Contrary to what many pundits say about

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1 Local Distribution of Gas and Electricity Five Tips for Building Strong and Enduring Customer Relationships Chris Oberle Contrary to what many pundits say about utilities inability to provide service levels rivaling those of other types of providers, utility companies actually perform relatively well on standard metrics used to measure loyalty and satisfaction among consumers. However, while these metrics tend to reflect and reward strong operational performance, an area that has been the primary focus of utility companies for many years, these metrics do not necessarily capture the full essence of the relationship or the extent to which customers feel connected to and engaged with their local utility company. Utility companies actually perform relatively well on standard metrics used to measure loyalty and satisfaction among consumers. These issues were explored in-depth in Market Strategies International s latest Cogent Energy Reports 2014 Utility Trusted Brand & Customer Engagement study. On the one hand, the data shows that residential customers are equally or more likely to recommend their utilities compared to most other service providers using the NPS (net promoter score), a widely used metric for measuring customer loyalty across many industries). In fact, electric and natural gas utilities on average post positive NPS scores, meaning they have more promoters than detractors. Meanwhile, the opposite is true Chris Oberle (chris.oberle@marketstrategies.com) is senior vice president, Cogent Energy Reports, Market Strategies International. for most other local service providers, including waste management, Internet, phone, satellite, and water service providers. See Exhibit 1. Electric and natural gas utilities on average post positive NPS scores, meaning they have more promoters than detractors. To underscore the relationship between NPS and perceptions of service quality, we observe overall strong performance among utilities across a variety of operations-linked measures, including overall Operational Satisfaction (732 on a 1,000- point scale), Customer and Field Service (784), and Safety and Reliability (694). Clearly, utilities investments in their billing and CIS systems, outage management programs, and system reliability have paid off with very high levels of satisfaction for the quality of their basic operations. Utilities investments in their billing and CIS systems, outage management programs, and system reliability have paid off with very high levels of satisfaction. Thus, what prevents utilities from developing the strong relationships with their customers that other types of household service providers enjoy specifically, from developing the types of relationships that allow providers to withstand significant challenges (for example, in the case of utilities, an outage or a rate increase) without backlash? The answer is engagement (Exhibit 2). When asked about the extent to which companies engage with them in a way that enhances their relationship, consumers rank service providers very differently than consumers do in a more narrow measurement of operational satisfaction. MARCH 2015 NATURAL GAS & ELECTRICITY DOI /gas / 2015 Wiley Periodicals, Inc. 19

2 Exhibit 1. Likelihood to Recommend Service Provider TIP #1: THINK BEYOND OPERATIONAL SATISFACTION Customers can be pleased with the quality of a company s operations and still not take the next step toward fully embracing the relationship. It is up to the utility to understand that there s more to a relationship than just basic service delivery. Specifically, utilities must take proactive steps to both improve brand trust and increase product experience if the goal is to enhance the overall relationship. Across multiple service industries, banks and wireless carriers continue to top the list on customer engagement. In part this is true because providers in these industries have effectively focused on both service and product innovation to help build and maintain more intimate connections with customers. Both types of providers offer electronic as well as physical locations for accessing service. Furthermore, as providers they are constantly finding excuses for communicating with customers, targeting customer segments with tailored messaging, and focusing on developing products that customers want. To top it off, wireless carriers and banks have become wizards at bundling products in a way that customers not only understand, but that also binds them closer to the provider. Coming up short in any of these areas means a missed opportunity to improve overall engagement. Examples of such missed opportunities can easily be detected among utilities, where only 14 of the 127 providers covered in our survey are at or above the average Engaged Customer Relationship (ECR) score for Wireless Carriers. In their overall ECR scores, combination and electric utilities rank at or near the bottom of a list of local service providers. However, natural gas companies are close to the top of the list, illustrating the potential for other types of regulated utilities to follow suit. Combination and electric utilities rank at or near the bottom of a list of local service providers. However, natural gas companies are close to the top of the list. TIP #2: BUILD BRAND TRUST... IT S CONTAGIOUS Regarding the first critical component to focus on beyond operational satisfaction namely, brand trust it is important to understand that companies that build trust benefit from a whole host of additional benefits. Natural gas utilities set themselves apart from their electric peers by having achieved stronger levels of brand trust, a key component of overall engagement and a critical indicator of increased levels of product and service engagement. Brand trust scores for gas providers average 679 across all companies and are higher than those for both electric utilities (654) and combination utilities (663). This higher level of brand trust enables natural gas utilities to assume the role of trusted advisor with their customer base, which they can then Wiley Periodicals, Inc. / DOI /gas NATURAL GAS & ELECTRICITY MARCH 2015

3 Exhibit 2. Level of Engagement With Service Provider leverage into greater product experience and, ultimately, enhanced customer engagement. Natural gas utilities set themselves apart from their electric peers by having achieved stronger levels of brand trust. Exhibit 3 shows a variety of ways in which natural gas utility brands are more effectively positioned with their customers than are electric and combo providers, either based upon real experience or the perception of how a provider would behave in specific situations. Being a trusted brand results in a variety of positive perceptions that are critical to having engaged, strong relationships with customers. TIP #3: DON T JUST BUILD IT... PROMOTE IT! What about product engagement? How specifically does that build engagement? Utilities have spent considerable time and effort building out robust product and service offerings for their customers. However, outside of alternative billing and payment offerings, relatively few customers report using features like consumption management, home energy programs, and other non-payment-related electronic offerings. Yet ironically, these kinds of offerings have the potential to add the greatest value in building customer engagement. Participation in these sorts of activities and programs can add upwards of 100 points or more on a utility s ECR index. These options also tend to produce stronger interest and demand than do billing and payment solutions with around 50 percent of customers typically expressing moderate to strong interest in adopting one or more of these programs. To build customer interest in these ancillary products and services, utilities need to find new and better ways to communicate with and educate customers about the products existence, and more importantly, the actual features and benefits, as Exhibit 4 shows. Furthermore, as customers consider new programs, they will expect their utility to offer more than just conveniences such as alternative billing solutions; they will want products and services with even more tangible benefits linked to lowering costs, managing consumption, helping the environment, and improving their customer experience. TIP #4: BUILD YOUR BRAND Managing customer service and touch points such as newsletters, blogs, and other types of communications outside billing, as well as alerts and field service updates, not only engenders trust MARCH 2015 NATURAL GAS & ELECTRICITY DOI /gas / 2015 Wiley Periodicals, Inc. 21

4 Exhibit 3. Perceptions of Utilities by Utility Type among consumers, but also helps generate support for management initiatives. To illustrate this point, Exhibit 5 highlights how customers who have been exposed to brand-building activities demonstrate significantly higher levels of satisfaction and engagement even when they hear about rate increases or have experienced a service outage. TIP #5: NEVER MISS AN OPPORTUNITY TO BUILD ENGAGEMENT Did you know that 16 percent of Duke Energy Carolinas customers who called the company about a billing issue also report using one of the utility s consumption management offerings? Half of Southern California Gas Company customers who Exhibit 4. Engaged Customer Relationship Index Score by Product Experience Levels Wiley Periodicals, Inc. / DOI /gas NATURAL GAS & ELECTRICITY MARCH 2015

5 Exhibit 5. Positive Halo Effect From Brand Building called about a safety issue are interested in using that utility s line protection program. Over 35 percent of Entergy customers who have received a proactive information alert during an outage either use or are interested in using the utility s social media sites. With 44 percent of Entergy customers with outages saying they received a proactive notification, there is good potential for this utility to build engagement with social media. Additionally, over half of New Jersey Natural customers who say they experienced an interruption nonetheless give the utility a top 3-box (8 10) rating on being well managed, and 28 percent say the utility s endorsement of an energy-related product would help my purchase decision. Customer experience linkages such as these show how service operations can be more than managing metrics like first-call resolution. Such operations are opportunities for deepening relationships in ways that lead to expanded product experiences. Such operations are opportunities for deepening relationships in ways that lead to expanded product experiences. CONCLUSION It is clear that utilities need to evolve from a generic household service vendor to a value- added service provider with engaged customers. To accomplish this, utilities need to move customers through the phases of a customer journey that not only begins with appreciating their utility s operational quality, but also includes believing that the utility is a good company to do business with and accepting the utility as a trusted and valued advisor. At each stage of this process, deeper engagement is achieved and the bond between customer and utility grows stronger. Effectively managing each customer s journey and making real strides toward better and more engaged relationships will require a considerable commitment on the part of utility management. First, management must recognize that delivering quality service alone is not sufficient. Considerable attention must also be paid to building engaged customer relationships, specifically by earning customers trust. Doing so will not only lead to greater participation in product and service offerings, but will also help insulate the company from consumer pushback associated with events such as service outages and rate increases. In the end, a more engaged customer base will result in greater revenue and profitability for the utility and elevate its brand profile and brand equity for all of its stakeholders. MARCH 2015 NATURAL GAS & ELECTRICITY DOI /gas / 2015 Wiley Periodicals, Inc. 23