Utility Marketing Mistakes to Avoid
Mistake No. 1. Wasting marketing dollars on look-alike advertising campaigns which will do little to sell energy.
Advertising is not marketing. Advertising is one of the elements in marketing, but it is not marketing. Most utilities have relied on an advertising agency to develop institutional energy-conservation advertising. In a competitive retail energy market, this will not help develop market share or generate energy sales. Selling energy will be required to grow in tomorrow's market. Ad agencies may be able to create catchy ad campaigns, but that won't be enough to sustain the onslaught of more than 200 other utilities whose ad agencies will also be creating catchy slogans.
Be wary of advertising agencies that try to sell an ad campaign with tired, worn-out concepts rather than focusing on how much return you will get for your dollars. In a competitive energy market, management and investors will want to see accountability for ad expenditures - i.e., results in the form of increased sales.
How many direct mail brochures can the typical commercial or residential household be expected to read? How many unsolicited phone calls will they answer? The result of many direct mail and telemarketing programs will be a confused consumer, not a new customer. Unique marketing programs which incorporate the needs of consumers for information and make the process convenient, easy and non-intrusive will win the day. The cost of acquiring a customer must be in the $30-$40 range in order to be productive in the competitive energy environment.
Utilities that develop unique, integrated marketing programs which go beyond advertising, reinforce their strategic marketing position, and help sell energy will win big.
Mistake No. 2. Not paying enough attention to consumer needs. The evolution of the consumer goods retail market has been fostered in part by the need of retailers in a highly competitive market to provide greater levels of value and service to an increasingly knowledgeable consumer.
Today's consumer has certain expectations for the type of shopping experience provided by a retailer. The retailers and product goods companies that can identify and meet the ever-changing needs of their target market are the winners. They provide a real value to their customers and they are the marketing leaders whose brands are best-known.
Utilities and their deregulated energy marketing subsidiaries have missed out on the retail marketing wars of the last two decades. In fact, they've been so far removed they haven't even participated in the war games. As a result, they lack the basic understanding of the consumer market that can be acquired only under the fire of competitive market battles. As markets deregulate to the commercial and retail sectors, energy marketers will have to cater to consumers who have been courted and conditioned by the consumer-oriented retailers, and product goods marketers.
Pleasing customers will have to be more than a slogan dreamed up by some ad agency. Just because you say it, doesn't make it so. Many utilities may believe the brand recognition they have built over the past 60-plus years will shield them from competitors. They might assume that their current rate payers will remain loyal customers and not leave them for some unknown competitor. They also may believe that they will be able to keep the process of choice confusing and inconvenient for customers without any backlash.
Some may even view confusion as an ally and smile at the low rate of switching in markets where "deregulation" has occurred. They may also underestimate the intelligence of the consumers who have been participants in the competitive retail markets for the past 20 years. As a result, they won't be able to recognize or at least acknowledge that they won't be able to change the way consumers shop for products and services. They may fear the empowerment the Internet is bringing to consumers and allow valuable opportunities to pass by as they seek to turn back the hands of the marketing clock.
The leaders and winners will recognize that they have to please consumers. Ultimately, the consumer (commercial, business and residential) will drive the retail energy market, not utilities.
The energy marketers who can simplify the choice process and make it convenient and enjoyable will win. Strategies to slow deregulation and/or negate savings to commercial and residential segments by negotiating terms unfavorable to competition may backfire.
In deregulated markets where savings are slim and choices of marketers few, consumers may perceive that deregulation is a myth with little benefit for them and may even view the franchised monopolies as the villain. This could turn out to be a classic case of winning the battle but losing the war. Utility Spotlight reported that a recent Harte-Hanks survey of 2,000 utility customers covering 12 industries showed the following:
50 percent - "Somewhat loyal" to their utility
21 percent - "Not loyal at all" to their utility
3 percent - "Would consider switching if rates stayed the same"
28 percent - "Would consider switching if rates were 5 percent lower"
58 percent - "Would consider switching if rates were 10 percent lower"
90 percent - "Would consider switching if rates were 20 percent lower"
14 percent - Rated service from utility as "excellent"
55 percent - Rated service from utility as "good"
31 percent - Rated service from utility as "fair" or "poor"
Mistake No. 3. Failing to recognize changes in the market. Retailers and manufacturers that have evolved to keep pace with a changing competitive market are now faced with a new revolution that is changing the economic models of retailing. It's called e-commerce.
Many traditional businesses are having trouble perceiving and understanding, let alone adopting strategies to capitalize on it. The Internet makes buildings and assets less important. Customers today can consider multiple suppliers of products because of the availability of information. Companies that can facilitate this "choice" process will enjoy a competitive position and own the energy window to the consumer.
Since they have never had to be nimble or move quickly in reaction to market changes, utilities and energy suppliers that can't respond to the Internet challenge will find themselves being left behind. Those companies that can respond and overcome the forces of inertia within their ranks will reap the promise of e-business: increased revenues, improved customer service and broadened market share. Interactive relationships will create an environment in which new products and services will be delivered faster, better and at much lower prices.
If utilities and energy marketers don't respond, watch for a new non-utility company, maybe even one not in existence today, to steal the retail market.
To capitalize in this new world, industry leaders need to start developing and implementing strategies now. This will require more than developing a Web page about their company and thinking that they are ready for e-commerce. It means being willing to make a commitment to a new enterprise which may eventually replace the old. In order to do this, a new organization will need to be built outside anything that currently exists. How many utilities and marketers have the ability to undertake a project like this, one that may undermine those managers used to the status quo, protected economic environment of monopolies.
Mistake No. 4. Failure to provide leadership. In regulated markets, most utilities and their deregulated subsidiaries have not been successful as a result of marketing leadership. As a result, these companies are full of highly educated, highly skilled people who have progressed by knowing how to survive within the corporation rather than by accomplishments that help grow market share through the meeting of customer needs.
Someone in the marketing organization will need to be the leader/visionary who can chart a course based upon sound marketing principles that incorporate aspects of today's retail market. These people will need to be the agents of change who will do more than reorganize and restructure departments.
They will need to create a new environment that will thrive on the growth of new opportunities fueled by the fires of competition and changing consumer attitudes. They will need to be forward-thinking and nurture an entrepreneurial spirit among managers. Failures will happen, but if they are grounded in marketing initiatives based on consumer needs, they will lead to more innovative and market-driven products and services.
The products will need to be more than $50 sign-up fees or other giveaways designed to buy market share. Someone will need to question the wisdom of losing money on every sale but trying to make up for it in volume. Sound, cost-effective marketing programs are sorely needed - programs that can generate profits, not just sales. Eventually, competitive marketers will change the way the industry conducts retail business and how they interact with and are perceived by consumers.