver cheaply. Both utilities and customers will have to decide what they are willing to pay for and receive in future – service, price discounts, or a blend of the two. But what can a utility do to impress the customer at the call centre?

Call centres have a reputation for being poorly staffed and difficult to reach. Waiting times of ten minutes or more are not unusual at peak times. However, call centres for UK utilities are generally performing well. On average the major UK utilities answer 76 per cent of calls within 20 seconds, ranging from a low of 44 per cent to a high of 90 per cent. This compares favourably against European utilities, and is improving every year. Not only are calls being answered faster, but the majority of queries are being resolved in a single contact much to the customer’s satisfaction.

Having said this, UK electricity and gas utilities cannot handle the close to 80 million calls a year without incurring heavy service costs. Nearly 12 000 agents are hired to answer customer calls, each requiring training on systems and becoming more and more sophisticated to better respond to customers in difficulty. Given this heavy investment, it is unsurprising that of the 43 per cent of UK customers that have changed supplier, only a tiny fraction have been driven away by poor service.

In practice, how necessary are these systems and well-manned call centres to the customer? In the UK, customers may call twice or possibly three times a year on average, while anecdotal evidence suggests a large proportion of customers do not contact their utility at all. In Spain as in Germany, customers call an average of once a year. The majority of these calls are simple to handle, with nearly half querying the bill amount, and a further ten per cent querying the tariff rate. While it is important to handle such queries quickly and efficiently, utilities may be setting themselves service targets that are simply unnecessary for most customers. To put this in context, the average cost incurred by suppliers to provide customer service per customer in the UK in 2001 was £7.50 (g11.39), and even including efficiency gains since, we can still expect a total service bill in the region of £144 million annually.

Key targets

Utilities, driven partly by call centre technology vendors and partly by their wish to improve, have set themselves key performance objectives that do not always directly relate to customer needs. While it makes little difference to the customer as to whether their call is answered in 20 or 25 seconds, it does make a significant difference in terms of the staffing and technology required to achieve this five-second improvement. With this in mind, utilities such as Atlantic Electric and Gas have been able to gain operational advantages over the established players, with 9800 accounts per customer service agent, compared to the average incumbent UK utility with less than half that number.

A utility such as Atlantic is able to survive and prosper with a low cost service strategy because its customers have different expectations. In terms of value, its customers pay lower rates for gas and electricity than the long-established utilities, and generally accept that a low-cost supplier can provide savings by setting guidelines for speed and efficiency in the call centre rather than the soft touch at a premium service provider. The classic example of this has been in the airline industry, where EasyJet gained market share through a well understood price proposition, and customers happily accept lower service standards in return for cheaper tickets.

There can only ever be one supplier that is cheapest, or one supplier providing the best level of service. By waging a perception war, the number of suppliers occupying these strategic positions can be increased, but the majority will be part of the undifferentiated herd in service. Customers with these ‘herd’ suppliers should not expect to be delighted by their service standards, but nor should they be disappointed. Calls should be answered in about 30 seconds, opening hours made accessible to those who need to call after work, and calls charged at a local rate.

In the UK we have yet to see a utility that can be called a premium service supplier. British Gas is investing heavily to reach a point where customer knowledge may enable this level of service, but at present the only examples can be found abroad in the small municipal utilities of Germany and Sweden with customer bases numbering fewer than

250 000. Technology may help the large utilities reclaim the customer information required for a more personal service, but this too must come at a price.

Convenience value

With few utilities able to operate in the low-cost provider space, and the data and opportunity required to demonstrably achieve premium supplier status in short supply, most utilities will necessarily be ‘herd providers’. Given that price remains a key issue in the customer’s mind, only the well-branded suppliers will have a chance of succeeding in differentiating on service, with British Gas’ “Doing the right thing” service advertising being a step in this direction. Nonetheless, most customers remain apathetic and unwilling to pay extra for service excellence. Additionally, many customers still value convenience and minimal risk, making the transition of price sensitive customers to the low cost providers a slow process. The future should therefore see utilities struggling to minimize costs, provide streamlined services that can handle the majority of queries in a basic but effective manner, with the real war being waged over customer perceptions rather than operational performance.

Integrating systems

To be able to chart and tailor the customer experience, the utility requires an integrated channel structure, without which data consistency and continuity is impossible. Data shortcomings have repeatedly hampered the deployment of an effective analytical CRM solution and thereby reduced the value of customer relationship building efforts. Within the call centres, the lack of integration causes substantial efficiency losses while also affecting customer services. The lack of integration in call centres is caused by the fact that channels are added without being integrated by a universal routing solution which would allow for information to be shared across channels.


Figure 1. The lack of integration is affecting the ability to provide adequate and improved service levels
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Datamonitor believes that by failing to implement an integrated solution, utilities are missing out on key cost saving and revenue generating opportunities, ROI is delayed, and customer service suffers. As Figure 1 shows, not only are calls handled impersonally and anonymously, the non-integrated structure precludes the ability to offer a service hierarchy, service consistency across channels, or call prioritization. These may be the factors that by 2008 provide the service differentiation that can provide real value for the utility in terms of customer retention and acquisition.


Figure 2. The strategic pyramid for service – most suppliers need not progress beyond the second stage of remembering past interactions
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Although channel integration may be particularly challenging in the utility sector due to the number of channels and inflexibility of legacy systems, the long-term costs of not implementing an integrated solution outweigh the cost of adopting one. In particular, utilities must focus upon analytical CRM that can help provide root cause analysis to unearth and resolve the underlying difficulties in their propositions.


Figure 3. Investigation of the correlation between response time and the agent:customer account ratio
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Utility customer service cannot afford to exist in a vacuum while customer expectations of service rise in response to the strengthening emphasis on customer care in other industries – finance, tourism, and even supermarkets. As a result, utilities will have to provide customer service that matches expectations built on experiences with other industries. It will no longer be enough to provide better service than one’s competitors to secure business – the goal will be to provide a standard of customer service comparable to the best customer service that consumers have experienced in any industry in order to maintain loyalty.