Going to Five Dials

How does an electric and gas utility build the loyalty of its small business customers? The Public Service Company of Colorado is rapidly learning how to do this. Why? Because deregulation is coming to Colorado in 2002, and PSC wants to be ready. PSC supplies gas and electricity to 70% of Colorado, with one million electric meters and 900,000 gas meters. It has operating revenues in excess of $2 billion.

PSC began its loyalty program with its large and wholesale customers. Once they had a program going, they decided to concentrate on loyalty building with small business customers. Carol Pedot, Director of Integrated Marketing at New Century Energies, as PSC is now named, was given the job. Small business represents about 25% of PSC’s revenue – or about $500,000 per year.

To begin the job, Carol set up a Direct Marketing Center, which they called PSCO Live, designed to build loyalty by communicating with small businesses, and by selling products directly to them. Carol formed a partnership with Saligent, who set up the call center. When they began, Carol found that they had 100,000 small business customer meters. Carol used her database software to determine locations, and found out that the 100,000 meters were in 50,000 locations. Who were the companies behind these 50,000 locations? By comparing the telephone numbers and company names, she reduced the universe to 11,000 marketable customer records from these 100,000 meters. This took a lot of digging.

To reach the decision makers in these 11,000 companies, Carol decided to send out a survey. It took four months to clean up the database, beginning in April 1997. The mailing went out in November. Their eight person staff in the PSCO Live followed up on all those who did not respond to the survey. The results were interesting.

Fifty percent of the customers contacted said that they had not received the mailing, or could not remember it. Five percent of them had moved or gone out of business in the previous six months. To reach the decision makers, they began by dialing each customer up to three times. Carol judged that they were not getting through to enough people, so she increased it to five dials. That did the trick. In most cases they were able to get through to the owner or the primary decision maker. They asked a lot of questions:

• If we could reduce your utility bill by 5%, would it affect your business? 30% said yes.
• Would you like an energy audit, an energy management product, or to receive power outages notification? More than half said yes.
• What could PSC do to serve you better? 43% said that they did not know. Customers who were used to dealing with an electric utility had difficulty understanding what electricity meant to them. PSC was also having difficulty understanding the relationship.

The result of all of the telephoning and surveying was the creation of a marketing database. PSC’s second step was to work with the data to see who was interested in saving money; who wanted PSC to help them with their power management. They wanted to know what people wanted so that PSC could provide the products and services to meet customer preferences. As Carol said, “We want to get away from segmenting customers only by size – kilowatt hours. We want to get away from usage, and get into the demographics of the customers. We want to go to five dials to get more information.”

The survey results were turned over to product development, whose job it is to develop new products for their customers. In designing the survey, PSC had a lot of internal debate about what questions to ask. Some customers had paid their utility bill on time for sixteen years and never talked to PSC. How can you measure the loyalty of someone who you have never talked to? Examples of questions:

• Are you satisfied with your electric service? 75% said yes.
• Would you be willing to pay for an energy audit of your business? Most said yes.

At this point, PSC has a good marketing database of its small business customers. Carol plans to communicate with them quarterly, with direct mail, inbound and outbound phone, and some internet email. Her goals:

• Raise that satisfaction rate to 90%.
• Increase profits by selling products and services to existing customers
• Boost loyalty over the next two years so that when deregulation comes in 2001, PSC will be ready to fight the competition, and win.

Across the country, utilities are trying to do just what Public Service Company of Colorado has done. As Carol Pedot describes it, it is fascinating and enjoyable work. But to succeed, you have to dig down. You have to go to five dials!

Arthur Middleton Hughes, vice president of The Database Marketing Institute, has presented 28 seminars on database and email marketing.  Arthur has also authored several books includingStrategic Database Marketing 4^th Edition (McGraw-Hill 2012). He and Andrew Kordek, chief strategist and co-founder of Trendline Interactive, are hosting a two-day Email Strategy Study Group in Fort Lauderdale  March 26-27, 2013, featuring group competition for email marketers responsible for subscriber acquisition, lifetime value, ratings and reviews, boosting their email budget, and doubling their ROI.  To learn how to attend the Study Group, click here

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