Even regulated monopolies need love and loyalty

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Even regulated monopolies need love and loyalty
Even regulated monopolies need love and loyalty

Since its merger with Progress Energy last July, Duke Energy became the largest U.S. electric utility, with 7.1 million customers across six states: both Carolinas, Florida, Ohio, Indiana, and Kentucky. In five of those six states, Duke Energy is a regulated monopoly—so it would seem on the surface that the utility's institution of a loyalty program is, no pun intended, a waste of energy. But Joe Cunningham, manager of market and customer insight at Duke Energy, realized that just because customers might be compelled to purchase from a company, satisfied customers purchased more.

“Why would we care about loyalty?” Cunningham asked, after presenting Duke Energy's case study at the DMA2012 conference in Las Vegas. “Because there's a floor, but there is no ceiling.” In other words, happy customers were more likely to purchase items like energy efficiency products and ventilation equipment. And the best way to make those customers happy is to show them how to save on their most fundamental expenditure: their electricity bill.

“It's highly predictable the level of electricity you use,” Cunningham explained. Using solutions and data sets from Experian Marketing Services, Duke takes a customer's electric usage and lines it up with known variables like name, age, income, and square area of the home. “We can tell you about your usage relative to your peers,” Cunningham said. Duke sends mailers and tips to households consuming more than their peers with suggestions on how they might cut down their energy use—an exercise in social norm marketing.  

“When you put things in context for people, you explain where they are in the hierarchy, they'll use that information in predictable ways,” Cunningham said. “If I tell you what the norm is, and you're outside the norm, you'll move toward the norm.”

The additional benefit, besides increasing customer satisfaction, is that households using less energy enable Duke to use its own assets more efficiently. In North Carolina, where Duke is based, population growth over the past decade forced the utility company to decide whether it needed to devote significant time and financial resources for a new power plant--$15 billion for a nuclear plant and between $2 billion and $3 billion for a coal-fired plant. The other option is convincing people to consume less.

“The city of Atlanta used it to get people to curtail their water usage,” Cunningham said. “It's beneficial from a pollution standpoint and it's beneficial for us not having to build power plants.”

Duke has used data and solutions from Experian Marketing Services for more than five years, Cunningham said, initially for basic targeting of direct mail pieces—such as flyers to households that make over $50,000 annually. However, Duke has only recently begun using Experian's solutions to use what it knows about customers to determine the content of its marketing messages. Currently, the utility company is using that information for its direct mail flyers and traditional mail pieces, and is working to use it for to the half of its customers that do online bill payment.

Future initiatives include expanding this information into digital channels like banner ads, and to send information related to more than simply saving electricity.

Despite the homey adage to turn off all lights before leaving the room, Cunningham points out that only 15% of an individual's electricity bill involves lighting. “Turning off lights is not a very big part of where your energy is used,” he explained, which is why Duke also uses data to tell consumers how to save where real expenditures occur: heating, ventilation, and air conditioning (HVAC).

And this also entails using the information to send messages to consumers when they're making decisions about upgrading their HVAC equipment or making home improvement decisions. “We want to be on banner ads when people are shopping in home centers,” Cunningham said. “When they're looking at the Energy Star website or when they're actively going through the buying process.”

For Rick Erwin, president of Experian Marketing Services's Data and Analytics Division, the increasing digitization of nearly all media means that this information can be used consistently in every marketing channel. He cited products and services like ConsumerView, which collects demographic, socio-economic, and behavioral characteristics of households and adult individuals, as well as Hitwise, which catalogs online consumer behavior. By using both, Erwin said, Duke could decide through which channel to reach out to customers—mail or digital, for instance—and at what point they should present them with a certain ad. “And that's how integrated marketing will be achieved,” Erwin said. “If you're going to make a form of media addressable and use it as an integrated marketing effort, it needs to be consistently addressable.”

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