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April 13, 2011

The Smart Grid Customer Experience Mandate

Analytical Framework - CRM Strategy

In a previous blog, I introduced the following Customer Experience Management Analytical Framework that Infosys recommends for articulating the Smart Grid value proposition for energy consumers

:CEM.png Infosys believes that Utilities must articulate segment-specific value propositions for its customers to increase consumer acceptance of new AMI and Smart Grid services, and also to reduce the risk of regulators not approving AMI and Smart Grid investments because of consumer pushback.

In this blog, I will discuss the CRM Strategy portion of the Customer Analytical Framework; in particular, those key questions Utilities should be asking themselves to develop a CRM Strategy for segment-specific customer value propositions.

Key Question #1: Does your Company's CRM Strategy development take a holistic approach to the following:

 •Customer Insight? (i.e. know your customer better than any competitor and execute using this knowledge)

 •Customer Strategy? (i.e. Define customer experiences and product and service offerings that maximize value for you and your customers)

 •Customer interaction? (i.e. Execute customer-facing segment-specific capabilities with consistent quality across all customer interactions)

Utilities must collect, organize, and analyze customer information using the appropriate segmentation scheme (Note: we will discuss customer segmentation in a separate blog). This information typically focuses on segment-specific needs and wants (ideally in priority order). Utilities can use this customer insight to develop appropriate customer strategies (i.e. customer experiences and product and service offerings that meet the needs (and some wants) of customers falling into each segment). Customer interaction is a vital part of the customer experience for each segment. Utilities will be challenged to provide the same level of quality for all customer interactions for each segment-specific customer experience. Utilities will be able to maintain the consistency of all customer interactions by developing the right mix of customer-facing segment-specific CRM capabilities.

Key Question #2: Has your Company developed a CRM Strategy that encompasses all of the following elements:

•Customer Segmentation? •Customer & Company Value Propositions (by Segment)?

•Customer Offers (by Segment)?

•Company CRM Capabilities?

 In addition to appropriate customer segmentation, Utilities need to define value propositions (by segment) for both the customer and the Utility. This is necessary to ensure Utilities strike the right balance between value delivered to the customer and value delivered to the Utility (i.e. a "Win-Win" for both). If Utilities do have to give something up to meet a customer's needs, at least the Utility knows what that is and can try to make it up another way.

Key Question #3: Does your Company create a multi-channel customer experience based on the anticipated customer lifetime value for each customer segment that meets their expectations and your cost justification guidelines?

Utilities need to calculate the lifetime value for each customer segment (i.e. the net of cost and benefits delivered to the Utility through the cycle defined by customer acquisition, retention, and retirement). This determination is a vital input to development of a viable value proposition for each customer segment (i.e. the level of value created over a customer's lifetime determines what product and service offerings a Utility can afford to offer the customers in a specific segment). If the level of lifetime value creation is relatively weak, Utilities won't be able to do too much for the customers in that segment. This calculation is also a critical input for defining customer segmentation schemes (i.e. Utilities need to design customer segmentation schemes that have relatively high lifetime value creation).