Callcredit Blog

The customer is key to a successful strategy

Credit Risk & Affordability

Image flow utilitiesPutting customer advocacy at the heart of the new accounts process will help utility providers to mitigate downstream costs from day one

The energy and water sectors are under pressure to simultaneously reduce costs and improve operational performance. Utility providers face a wide array of challenges, as well as increased scrutiny, but one of the biggest pressures is to achieve these reductions and improvements whilst ensuring customer advocacy.

Not all customers want or need the same thing and treating customers fairly is not necessarily the same as treating them in the same way.  By engaging with the customer in negotiations to determine the most appropriate and mutually beneficial terms, the utility provider can align the payment and follow up strategies responsibly.  The value and risk that individuals bring to utility businesses varies and it’s key to determine customer and business need as early as possible to mitigate downstream impacts, particularly if the first interaction is the only opportunity to engage with the customer.  The last figures released on households in debt to their energy supplier stood at around £464million with a quarter ignoring bills.

Nationally consumer debt and customer fairness is the centre of attention for regulators and industries and as such it is important for providers to understand who their vulnerable customers are, put in place suitable methods of payment and implement affective solution in ascertaining customers’ ‘ability to pay’.

According to the April 2015′s Money Statistics in Q4 2014, households in the UK spent £77.58m a day on water, electricity and gas – or £2.91 per household per day.

  • The average total debt per household – including mortgages – was £55,083 in February. Per adult in the UK that’s an average debt of £29,126 in February – around 115.6% of average earnings.
  • Citizens Advice Bureaux in England and Wales dealt with 6,407 new debt problems every working day during the year ending December 2014.
  • The number of people unemployed for over 12 months fell by 553 per day.
  • There were 5.1 million working-age people claiming benefits in August 2014.
  • The number of people classed as unemployed between November and January was 1.856 million (5.7%).

These figures highlight the pressures facing consumers which in turn becomes a challenge for utility providers, reinforcing the importance of understanding new customers and how this is core to customer service delivery, limiting risk exposure and maximising value delivery.

For many customers new energy and water accounts are a formality. Most customers can afford to pay and will continue to pay without promoting contact. In general the large proportion of customers will make a contribution to your bottom line.

There is however a proportion of customers that will “not pay”, whether this is a consequence of choice or ability to pay is the key question. By establishing whether a customer has the necessary disposable income to cover their utility consumption is the first factor. The second differentiator is whether the customer chooses to prioritise energy or water bills over other credit lines.

Now is the time for utility providers to implement, strategies and best practices to ensure a strong and forthcoming relationship between their consumers from the start of an account.

If you would like to discuss this further please email me on martyn.cladingbowl@callcreditgroup.com

Author:  Martyn Cladingbowl | Head of Utilities

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