The Utility sector as a whole is currently experiencing a very complex and delicate phase. The conflict in Ukraine and related international tensions are taking center stage, and the entire European context is being dramatically affected. Risks related to energy supply shortages, soaring market prices, and unprecedented increases in bill costs for individuals and businesses: these are issues that monopolize everyone’s attention in these very difficult and uncertain phases.
We will leave the analyses of these various issues to the relevant experts. But here, we want to be much more specific and focus on a decisive issue for this Industry that is so central and strategic in the economic landscape: that of credit management.
This is a very important issue that, given the dramatic economic and political framework we have already mentioned, becomes even more urgent today. Let’s say it very clearly now: now more than ever, there is a greater need for a new approach to managing unpaid debts and debt collection. A less old-fashioned and less schematic approach, first and foremost.
One that embraces a broader, holistic view, because credit management, in reality, always starts with the Customer Experience. There is a need that these processes should be redesigned following two crucial themes: digitization and personalization.
This will be our focus for the remainder of the post, starting with the basics.
Credit management in the Utilities and energy sector – an overview
What are we talking about when we talk about credit management in the Utilities and Energy sector? It’s about a truly enormous amount of outstanding debts, with a trend that is constantly and dangerously increasing. To get a more concrete measure, let’s consider some current data.
Some very reliable indicators are provided by UNIREC’s 12th report on credit protection services, published in May 2022 and presented during its digital conference. What did it reveal? In 2021 alone, the report found that UNIREC member firms handled around 40.1 million third party practices. This represents a 9% increase compared to 2020. Receivables entrusted for recovery to UNIREC member firms also increased in 2021 compared to the previous year (+5.2%), reaching just under €106 billion.
These numbers refer to the total number of companies, not broken down by sectors. However, as far as Assigned Third Party Accounts are concerned, almost half of the practices, in numerical terms, are related to the Utilities and Telecommunications sector alone.
Again for the Utility sector, entrusted value grew by 20%, well above the average that emerged in the report.
We are sure there is no need for too much commentary. The numbers are telling. The issue, therefore, needs to be tackled head on, but with novel and forward-looking strategies. Before turning to possible solutions, let’s quickly look at where these delinquencies lurk.
The vast majority, as we can guess, are unpaid bills, thus resulting in increased delinquency, both in the private residential sector and within small and medium-sized businesses. But that’s not all.
Parallel to delinquency, we must pay close attention to the phenomena of churn and switch, i.e., of moving from one supplier to another. In these cases, any debt collection activity risks becoming even more cumbersome and ineffective.
These are different issues, of course, but it’s important to start considering them as a whole because the solutions can also be wide-ranging.
From the problem to possible solutions
The dimensions of the problem of credit management in the Utility sector are very clear. Now, let’s delve into the field of possible solutions.
As we have already mentioned, it is first and foremost a matter of embracing a holistic view: credit recovery is not a sectoral issue, but can and must concern the entire chain from marketing and customer service departments to sales. In short, we have to take into account all the pieces that contribute to the creation of bad debts. Consequently, it involves digital and innovative solutions involving new communication with users. And as always, as far as Digital Transformation is concerned, there are critical keywords: data and people.
It’s not just about collection management, however. The fallout from these operations also impacts the company’s image and its position in the market. Now, let’s take it a step further at the operational level and look at three concrete types of actions on which to pivot innovative credit management:
- Enable and form cross-functional teams so that all relevant departments are involved in credit management. In practice: marketing, sales, administration and commercial, legal, and collection agencies. This involves breaking down the barriers that often come between these departments, and which make the whole process inefficient.
- Automate processes: this is the best way to streamline procedures, eliminate downtime typical of manual activities, and intervene promptly on insolvency situations, saving – simultaneously – time and money.
- Make the most of Big Data analytics and Analytics tools in order to: capture highly accurate snapshots of your user audience and then organize them into segments with homogeneous characteristics, behaviors, and needs; keep track, automatically, of the tasks that need to be done, with a focus on the tasks that are due...these are the crucial touchpoints for credit management; centralize customer information (master data, contacts, invoices, documents, actions performed and those yet to be performed), in order to decrease the time to initiate recovery activities.
- Aim for predictive insight. Among the various benefits of data analysis, the most important is that of being able to anticipate the future. This is true in general, in marketing, customer service, and beyond. In the specific case of credit management, conducting an in depth and dynamic analysis of the history of the relationship between company and customer makes it possible to work predictively on a probable delinquency so that you can try to prevent the problem with ad hoc actions, instead of just running for cover later.
The central role of personalization
There are no foolproof solutions for bad debt collection. But certainly, especially when it comes to so-called soft collection, communication between company and customer plays a pivotal role. This communication must be radically renewed following three directives: simplification, digitization, and personalization. These are three directives that constitute one unified path.
We saw above how important it is to efficiently collect and organize the data related to your users. The next step is to use the “magnifying glass.” Therefore, don’t just divide your audience into consistent segments and clusters, but really aim to learn about the characteristics and behaviors of the individual customer.
The result? Packaging, even for credit management, one-to-one digital communications that facilitate dialog and debt collection. In this sense, the old bill (a cold and often unreadable document) or the much-feared reminder can be transformed into a moment of discussion and represent the beginning of a conversation between company and individual customer.
This is the turning point of personalization. How to embrace it? By relying on companies that specialize in this type of process, such as Doxee. Let’s look at two practical tools.
- Doxee Pvideo: Video is, without a doubt, the most effective and engaging digital communication tool. It can be used to provide customers with a detailed and clear explanation of the content of the bill and all items of expenditure. Moreover, with Doxee Pvideo, each customer receives a video packaged based on his or her specific characteristics and situation…all this, of course, without the enormous expense of building one video at a time, but in an automated way, in an omnichannel dimension, and optimized for each type of device. In addition, you can insert simple calls to action, allowing the customer to pay directly with a simple click or tap on their smartphone.
- Doxee Pweb: Another original Doxee product that offers a solution to the precise needs of the utilities sector: Doxee Pweb is a personalized micro-site generated and deployed for each customer following the billing cadence and using data from CRM or internal information systems. The micro-site can contain consumption data, directions for optimizing customer spending, as well as access to your company’s customer care and loyalty processes. Again, there is the possibility of closing transactions directly in the micro-site in a very simple and intuitive way.
The bottom line is this: the shift we’re talking about is away from cold, cumbersome communications to a simplified, close, more customer-focused dialog. This new win-win perspective improves debt collection efficiency, soars retention and loyalty, and has extremely positive spillover effects on the company’s image as well.
It is not surprising, at this point, that Doxee products have been chosen and implemented by Utility and energy giants such as Enel, Eni, Gruppo Hera, and Iren.