Current utility marketing efforts focus almost entirely on large customers or "key" accounts, responding reactively to competitive threats such as self-generation, municipalization, and even geographic relocation. These threats have become all too real for many utilities. Niagara Mohawk Power Corp. has lost 15 percent of its large industrial load in the last 15 years. The recently negotiated long-term power contracts between Detroit Edison and the Big Three automakers are a conscious response to the looming threat of retail wheeling. Anticipated competition for key accounts under retail wheeling is prompting many utilities to begin developing proactive key-account marketing plans that include incentive rates, technology assistance, and a good dose of TLC.By contrast, utility mass accounts (em that is, residential and commercial customers (em are not currently at risk from competitive factors. Thus, strategic marketing for mass accounts is typically placed on a back burner, to be addressed later when details on the industry transition to competitive markets become more clear. The not uncommon view that retail wheeling will slowly extend beyond a limited number of large customers, perhaps never to reach individual retail customers, makes this wait-and-see attitude seem prudent in the current cost-cutting atmosphere.

This is dangerous thinking for several reasons.

Key Accounts are Fleeting

First, in a world of retail wheeling, key accounts will quickly become unattractive utility customers. Key accounts have the corporate experience and incentive to play one utility off another to extract the best possible energy contract. Since these customers also operate in increasingly competitive markets, they can be expected to drive hard bargains to minimize their energy costs. Retail wheeling brokers will work hard to ensure this result. Key account negotiators will work to secure contracts that cover utilities' fixed costs and contribute the smallest amount possible to variable costs. This means that the viability of individual utilities will hinge on retaining profitable mass accounts and securing new mass accounts from competitors' utility service areas.

Second, retail wheeling down to the individual residential customer, in one form or another, will almost certainly occur in the reasonably near future. The only real obstacles to retail wheeling are political, and the lineup of winners and losers makes the extension of retail wheeling to residential customers almost a foregone conclusion. Once retail wheeling is allowed for larger industrial customers, how can the same choice be denied to hospitals, regional shopping malls, grocery store chains, and large apartment buildings? Some large suburban residential subdivisions use as much energy as key accounts; these entities already have homeowners' associations with decisionmaking apparatus, histories of contracting services for their members, and experience in achieving goals politically. Even if retail wheeling evolves in such a way that only large customers and large purchasing cooperatives initially participate, a substantial portion of the commercial and residential markets may soon be open to competition.

Finally, since it takes two to five years to develop mass account competitive positioning, utilities who currently ignore mass account marketing development do so at their peril. Utilities that are prepared to maintain and develop new mass account customers in the most profitable way will set the competitive agenda. Companies that only react in competitive markets are destined to fall behind.

IBM is an example of a company with a preeminent market position that steadfastly focused marketing and product development on "key account" business in mainframe computers. In spite of an initial advantage, they lost much of their "mass account" personal computer (PC) market to competitors who knew more about PC customer needs. IBM was confident that its key accounts would continue as a primary source of revenue, and that the desire of most customers for reliable support and the quality associated with a "name" product would limit demand for ubiquitous mail-order clones. Dell's "no questions asked" return policy and one-year onsite repair warranty destroyed this advantage almost overnight. It is easy to recast this experience in terms of current utility markets.

Think Intelligence

Few utilities have developed mass account marketing strategies. Even utilities that recognize the value of marketing to mass accounts have taken few concrete steps. As a marketing manager at a New England utility admits: "We've been focusing on key accounts; we know that we need to do something about our mass accounts but we're not sure where to start or what to do."

Successful marketing in competitive industries involves identifying target markets and creating differential advantages that provide an edge over the competition. Not surprisingly, this marketing process requires a customer intelligence system. What may surprise you, however, is that most utilities already have sufficient data resources to develop customer intelligence systems.

Customer intelligence systems comprise three elements:

Customer Data. Since mass accounts often include hundreds of thousands of customers, it isn't cost-effective to develop detailed customer information for each individual customer. A much better approach is to develop information on a sample of customers as representative of the entire service area. Most customer surveys periodically conducted by utilities provide a solid basis for an initial customer intelligence system. Utility billing files, new-customer surveys, DSM audit results, and other special databases are good supplementary sources of customer data.

Energy Data. Utility customer energy data is usually available only as monthly sales derived from billing files. Monthly billing data are too aggregate to be very useful in evaluating marketing programs where the objective is to influence specific end uses such as electric space heating and water heating. End-use energy and load information are vital in developing profitability measures. A number of methods developed in utility demand-side management applications over the last decade can be used to estimate detailed customer end-use energy from customer billing, survey, and engineering data.

Access and Analysis Software. Software systems are required to convert customer data into customer intelligence. These systems should be able to answer questions that begin with phrases like "which," "how many," "what kind of," "what if," and "assume that." This access and analysis can be performed with a combination of commercially available spreadsheet, database, and statistical software packages or with software specifically designed for utility customer intelligence systems.

Rather than waiting to construct the ultimate marketing database with expensive commercially provided data, utilities need to go ahead and incorporate the data they already have into an initial

customer intelligence system. As this system is

applied to marketing program analysis and stra- tegic marketing, new data needs will become clear and the system will evolve to uniquely support each utility's view of its role in the evolving competitive industry. t

Jerry Jackson is president of Jackson Associates, a Chapel Hill, NC, consulting and software development firm that provides energy modeling and customer intelligence software to the electric utility industry. Jackson Associates end-use models, CEDMS and REDMS, are widely used for energy forecasting and DSM analysis. MAISYO is a new market analysis and customer intelligence system.

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