Introduction

Managing cost-to-serve as part of an acquisition strategy for new entrants is essential to successfully compete with established domestic suppliers

Scope

By analysing data from the Datamonitor cost-to-serve model, a typical new entrant strategy can be compared against incumbent domestic suppliers. Taking a case study from the Australasian market, the difference in strategies can be highlighted based on various market conditions.

Highlights

Eliminating inaccurate bills can greatly reduce the operational costs involved in running a call centre. Online activity can only promote effective ways of contracting and servicing customers.

Reasons to Purchase

As new entrants look to gain market share, this report will identify some of the niche areas that new entrants will be looking to explore. Interested stakeholders will be able to asses the impact to operational efficiencies gained from adhering to strict controls.

DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Competitive advantage gained by having low cost-to-serve is a key factor in competing against established energy suppliers 2
On average, traditional energy suppliers have a cost-to-serve twice as high as new market entrants 2
New entrants can change billing methods to rapidly reduce cost-to-serve 3
Electronic billing will enable new entrants to minimize their invoicing costs 3
Regular cash flow that monthly billing provides is essential for success 4
Eliminating inaccurate bills can greatly reduce the operational costs involved in running a call center 5
Moving the emphasis on data accuracy back to the customer will ultimately lead to a better service 6
Direct debit payments are both cheap and easily administered 7
Direct debit efficiency dominates other payment methods 7
Suppliers would benefit by up to 46p per payment by customers moving to a fixed direct debit payment method 8
New entrants see value in an electronic relationship to reduce cost-to-serve 9
Introduction of online comparison sites have resulted in an increase in online switching 9
Online activity can only promote effective ways of contracting and servicing customers 10
Australasian case studies offer interesting insight into cost-to-serve savings 11
New entrants promoting payment by direct debit in Australia can expect large savings in cost-to-serve 11
Installation of AMR technology in New Zealand is likely to significantly reduce cost-to-serve 12
APPENDIX 13
Glossary 13
Ask the Analyst 13
Datamonitor consulting 13
Disclaimer 13
List of Figures
Figure 1: Cost-to-serve comparison - UK 2
Figure 2: Profitability of electronic billing 3
Figure 3: Incumbent supplier cash flow timeline 4
Figure 4: Process flow for estimated reads 5
Figure 5: Process flow for automated reads 5
Figure 6: Cost and efficiency comparison of payment methods 7
Figure 7: Cost comparison of payment methods 8
Figure 8: Online and total customer switching 9
Figure 9: Cost-to-serve comparison - Australia 11