20/10/2020 Risk management
Christian Steiner

Energy industry: customer acquisition in the age of digitalisation

The topic of digitalisation is becoming increasingly important in the energy industry and thus plays a key role for most companies. The digitalisation of business processes will increase their efficiency and enable bidirectional real-time communication between all market participants involved. This will also open up unimagined opportunities on the cost and revenue side.

In the long term, three key trends are emerging in the introduction and implementation of digitisation approaches:

  • In the distribution network sector, the distribution network operator (DSO) will develop as a platform operator.
  • In the metering sector, smart meter gateways will develop into a communication platform through which new business models will be placed.
  • In sales, new market participants will lead to a significant shift in established business processes.

Understanding the industry – Digitisation

  • Digitisation is still interpreted very differently in the industry: Initially, the term is generally associated with the automation of business processes and the rollout of intelligent measurement systems.
  • In addition, digitisation is associated with other topics, such as IT security, data protection, smart grids, but also the equipping of employees with mobile data processing and data communication devices and home office workplaces.

Value-based risk and accounts receivable management

It is the sad truth that in the energy industry the range of technical and commercial energy supply company processes is not fully covered by current ERP systems. This is especially true in the phase of the application process, where insufficient functions of existing ERP systems lead to inefficiencies in customer control, evaluation and cost transparency. These gaps must be bridged with a lot of manual effort. The delayed return of customer information in sales and accounting/controlling has a direct impact on liquidity.

The changes associated with digitalisation mean, especially for risk & accounts receivable management, a special adaptability – especially in the application process. In this context, energy suppliers are changing the way they view their clients from pure subscribers to end customers with high value. With new tariffs and value-added models, energy companies are trying to retain their customers in the long term. A prerequisite for closer customer loyalty is an improved understanding of customers and consistent customer analysis. To achieve these goals, a customer-specific offer system should be preceded by the results of the risk & collection processes and marketing and sales measures should be synchronised with billing and bill of exchange management.

High fluctuation rates in urban areas, over-indebtedness of private households and a lack of knowledge about their liquidity situation tend to lead to an increase in payment defaults. It is therefore necessary to classify a prospective customer/customer according to characteristics such as his creditworthiness, which provides information about the intended contractual relationship and its course. Subsequently, the delivery relationship of the client is classified according to his payment history. Due to the increasing competitive pressure, analyses of write-offs and annual write-offs will also become more and more the focus of business decisions in the energy supply industry. For this reason, regulations and control instruments should be established in the application process rather than in the accounts receivable management.

What should be done specifically in the application process?

In the application process for (new) customer acquisition and customer retention (cross-selling), the focus is on the segmentation of customer groups. For this segmentation, in the form of value-based customer management and customer ratings, both an internal and an external and objective view are required. This is based on both social and economic aspects and includes characteristics such as fraudulent intent, liquidity bottlenecks and the risk of insolvency. In general, customer segmentation should be based on the factors of creditworthiness, fraud prevention and potential, because only then can the right conclusions be drawn for all core processes in the company.

In order to be able to carry out segmentation in the application process (first customer contact), the customer-specific information and rate tables for each offer must be brought together. This requires a database with the corresponding customer information and a direct query. The result of such a query is used to price the customer-specific risk in the offer/contract design or to reject the customer if there is no obligation to contract.