As utility takeovers break new ground, the FERC ponders proposed rules, perhaps already out of date.
A year ago, when U.S. Antitrust Czar Joel Klein talked of a "window of opportunity"...
As we move toward open energy markets, new players will be competing to offer consumers many of the services utilities offer today. It will no longer be enough to just meet our obligation to serve. We will also need to provide the products and services that customers value, at a level superior to that of the competition, while enhancing value to shareholders.
To retain customers, utilities need to understand the nature of the market. What customer values shape it? How are we positioned against the competition? And how can we respond to customer values profitably?
In 1993, Southern California Gas Co. decided to find out. The resulting Customer Value Initiative had four key goals: 1) refine our understanding of what customers value, 2) integrate these values into the company's customer satisfaction program, 3) develop an overall strategy for products and services, and 4) adapt the findings to our customer call centers.
One Size Does Not Fit All
The most important lesson we learned can be summed up in the catch phrase, "One size does not fit all." Companies that operate in competitive environments have known this for years.
We used to see our 4.7 million customers as large monolithic customer groups established primarily for allocating costs and setting rates. We now see them as distinct population segments with varying service needs and desires, and unique characteristics that affect their views of our company.
Previous surveys focused mostly on the 20 percent of our residential customers who received onsite service in a typical year. By expanding our survey samples to include a better cross-section, we learned that customer values varied over major customer classes. For example, residential customers attached great value to "convenience," but not necessarily to "competitive price," a high-ranking value among commercial and industrial users.
Perhaps most important, the initiative enabled us to identify various segments within customer classes according to their receptivity to new services. For instance, among residential consumers we identified six separate groups: Service Seekers, High Contact, Been There, Done That, Single and Carefree, and Low Flow (see sidebar). The "Been There, Done That" group represents about a third of our customers; the balance is split among the other five.
Within the commercial market, we identified seven segments: Help Me Grow, Sophisticated Service Seekers,
Status Quo, Divided Responsibility, Low Interest, Almost Residential, and Laundromats (see sidebar). About one-half of our customers fall in the "Almost Residential" category.
Finally, among industrial users we identified groups ranging from key accounts that want us as energy partners to smaller firms with small energy bills that just want good basic service.
Although the high opportunity segments in these three groups are small in terms of total customers, the throughput (em and market potential (em is significant. This insight alone enabled us to focus
better on key customer groups and opportunities.
We also learned that customer values are dynamic. For example, prior to the 1994 Northridge Earthquake, customer interest in automatic earthquake shutoff valves and gas-restore kits was limited. Today, there is keen interest in these products. Also, changing demographics ensure interest in