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<td width="75%" valign="top"><font SIZE="5"><b><p ALIGN="left"></b></font><big><big><big><strong>CONSUMER
RESEARCH FOR THE ELECTRIC AND NATURAL GAS UTILITY INDUSTRY</strong></big></big></big><i></p>
</i><p ALIGN="left"><strong><big>Kathrine Brown</big><br>
Marketing Manager, Customer Development Corporation</strong></p>
<p ALIGN="left"><small>(<em>originally published by PMA OnLine Magazine: 08/98</em>)</small><br>
</p>
<b><p>Lessons for Energy Providers</p>
<blockquote>
</b><ul>
<li>You can get consumers excited about deregulation if you educate them about how it will
benefit them: more choices, better prices, better customer service, and additional
integrated services.<br>
</li>
<li>Most consumers feel OK or good about you, so leverage that good feeling to begin to
build a brand image with them as an energy company who provides a good value, information,
reliable service, and value-added services.<br>
</li>
<li>Make sure your prices are competitive, your service is exemplary, and that your bills
are right—otherwise you are vulnerable to attrition.<br>
</li>
<li>To acquire new customers, go after the younger, more educated, and wealthier segment
with innovative services. They are the "early adopters," they buy immediately,
and they spread the news through word of mouth. Conversely, they are also the same
customers that will be the targets of your competition, so you will need to work to retain
them.<br>
</li>
<li>To keep the customers you already have, remind them that you are the big, safe, reliable
company upon which they have grown to depend. But don’t take them for granted,
because they will have other suitors, and price pressures will inevitably escalate.<br>
</li>
<li>Remember that branding is more about relationships and less about products, so
communicate with customers.<br>
</li>
<li>Send customers informational mailings—they say it makes them feel better about you.<br>
</li>
<li>Send customers coupons for your old and new services—they say they will respond to
them.<br>
</li>
<li>Consider bundling your traditional services with newer energy-related products and
services, such as indoor air quality products, home security systems, home safety
products, and home warranty products. Consumers are interested in them.</li>
</ul>
</blockquote>
<b><p>How Consumers Feel About Deregulation of the Energy Industry</b></p>
<p>Survey respondents said they were still unclear on several issues regarding
deregulation within the energy industry and are not yet excited about it. Only 15% of
respondents thought that deregulation existed in their area. </p>
<p>Overall, respondents felt that deregulation meant that they would have a choice of
providers, that there would be more competition, and that there might be price changes
(but weren’t sure in which direction.) However, based on what they knew about
deregulation, most respondents were indifferent about it and nearly half (47%) felt that
it was the providers—not the consumer—who would benefit most from it.</p>
<p>These findings are consistent with the "wait and see" attitude noted in other
recent research. Many consumers want to wait to see how the market shakes out before
making any decisions about switching providers. It appears that consumers may be both
overwhelmed and under-whelmed by deregulation at the same time. </p>
<b><p>How Consumers Feel About Their Energy Providers</b></p>
<p>Of the respondents, 18% said they had the same company for both electric and natural
gas, 50% had different companies, and 32% did not have natural gas service at all. They
reported their average monthly bills to be $67 (gas) and $95 (electricity). </p>
<p>Whereas other recent research suggests that consumers feel better about their natural
gas provider than their electricity provider and would rather buy electricity from their
gas provider versus the other way around, CDC’s survey showed only a slight
difference. When asked how consumers felt about their electric and natural gas providers,
between 88%-90% felt good or better. Moreover, they felt they were getting a fair or
better value for their money. Those who dealt with the same company for both tended to
respond more favorably to both questions. </p>
<b><p>Will Consumers Stay With You When They Have Options?</b></p>
<p>Not surprisingly, the most frustrating things for consumers were price increases,
service interruptions, poor customer service, and billing problems. And these were
precisely the same things that respondents said might cause them to consider switching to
another provider if one became available.</p>
<p>Between 85% (gas) and 88% (electric) of respondents said they were at least somewhat
likely to seek information about alternate providers, and most were looking for at least a
6-10% savings to switch. However, respondents who felt positive about their energy
companies—both overall and based on perceived value for the money--were less likely
than those with negative ratings to consider another provider. Demographic statistics such
as home ownership, length at residence, single family or multi-family dwelling, marital
status, and presence of children did not appear to affect their likelihood to consider an
alternate provider.</p>
<p>However, those who are employed full-time and who are higher educated tended to be
slightly more likely to seek information about an alternate provider. Moreover, the
younger respondents and those with higher incomes also tended to be more likely to seek
alternatives. These last four demographic strata may be the innovators or "early
adopters," those that buy immediately and spread information by word of mouth; they
may represent a lucrative target segment for newer utility start-ups or for traditional
providers who want to introduce a new service. </p>
<p>The things consumers said would make them hesitate to switch to another provider were:
fear of poor service, unknown company, eventual same or higher prices, and simply the
inconvenience of switching. This evidence suggests that there is a brand image that the
bigger, more well-known utilities have achieved and that newer start-ups would have to
earn. </p>
<b><p>How Consumers Want Their Energy Providers to Reach Out to Them</b></p>
<p>Respondents said they would prefer to be contacted about new products or services from
their utility company through the mail (75%), through TV/radio ads (10%), by telephone
(7%), and 4% specifically stated with their billing statements. </p>
<b><font FACE="Arial" SIZE="1"><p></font><font FACE="Arial" size="3">How Should Utility
Companies Tell You about New Products/Services?</font></b><font FACE="Arial" SIZE="1"></p>
<p align="center">Based On 171 Responding – Multiple Responses Allowed</font><img src="../images/gas.gif" alt="gas.gif (2613 bytes)" WIDTH="435" HEIGHT="133"><font SIZE="2"></p>
</font><p>In terms of response channels, consumers indicated they were either
"likely" or "very likely" to return a coupon mailed to them (66%),
return a coupon bundled with their bill (56%), or call a telephone number from a TV
commercial (43%). They were least likely to respond over the internet (28%) due to the
limited number that have access. Among those who currently have an internet connection,
however, the percentage rose to 45%. </p>
<table BORDER="1" CELLSPACING="1" CELLPADDING="7" WIDTH="486">
<tr>
<td WIDTH="40%" BGCOLOR="#C0C0C0"><font SIZE="2"><b>Response Channel</b></font></td>
<td WIDTH="18%" BGCOLOR="#C0C0C0"><font SIZE="2"><b><p ALIGN="CENTER">Very Likely to
Respond</b></font></td>
<td WIDTH="20%" BGCOLOR="#C0C0C0"><font SIZE="2"><b><p ALIGN="CENTER">Likely to Respond</b></font></td>
<td WIDTH="22%" BGCOLOR="#C0C0C0"><font SIZE="2"><b><p ALIGN="CENTER">Not Likely to
Respond</b></font></td>
</tr>
<tr>
<td WIDTH="40%"><font SIZE="2"><b>Call Telephone Number from TV Commercial</b></font></td>
<td WIDTH="18%"><font SIZE="2"><p ALIGN="CENTER">11%</font></td>
<td WIDTH="20%"><font SIZE="2"><p ALIGN="CENTER">32%</font></td>
<td WIDTH="22%"><font SIZE="2"><p ALIGN="CENTER">57%</font></td>
</tr>
<tr>
<td WIDTH="40%"><font SIZE="2"><b>Return Coupon Mailed to You</b></font></td>
<td WIDTH="18%"><font SIZE="2"><p ALIGN="CENTER">15%</font></td>
<td WIDTH="20%"><font SIZE="2"><p ALIGN="CENTER">51%</font></td>
<td WIDTH="22%"><font SIZE="2"><p ALIGN="CENTER">34%</font></td>
</tr>
<tr>
<td WIDTH="40%"><font SIZE="2"><b>Return Coupon Bundled in Bill</b></font></td>
<td WIDTH="18%"><font SIZE="2"><p ALIGN="CENTER">11%</font></td>
<td WIDTH="20%"><font SIZE="2"><p ALIGN="CENTER">45%</font></td>
<td WIDTH="22%"><font SIZE="2"><p ALIGN="CENTER">44%</font></td>
</tr>
<tr>
<td WIDTH="40%"><font SIZE="2"><b>Respond Over the Internet</b></font></td>
<td WIDTH="18%"><font SIZE="2"><p ALIGN="CENTER">7%</font></td>
<td WIDTH="20%"><font SIZE="2"><p ALIGN="CENTER">21%</font></td>
<td WIDTH="22%"><font SIZE="2"><p ALIGN="CENTER">72%</font></td>
</tr>
</table>
<p>22% of the respondents indicated that they currently receive mail from utility
companies besides monthly billing statements. They receive newsletters (27%), fliers
(18%), information about switching companies (13%), information about deregulation (10%),
brochures (8%), and price increase notices (8%). Most consumers (64%) said the mail they
receive from their energy providers doesn’t affect the way they feel about them.
However, 19% reported that it made them feel somewhat more positive and 8% said <i>much </i>more
positive. </p>
<p>Respondents also indicated that they would be either "interested" or
"very interested" in having their electric and natural gas service bundled with
other energy or home-related products and services, such as:</p>
<blockquote>
<ul>
<li><font SIZE="2">Home security systems 24%</font></li>
<li><font SIZE="2">Indoor air quality products 34%</font></li>
<li><font SIZE="2">Home safety products 24%</font></li>
<li><font SIZE="2">Home warranty products 21%</font></li>
</ul>
</blockquote>
<p>Bundling of different products and services may turn out to be one of the real
differentiators for utility providers who find themselves competing for the same consumers
and struggle to offer substantial savings over other providers. It may also present an
opportunity to for energy companies of all sizes to become "energy consultants,"
not just providers, who help consumers become smarter, get more for their money by
conserving energy, and understand the impact on the environment (marketing green power).
If they offered these energy-related products and services through a catalog, it would
also help create the perception of a retail infrastructure, which is helpful in building a
brand image to the customer.</p>
<b><p>Survey Methodology</b></p>
<p>In April 1998, Customer Development Corporation, a full-service database marketing
company based in Peoria, IL, conducted a telephone survey of consumers in the top 50 MSAs
(metropolitan statistical areas). In total, 15 minute interviews were completed with 171
respondents. About half of the interview focused on questions relating to electric and gas
utilities, and the other half was dedicated to cable. The purpose of the consumer research
was to assess consumers’ knowledge of deregulation, to determine their attitudes
toward their local providers, to explore the issues of price, cost, and value, and to
understand their buying preferences.</p>
<p>Demographically, 69% of those surveyed had children at home, 84% were married, half
were between the ages of 35-44, incomes were dispersed between practically none (students)
and over $70,000, most had at least some college education, 67% were employed full-time,
90% owned their own home, and 64% were male. </p>
<blockquote>
<hr width="98%" color="#FFFF00" size="1">
<font SIZE="2"><p><strong>Katherine Brown</strong> is the <strong>Marketing Manager</strong>
for <strong>Customer Development Corporation</strong>, a fully integrated database
marketing company based in Peoria, Ill. Prior to joining CDC, she spent six years at
Unisys Corporation as the Client Relationship Manager for Bank of America account sales.
In addition to 11 years experience in marketing and new business management, Kathy holds
an M.B.A. in finance from Pepperdine University and teaches business statistics at Bradley
University.</font></p>
</blockquote>
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