Until recently, telecommunications, energy and cable companies operated and marketed as they pleased. For marketers, life was simple. However, deregulation has introduced a vastly more challenging TEC arena for direct marketing professionals.
With a shifting and highly competitive marketplace unfolding, consumers and TEC companies alike face many new and monumental changes. We now find both start ups and well-established companies struggling to expand their breadth and depth of services just to compete. Yesterday's standard one-service providers are tomorrow's full-service providers — offering customers a comprehensive set of products and services. Now, communication companies strive to become Integrated Communications Providers, providing customers with all their communications needs, from wireless, local and long distance services to Internet and data services.
Also, traditional energy companies are merging with other utility providers to become full-service energy providers, selling more diverse energy products and services, from security systems and warranty protection packages to home safety consulting and surge protectors.
This new, competitive marketplace presents TEC companies with many new marketing challenges, including: how to acquire profitable new customers; how to reduce churn and increase customer loyalty; how to identify best customers and replicate them; how to drive out-of-territory customer acquisition programs; and how to cross-sell and upsell into an existing customer base. For example, long distance carriers with historically high customer churn rates are now adding more products and services in order to upsell into and retain its customer base while also expanding into new markets. Since the cost of winning a new customer may be two to three times the cost of retaining an existing one, marketers realize they must do everything possible to motivate customer loyalty.
At the same time, it makes little sense for them to expend resources on customers who are not profitable or likely to churn. Many marketers, whether in telecommunications, energy or cable, are recognizing that enhanced customer usage data and loyalty profiles can play a crucial role in developing targeted, cost-effective marketing campaigns and managing the new dynamics of the TEC industry.
Need for residential utility usage tools. It's clear TEC companies are looking for enhanced customer insights to better match direct marketing strategies to potential customers and to increase market share. Without current usage information, many must resort to costly and ineffective blanket marketing tactics. Many well-established TEC companies have limited customer information as it stands. Companies entering new markets or start ups are at a disadvantage without any existing usage information.
Fortunately for marketers, there are now residential utility usage tools currently available to help identify enhanced consumer TEC behavior at the household level. The advent of these new tools now allows marketers to X-ray the entire customer's lifecycle, including demographics, lifestyle and behavioral characteristics.
Unlike other data technologies, new customer usage tools can identify and segment consumers based on utility usage, behavior and revenue potential. With this insight into a TEC customer, marketers can begin to intelligently customize offers, accurately target consumers and optimize response rates.
The new data usage technology's approach starts with a national survey that fields a normalized population to represent the total population of the United States. The survey poses a variety of questions: local and long distance phone bill sizes, electric and cable bill sizes, loyalty to current providers and interest in receiving products or services from alternate providers. Then, sophisticated modeling techniques allow households to be identified as having the marketers' desired characteristics.
Finally, the results are layered onto a database of more than 120 million households, or a company's current customer base. This database then becomes the vehicle by which TEC companies can develop highly accurate prospect lists for many marketing efforts, such as cross and upselling, customer loyalty programs and new customer acquisition. Matches are identified and then targeted with the appropriate, pinpoint messaging and incentives.
Residential usage tools help TEC marketers not only target segments but also manage the whole customer lifecycle: retention, acquisition, cross-selling and upselling, new product introduction, etc. Therefore, the technology can be used for diversified marketing applications. The tangible, net results of such tools for marketers are increased response rates, lower acquisition costs and increased customer profitability.
The paradigm of the traditional noncompetitive TEC market has drastically changed and created tremendous consumer marketing opportunities. Increased competition has forged new industry dynamics and trends, including the corporate identity shift to full-service providers, out-of-territory marketing, loyalty programs and increase consumer share-of-wallet.
However, company changes present marketers with challenges to better understand enhanced consumer TEC usage behaviors, a challenge that can be further complicated by regional deregulation. To help give marketers a competitive advantage, new residential usage tools offer the needed data to manage the whole consumer lifecycle from acquisition and retention to upselling and cross-selling programs.
David Linhardt is vice president of marketing and strategy in the telecommunications, energy and cable division at Experian, Lombard, IL.
