ScottishPower has ambitions to become a leading European multi-utility supplier. It is already a leading provider of electricity, gas, water and telecommunications services throughout the United Kingdom, providing gas service to more than 9,000 industrial and commercial sites. ScottishPower has already taken major steps to expand beyond its traditional base in Scotland, acquiring a water supply company in southern England, and Manweb, an electric utility in the North Wales region; all in preparation for the coming deregulation of the utilities industry throughout the U.K.
Deregualtion in the Utility Industry
That coming deregulation has created a dramatic increase in competition, where only the most efficient suppliers with sophisticated marketing plans will survive. In light of this, it becomes increasingly more important for providers to understand their existing and potential customers.
ScottishPower is preparing for the free market by accumulating information about its customers and prospects with the help of a data warehouse. Its goal is to develop what is referred to by one-to-one marketing experts Don Peppers and Martha Rogers as a "learning relationship," where consumers willingly provide information about themselves to companies, and the companies use that information to learn their customers' preferences and market more effectively to them.
There are more than 20 million households in the U.K., each with potentially unique patterns of telecom, water, gas and electricity consumption. For example, a household consisting of two adults who work during the day may require a different level of service from ScottishPower than a family with preschool-age children, a retired couple living alone or individuals running a business from their homes.
"There's really no such thing as an average customer," says Tony Harper, ScottishPower's market research and planning manager. "Yet, we have to know them as well or better than do our competitors and offer them the best blend of services which meet their individual needs."
The situation becomes more complex: the electricity which ScottishPower buys "wholesale" is priced differently every half hour and varies in price by the day of the week and season. Telecom charges also vary, as do charges for gas supplies, changing between peak and non-peak periods. Only water, which is easily stored, has a more stable pricing structure. Therefore, ScottishPower needed to develop a way to understand when its customers needed specific utility services and in what quantity. Company officials saw this as vital in maintaining a competitive and profitable edge in the U.K.'s rapidly changing marketplace.
Segmented Customer Base
They decided to look for patterns in the massive amount of information they already had accumulated in their customer records. "Lifestyle clues" became a buzzword among team members charged with developing a way to track their most profitable customers and develop ways of marketing to them as "segments of one," that is, as individuals. A tough order, to be sure, given ScottishPower's three million existing customers. Even tougher, given the utility's goal of growing its customer base to five million names in the near term.
Manweb had already begun thinking in this manner, prior to becoming part of the ScottishPower family. It first proposed farming out its data to a computer bureau, but quickly found this solution did not work. It then considered building its own data mining engine, but killed the idea after realizing it would have to use summarized data, rather than being able to access all of the records contained in the entire database. "This was not a tenable option," Harper commented. "We also came to the conclusion that we would have to develop custom applications and would need considerable technical support."
ScottishPower then turned to the WhiteCross WX9010 data exploration system to provide the solution. A WhiteCross server, running 48 processors in parallel, is tightly integrated with a WhiteCross SQL-compliant relational database. The combination allows ScottishPower to scan upward of 20 million rows of data each second, offering significantly higher performance than general-purpose RDBMS running on the latest parallel hardware.
The end result, according to WhiteCross' Mark Robinson, is that ScottishPower is able to query the WX9010 server in virtual real time, extracting answers from its database in seconds or minutes, as opposed to hours and days, even weeks under the previous system. "In addition, the brute force of the WhiteCross system solves the dilemma of querying the entire database as opposed to extracting samples," Robinson commented. "Systems which only analyze samples of the data run the risk of missing patterns in their entirety, or even worse, drawing conclusions and implementing programs based on incomplete data samples."
Tony Harper says the WhiteCross system allows ScottishPower to quickly perform multiple criteria queries, and empowers him to creatively look for clues on how to more efficiently market the company's services.
"We are considering whether first names can help us," Harper says. "If the head of a household is named Harold, it's very likely that he is more than 40 years old. If Harold has a family, it's probable that his children are of school age, at least. We can then imply that his house is unoccupied or lightly occupied during nine to five weekdays, except during school vacations.
"Any 'Alberts,' by contrast, are almost certainly retired by now, with their children away from home. 'Alberts' are more likely to use utility services during the day, but never to hit high peaks. We've also found that 'Kates' are likely to be young mothers or perhaps a student, with different utility demands," Harper adds.
Harper said the WhiteCross system allows ScottishPower to rapidly test assumptions such as those, by correlating service consumption against names. "One benefit of working with WhiteCross is that we can ask oblique, train-of-thought questions, without having to pre-program or pre-select data. And the sheer speed of the system means we get the answers back while we still remember why we asked the questions in the first place!"
All of which empowers ScottishPower's product managers to assemble a wide variety of single and multi-utility packages which can be sold to individual consumers. Harper says that this ability positions ScottishPower to take a leading role in the post-deregulation market. "A new breed of utility 'broker' will spring up, out to cherry-pick the most profitable customers. If we can understand exactly who wants what services, and when they want them, we can compete very effectively, defending our existing customer base, while winning new accounts.
"Customers will quickly learn that they have the right to expect, even demand, individualized treatment from companies. Those companies which can anticipate that demand will be winners in the marketplace. The end-to-end solution provided by the WhiteCross system is helping us position ScottishPower as a winner."
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