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<td width="82%" valign="top"> <b><p><strong><font face="Arial" size="6">GIS Sheds Lights on
a Changing Market</font></strong></b></p>
<p ALIGN="left"><strong><font face="Arial" size="6"><b><br>
</b></font><font face="Arial" size="4">BY ERIC COHEN<br>
Vice President and Managing Director<br>
</font><font face="Arial" size="3">CACI MARKETING SYSTEMS<br>
</font></strong><font face="Arial" size="2">(<em>originally published by PMA OnLine
Magazine: 99/07</em>)</font></p>
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</i><p><font face="Arial">One of the fastest changing – and most competitive –
industries in existence today is the utility marketplace. Until recently, most utilities
operated as monopolies in their business areas. With the advent of deregulation, more and
more utilities are waking up to a new era of inevitable competition and essential customer
service.</font></p>
<p><font face="Arial">Utilities are responding to this new competitive environment by
moving into new communities, searching for partnerships and offering an expanded range of
services. They are also trying to learn more about their customers.</font></p>
<p><font face="Arial">Recently, a large southern electric company needed to understand its
changing marketplace. Previously, it did not need to know about its customers (nor care
about them). However, it is starting to see competitors moving into its territory and
realizes it needs to become smarter in targeting specific service areas and other utility
companies where a synergy might exist to work together. So, in addition to finding new
customers in new markets, it also needs to strengthen its grip on its current customers so
they will be less likely to change service providers when a new one comes into the
marketplace.</font></p>
<p><font face="Arial">Like many companies, utilities are rich with data. Unlike many other
industries, however, utilities serve both residential and business customers – each
needing different levels of service. This particular electric company has a large customer
database, within which it already knows each customers’ level of service, along with
energy demand statistics so it can forecast loads in both the residential and business
arena. In addition, it also has customer satisfaction surveys, which are important to
better understanding where it has not been servicing its customer base.</font></p>
<p><font face="Arial">As with most market analysis projects, this one starts with
geocoding and profiling of the utility’s customer database. Using a GIS system, the
latitude and longitude of each customer is plotted on a map so as to better understand its
true service area. During this process, residential and business customers are segmented,
along with further delineation in terms of those customers on an energy saver program,
those who donate to an electric fund and those customers who pay an estimated monthly
budgeted fee vs. those who pay an actual usage fee each month.</font></p>
<p><font face="Arial">During this process, the customer satisfaction surveys are
researched so that demand indices by neighborhood segmentation clusters can be created for
the survey, i.e., which customers use specific types of products, who is interested in an
energy saver program, etc.</font></p>
<p><font face="Arial">The next type of segmentation involves the business customer
database. In this instance, it is important for the utility company to know which are
"mom and pop" retailers, who are the large factories, and which are the shopping
centers that are comprised of many different businesses. For this exercise, segments by
type of business, number of employees and sales volume are created – hand in hand
with information about their electric utility usage.</font></p>
<p><font face="Arial">The GIS system is used for all types of mapping, which helps the
utility to see its current service areas, its potential new service areas and those areas
where new housing starts are appearing, new business parks or office buildings and other
areas of growth. From this, it is able to look at its penetration in its existing markets,
along with levels of saturation. This is imperative to understanding where it has
opportunities of losing customers to the competition. As well, the utility looks for
similar profiles to the current customers in those new areas of growth. By studying
another company’s territories, it will be able to see if these particular service
areas match its profile so it can consider acquisition opportunities that may not have
existed previously.</font></p>
<p><font face="Arial">The last step is to do target marketing based upon neighborhood
segmentation cluster types and the messages to place in the various media. Clustering is
effective at segmenting the marketplace for differing marketing messages as evidenced by
the fact that a 35-year-old professional earning $50,000 a year in Great Falls, VA (a
suburb of Washington D.C.) is very different from the 35-year-old professional earning
$50,000 in Great Falls, Montana. It’s likely that one may be tagged as living in a
cluster titled, "Semirural Lifestyle" while the other may be in a cluster
titled, "Baby Boomer with Children". Their likes, dislikes, buying habits and
interests are different. As are their response to marketing messages to which they
respond. </font></p>
<p><font face="Arial">The utility’s service areas are then mapped, in conjunction
with a display of cluster segments. In this way, the utility can see which segment is most
predominant in each of its service areas. Once the marketing messages for each group are
tested, direct marketing and advertising campaigns (along with customer care programs) are
created for each service area and the relating ACORN segments. By incorporating a more
structured one-to-one approach, the utility is able to do a better job of keeping its
current customers while bringing new customers into its family.</font></p>
<hr>
<i><p></i><small>Eric Cohen is Vice President and Managing Director of CACI Marketing
Systems, an Arlington, VA based company that has provided demographic, consumer and
business information to business professionals for nearly 30 years. For more information,
call (800) 292-2224/East or (800) 394-3690/West or visit them at <a href="http://www.demographics.caci.com">www.demographics.caci.com</a></small></td>
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