In this report a change plan for ESIC is proposed to help it adapt and succeed in the competitive market. The ESIC Distribution Division used to be the sole provider of electricity in the country, transporting and delivering medium voltage and low voltage electricity to consumers. However, as the electricity distribution market recently opened to competition, this means that other electricity suppliers will compete with ESIC Distribution to provide electricity services to customers. In order to compete, ESIC must devise strategies to become more efficient and satisfy customers. The goals for change that ESIC must undertake in order to compete involve creating a customer-oriented culture, improving its financial efficiency, improving its internal process and allowing company growth through learning. Before these goals can be implemented, ESIC must make sure that it complies with the EU regulations.
In accordance with Directive 2003/54/EC, although ESIC is entering a competitive market, it must provide competitive and fairly priced electricity in a non-discriminatory fashion in terms of both price and supply. This is to ensure a fair and level playing field and lowers the risk of ESIC dominating and monopolising the market. Change goals for ESIC should also take into account the environmental impacts. As suggested by Directive 2003/54/EC, ESIC should be aiming to protect the environment. In addition, Directive 2003/54/EC states that they should provide information regarding the environmental impact of using electricity to their customers by specifying in their bills and promotional materials information about CO2 emissions and radioactive waste from electricity production.
Deregulation of the electricity supply means that ESIC now have to compete for customers. In order to attract and retain consumers, it is essential for ESIC to differentiate itself from the competition and create a customer-oriented culture to ensure customer satisfaction. Secondly, another change goal for ESIC is to become financially efficient and competitive. For ESIC to do this, ESIC plans to improve its method of bill collection, its accounting practices and improve its metering procedure. This change will reduce operation costs, as well as reduce lead times and hence leads to overall financial efficiency. Thirdly, certain measures have been implemented for internal process across the organization. Finally, as workers are one of the company's key resources, and the business market is always changing, it is essential that ESIC workers are continuously educated and trained in order to improve their work so that they become more efficient. Additionally, this not only leads to company growth, but the company can also compete in the competitive arena.
Therefore, since the overall change plan is an integrated system, each of the perspectives influences each other. Hence altering the culture of the company so that it becomes more customer-oriented, developing training, making the internal distribution network more efficient and improving financial efficiency will all impact each other.
While in a regulated system, creating a customer-oriented culture was not of major importance to ESIC. Although it was essential to provide a good service for consumers, there were no competitors with which to compete. However, by deregulating the electricity supply, it means that there is now competition. As a result, ESIC have to fight for those customers who are able to switch to another supplier - the eligible customers. In order to compete, ESIC has to develop a customer-oriented culture so that it appeals to its customers in order to attract and retain them. ESIC has developed a series of goals in an attempt to create the customer-oriented culture that it desires. In order to reach these goals, it will need to make changes to the existing system.
Creating a customer-oriented culture “is more than just telling all your employees to smile!” (Anand 2008). It involves many different aspects of a business, not just the front of house staff as is often conceived. To reach their goal of a customer-oriented culture, ESIC will need to implement changes to parts of the company structure and practices. Additionally, new/updated information systems (IS) will be required with relevant staff training. The aim is to create a new culture within the company resulting in increased customer satisfaction and hence the retention of customers in order to defend the market share. The following causal loop diagram and explanation highlight possible actions and changes that could be undertaken by ESIC in order to achieve the customer-oriented culture which they desire.
Reaching the goal of a customer-oriented culture follows the attainment of many other goals. The first of these is aiming to achieve customer satisfaction. To attract and retain customers, ESIC needs to ensure that their customers have the desired level of satisfaction. According to Kaplan and Norton (1992), customers' concerns can be categorised into four groups - time, quality, performance and service. To satisfy customers, ESIC needs to ensure the goals relating to these four areas are fulfilled so that the goals of required lead time, quality, performance and service level are met.
In order to establish what customers expect of the company in terms of lead times, quality, performance and service. The first step towards ESIC establishing a customer oriented culture will involve the creation of a questionnaire in order to define what the customers expect of the company in terms of lead time, quality, performance and service. The contribution of this questionnaire to the creation of a customer-oriented culture can be seen from R4. After the responses have been analysed standards need to be set in accordance with the results relating to estimated lead times for billing and maintenance, services offered etc. Once these standards have been set, all members of the organisation and the customers need to be made aware of them. By creating awareness of the standards expected by customers, this leads to increased staff knowledge and hence improved services. Consequently, consumer satisfaction is increased resulting in customer retention which all contributes to the creation of a customer-oriented culture. The implementation of a questionnaire and the feedback that follows will be an expense not currently incurred by ESIC and will therefore impact profit and will need to be accounted for by the finance department.
One of the major factors contributing to customer satisfaction and hence establishing a customer-oriented culture is the lead time of services whether related to the supply of their electricity or billing facilities (R1). ESIC currently functions in divisions with each division being responsible for certain activities. Therefore internal processes will need to be altered to include a single integrated information system that is accessible at any time to ensure that every division has all of the information they need. This will allow public relations in the central division to input information from customers, and relay service and access information regarding the resolve of the problem back to the customer. Depending upon the request, the required division will be notified who will then be able to access all of the customer information needed automatically, the action that needs to be undertaken and when. Hence, minimising waiting periods. Currently delays occur due to the time taken to transfer information between divisions. While the information system improves efficiency, further changes will be made to internal processes in order to minimise consumer waiting periods. This will involve setting targets for the minimum number of applications to be completed per day and setting up a new division whose responsibility it is to continually review pending applications.
Staff training will be required to ensure that all members of staff can use the information system to gain the data they need and input information correctly. Additionally, staff may need training to raise the level of efficiency required by the company to provide a prompt response to customer requests in accordance with the standards set.
With regards to maintaining a high level of quality, ESIC needs to ensure that they continually check that the standards set are being met by staff and if not, investigate why. Furthermore, customer requirements will not remain constant and therefore it is essential that surveys are carried out at regular intervals to ensure that standards still fulfil customer needs and are revised if required, therefore, the financial department will need to account for this in their budget to ensure sufficient finance is available. In addition to this, it is clear that staff will need to be trained to ensure that they know how to meet the standards. Staff training needs to occur to ensure that they are able to carry out all aspects of their job efficiently. Currently ESIC is split into different divisions and the information on current practices highlights how each sector works independently with improvements occurring gradually and separately instead of as a whole running through the organisation. If ESIC is to create a customer-oriented culture, this has to change. All of the divisions need to work to the same universally set standard. Consequently, staff training needs to be controlled centrally to ensure all members of staff have the same training, are working to the same standards and feel they belong to the same company which clearly impacts measures related to learning and growth as it needs to be centralised. This is needed to create the ethos of a customer-oriented culture so that it is understood in the same way by all. It has been found that if staff are to help a company succeed in reaching their goals then the overall goals of the company need to be communicated to all members of staff (Hogg et al 1998). If this does not occur, quality levels will not be met as the standards will not be universal which then impacts the other factors influencing customer satisfaction levels. That is, as can be seen from R5, if staff training is not controlled centrally, it is difficult to ensure that the required level of knowledge has been attained. This impacts the services offered which in turn influences customer satisfaction and whether the customer-oriented culture is effective.
Performance is also related to customer satisfaction levels. Performance can be linked back to the quality standards and how well staff are performing in accordance with them. ESIC needs to implement measures to ensure that staff are complying with the standards set, this could be through post-service questionnaires, monitoring phone calls and staff appraisals.
In addition, the performance of the electricity distribution network should be reviewed. This involves reducing the number of failures that occur which can be achieved by ESIC using better metering facilities such as the development of computerised mechanisms including electronic meter reading facilities. Reducing failures will clearly have a positive impact on customer satisfaction levels which again helps to create a customer-oriented culture (R6).
The fourth goal which will help achieve the higher level goal of customer satisfaction is providing high level services. One of the key drivers of good service is staff ability and knowledge. The quality of the service perceived by consumers is affected by the interaction they have with employees, this is with respect to both knowledge and manners (Gronroos 1994). It is essential that all members of staff have the appropriate training so that they possess all of the knowledge and abilities needed for their job. For example, those engineers who are required to go to consumer's homes to fix problems will not only need knowledge related to the technical malfunction, but will also be required to learn skills regarding customer services as they will be required to interact with the consumers.
The introduction of post service questionnaires will help achieve higher service levels and is one of the goals set by ESIC. The plan is to introduce online questionnaires, call centres and outdoor surveys with questionnaires. In order to gain meaningful results from these questionnaires, the results will need to be consolidated. To ensure that this happens effectively, all questionnaires need to be of the same format so that the information can be entered into a database and the overall results easily interpreted. ESIC can either collect all the questionnaires together in one place and input the results or set up an information system which allows the results to be entered at different locations but collects all of them together to be analysed. The results then need to be acted upon accordingly if they are going to have an impact, they are of no use just staying on the computer. Therefore, the results will need to be analysed and fed back to members of staff. This will require the satisfaction survey team learning the skills required to compile the results into the database and translate them into meaningful results. Once fed back, if good the results will boost staff morale (R12), if not, the problems need to be identified clearly and action needs to be taken to improve services offered either through disciplining or training so that an effective customer-oriented culture is maintained (R13). Either way, the company need to decide upon a staff reward scheme before relaying the questionnaire results to the staff.
In addition, ESIC can extend the services they offer which will impact the company financially as expansion will require funding, along with changes having to be made to internal processes. However, by extending the services offered, ESIC will be able to increase customer satisfaction and hence retain their customers which then contributes to a customer centric company (R3).
Firstly, as mentioned in the goals for change, the product offering could be expanded to include telecom services. This is a way of competing, as packages can be offered to combine existing services with the telecom services. It will attract new customers to the company who may currently have decided to take their custom elsewhere for electricity but may be convinced to return if they are to receive good telecom services.
Additionally, in a world where caring for the environment is prominent, ESIC should consider providing renewable energy sources as they are being demanded by consumers. This would also comply with Directive 2006/32/EC which states that energy efficiency improvement measures must be introduced. Providing renewable energy sources will clearly be more expensive for ESIC however, there is empirical evidence identifying that consumers are now requesting green power and they are willing to pay more for it (Truffer et al 2001).
Customer support is a further service that could be provided by ESIC, this could be in person, by phone or on the internet. It can involve offering advice to customers on the best packages for them and energy saving which also complies with Directive 2006/32/EC. Customer support could also involve advice on better payment plans which is a part of accomplishing the goal of financial efficiency as it will help consumers to better manage their money to ensure that they are able to pay their bills. By providing this support, ESIC will establish a relationship with the customer which will all contribute to their satisfaction levels. However, this is also dependent upon how responsive the staff are and therefore training will be required with respect to both customer care and services offered.
Linked to extended services are better billing facilities. This includes regular billing on actual consumption instead of estimated usage which is in accordance with Directive 2006/32/EC and multiple options regarding how bills are paid. This enhances customer services by allowing them to monitor more closely their energy consumption and allows customers the freedom and flexibility to use which ever payment method is best for them whether online, by direct debit, by phone, by post or using a pay and go pre-payment system. By providing numerous different payment methods, it not only appeals to the customer by giving them choice, it also helps to achieve financial efficiency. These billing facilities would require an information system which contained all the information related to the customer and their usage in order for them to pay the bill. Additionally, it would have to be linked to a bank that would carry out the transaction and when complete feed the required data back into ESICs information system to confirm that the customer had paid their bill.
A further way to extend services is through a company website. There is no evidence of a website in the information provided about current practices at ESIC. However, in a society where the internet is used so widely, it is essential that ESIC have a website so that customers can easily access information, therefore, financing will be required to establish and maintain the website. ESIC could lose business without this as customers will search online for the best deals. If ESIC are not online, consumers will not be aware of the product offerings and will not consider using the company. The website needs to contain all information on services offered, could be used to pay bills and as a means of interactive communication with customers. That is, the website could contain a way of emailing ESIC who could then email a response. This means of communication is often preferred by customers today who have busy lives, may not be available during stated business call hours and do not have the time to wait for their call to be answered. The customer can email when it is convenient for them and ESIC should aim to respond within 24 hours. Responsive email systems would also reduce the number of consumers who visit the office which again helps achieve one of ESICs goals as well as still providing help for the consumer. In order to comply with Directive 2006/32/EC, customers should be able to use the website to access personal information regarding their consumption, along with comparisons made to past usage and national averages. This information should also be sent by post with customer bills as not all consumers will have internet access.
Additionally, a call centre will need to be established so that customer requests can be handled efficiently and so customer support is readily available. Although this relates to the alterations in the internal processes of the company, it will also require funding both to set up and to train staff so that they are equipped with the relevant knowledge and skills needed.
Despite wanting to reduce the number of customers who visit the office, ESIC will still have the option available for those customers who prefer a more direct approach and face-to-face . However, as stated in the goals for change, ESIC want to implement ‘one point procedures' and need to adapt their office to include a specific area for dealing with customers. Therefore, it is essential to ensure that there are staff available with the appropriate skills to handle face-to-face customer and the required level of knowledge of company policies and practices to answer any questions.
It is also key to know what services the competition is offering. Although not specifically linked to ESIC's services, it will impact them. It is always important to know what it is that the competition is offering and their strengths and weaknesses in order to capitalise on it by offering better services and filling any gaps in the market (R8).
Finally, with regards to service and a customer oriented culture, it is essential that in order to satisfy customers, ESIC do not discriminate between consumers and offer premium services to some and not others (Directive 96/92/EC).
Although the above will help ESIC achieve customer satisfaction, this is not the only aspect of a customer oriented culture.
The need for staff training has been identified at many stages in the change model already which will clearly impact those measures and decisions made with relation to learning and growth. It is clear that the implementation of new procedures and technology will require staff training to ensure all of the changes are carried out to the correct standard. There is need for all training to be controlled and administered centrally to ensure continuity instead of each division working separately. This is to enable a single set of standards to be implemented and so that behaviour can be monitored easily. It is also useful for improving staff morale as the correct people will be rewarded. Additionally, if training is administered centrally, appropriate training will be given enabling everybody to be equipped with the skills needed to do their job efficiently which should lead to a happier staff group which all impacts the customer experience. It is also essential that training is continuous. That is, as new practices are implemented, further training needs to occur for staff to acquire new skills. The staff training which is required to create a customer-oriented culture will have an influence over decisions made in areas regarding financial efficiency, internal process improvement and learning and growth. That is, in order for the training to take place it will require funding to establish the standards and train the staff accordingly. Additionally, internal processes will need to be changed from the divisions which currently function independently to the learning and growth being controlled and implemented centrally.
The introduction of competition into the electricity market means that marketing is required to attract customers. In order to do this effectively, ESIC will need to carry out surveys to gain customer information so that segmentation can take place and hence targeted marketing (R7). Anand (2008) suggests that segmentation should look at “professions, spend and loyalty patterns, and needs that are specific to their social, economic, personal networks and communities.” It is essential that ESIC find out what makes people buy electricity so that it can be sold in the most appealing way to each segment. In this way, ESIC will attract as many customers as possible by offering the services best suited to individual consumers. It is essential to differentiate the product offerings to ensure that the competition is not seen to be providing a better service. Marketing will require money from the finance department which although will initially reduce profit, should in the long run help to attract customers and hence improve financial stability. Linked to marketing is word of mouth (WOM). WOM is a key lever in the consumer decision making process and therefore it is essential that existing customers have a good experience with ESIC to ensure they are satisfied with the company and speak positively about it to help attract new customers (R11).
Due to the similarity in products, one of the ways to distinguish the product offerings from the competition is through branding. By establishing a brand, ESIC is better able to differentiate its products to attract customers which all contributes to the creation of a customer-oriented culture (R9). Just as with the marketing, establishing a brand will require an initial financial outlay but should generate custom and hence future profit. Branding helps to create a relationship with consumers and “encompasses the goodwill it earns during its lifetime” (Melton 2000). The Spanish brand Gas Natural used advertising to attract customers and build brand trust by showing their brand as part of everyday life (Hartmann and Ibáñez 2007), a technique which should be considered by ESIC. Energy brands which offer services that are appealing to the customer are also able to charge a premium which will clearly benefit ESIC financially (Hartmann and Ibáñez 2007). However, if ESIC choose to brand their product, it is essential that it is integrated into the company culture and adopted by all employees if it is to be successful (Melton 2000). Branding will also help ESIC branch out successfully into other services, as the positive associations and brand loyalty built for the electricity services will make it easier to attract customers for these new product offerings (Melton 2000).
A large part of a customer-oriented culture is establishing a sense of loyalty. The goal of customer loyalty will often follow from customer satisfaction. If consumers feel that they are receiving a good service and are happy, they have no reason to leave the company and are more likely to be loyal. Hartmann and Ibáñez (2007) maintain that loyal customers are those who hold positive attitudes about the company and repeat purchase. Loyalty is found to follow from both brand trust and satisfaction (Hartmann and Ibáñez 2007). This highlights the need for ESIC to establish a brand in the competitive market and satisfy their customers if they want to increase loyalty and hence limit customer migration (R10).
The introduction of a single information system that is accessible to all is one of the key drivers for the new customer-oriented culture. This new database which requires the transformation of internal processes, is essential for many of the changes to take place efficiently. The database will allow all members of staff to access all relevant information about customers so as to reduce the time it currently takes to request and receive information from a different division and consequently act on it. The information system will allow actions to be carried out quicker and offer a better service for customers which is the main aim of achieving the customer-oriented culture as it helps to increase customer satisfaction and hence customer retention (R2). Being able to access customer information allows the consumer to receive the best service possible and therefore adds a competitive advantage if it makes ESIC quicker and more efficient than the competition.
Finally, although pricing is not one of the key drivers affecting whether consumers change electricity supplier (Lewis, 2001), it still plays an active part in creating a customer-oriented culture. As is seen from B1, pricing will impact how satisfied customers are with the service and hence whether they continue to use ESIC, therefore it is essential that they feel they are getting quality for money. Although the company will want to offer the best price, according to Directive 2006/32/EC all services need to be competitively priced.
The causal loop diagram below highlights the interrelationships between the policies proposed in order to reach the change goals developed by ESIC. The policies (written in blue) have been selected from the change models designed from each of the four areas in order to reach all of ESICs goals. The following discussion highlights how the policies selected are related to those associated with the creation and implementation of a customer-oriented culture.
It is clear from the causal loop diagram that in order for ESIC to reach the goal of introducing a customer-oriented culture, investment needs to be made in many areas of the business. As can be seen from R1, investment in a single integrated information system will lead to customer satisfaction, as will investing in better metering (R2) and extended services (R3). Customer satisfaction then links to customer retention and loyalty which can also lead to new custom, all of which results in revenue, profit and hence more money for investment, to help to maintain the customer centric culture. R4 also highlights the benefits of investing in the establishment of a brand for the business to differentiate itself to attract and retain customers.
Additionally, implementing satisfaction surveys will incur costs for the company but will help to indicate suitable training to improve satisfaction levels. Also, marketing reduces profit as it requires financing (B2) but it does promote the company to gain new custom and hence provides revenue (R5). The implementation of these new procedures also requires training as can be seen from the loops mentioned, this will again require further costs. Directly these costs reduce profit, as seen from B1. However, indirectly the costs spent on training lead to efficiency and reduced lead times with the result of customer satisfaction, attraction and retention, consequently increasing revenue contributing to profit (R6). This profit can then be used for additional investment which further contributes to the creation of a customer-oriented culture and customer satisfaction.
Essentially, the main reason for creating a customer-oriented culture is to compete. In the new deregulated system ESIC need to distinguish themselves from the competition and the way to do this is through creating a customer-oriented culture. The above changes will help ESIC to provide a better service for its consumers. By implementing new techniques, ESIC will be better able to deal with customer data and handling customer requests. However, for the change to a customer-oriented culture to be implemented and maintained successfully, it requires continuous employee commitment to all of the new goals, it is not something that can just be executed and ignored (Gronroos 1994).
Entering into a competing market and creating a customer-oriented culture, is not something that can be carried out independently. As highlighted, many of the changes influence and are influenced by decisions made regarding financial efficiency, internal processes and learning and growth. Therefore, changes will also need to be made concerning these components if ESIC is to achieve all of its goals for change.