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The Search for Consumer Content in Energy Marketing and Retailing

Fortnightly Magazine - September 15 1996

abundance began at the wellhead and mine mouth during the early 1980s and, like an expanding wave front, has enveloped the busbar. Now it is seen spreading to pipeline and wire capacity. In such an age of abundance versus scarcity, the battle to control profit margin in the energy industry really boils down to a battle for control of the portal that leads to the premises of the consumer, especially the retail consumer, where the serious money resides.

Some firms are struggling to control portals via conduits; others via content; none with much coherence or insight (see below).

In the end, efficient conduit owners will, at best, capture annuity returns as they reposition themselves to attract third-party content. Clever providers of energy-based consumer content (i.e., desired features stapled to basic energy and ancillary commodities) will successfully create enormous value for their shareholders, executives, selected employees, and of course, customers.

Voice, text, data, and image have become the building blocks of value for energy consumers (em not invisible or impersonal electrons, molecules, equipment, pipes, wires, meters, switches (physical and electronic), and valves. The intangible has become compellingly real and immediate; the tangible, uninteresting and distant. As our economy devotes a growing share of effort to manipulating symbols for a living, the symbolic representation of a good (em be it energy or a phone call (em becomes the source of value, rather than the underlying good itself.

Brand Names, Choice, and Consumer Behavior

The retail consumer makes three broad buying decisions: planned, spontaneous, and imposed. The first kind applies to homes, longer vacations, cars, major appliances, and personal computers. The

second governs most small-dollar transactions, such as entertainment, books, dining out, beverages, clothes, videos, and gifts. The third applies largely to purchases from monopolies, such as energy utilities and governments.

With vibrant retail competition, the buying decisions of the energy consumer will shift from imposed to a combination of planned (for the energy and ancillary services infrastructure) and spontaneous for both general and specialized consumer content. Product positioning will drive this shift, along with promotional inducements and discounting plans.

Nevertheless, energy companies of all ilk (especially the utilities and big producers and traders) demonstrate precious little ability to influence consumer buying decisions in a world of choice. Many energy utilities have only just acknowledged consumer sovereignty and the primacy of consumer content. Of the five levels of marketing, energy companies occupy, at best, the first two (see sidebar). Even at those levels, energy utilities appear to be regressing toward tactical peddling rather than progressing to mass marketing.

Few energy firms bother to distinguish between marketing and selling. Selling is monetizing production assets (em a disposal business. Marketing is monetizing consumption assets (em a husbanding business. Marketing is more valuable because consumption assets (i.e., loyal customers) outweigh production assets. Every competitive industry contains many more producers than merchants, because knowledge of supply is easier to acquire than consumption knowledge and customer insight.

Energy as a product now stands in the midst of transition from a utility to a staple to a consumer good. That means