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Advertising & Branding: Are Utilities Getting It Right?

Fortnightly Magazine - January 15 1998

I don't think it would be those that are out there with these mass television campaigns unless their target market is the residential customer."

Don Schultz, a professor of integrated marketing communications at Northwestern University, also doesn't think the energy industry is playing the game correctly. His advice: Stop making the same mistakes that the telecommunications and health care industries made. Stop hiring consumer marketers and trying immediately to create a brand through promotional discounts, give-aways and coupons. Instead, think about how to build a brand through relationships.

"Branding is about relationships. It's not about colors, icons or logos," he admonishes. Utilities already have a relationship; they just don't understand it. Referring to customers as 'billing units' or 'ratepayers' is proof of that, he adds.

Utilities need to use their existing databases and analyze their customers' needs and requirements, Schultz says. Find out how the customer feels about the supplier. Identify the company's most - and least - valuable customers and allocate resources accordingly. Utilities should cater to current customers, says Schultz, before looking outside their traditional region.

Potomac Electric Power Co. is concentrating on a local, rather than national, presence. While Pepco waits for its merger with the neighboring Baltimore Gas & Electric Co. to overcome some hurdles, it's continuing to do standalone advertising. "It wouldn't be wise not to pursue all options," says Pepco spokeswoman Susan Moyer.

Though Pepco serves much of the Washington, D.C., metropolitan area, it won't attempt to sway Congress one way or the other on electric competition. Nor is it advertising outside the region, or even in Baltimore. Instead, says Tom Welle, head of advertising for Pepco, the company is just "reintroducing our self to our customers at this point." After all, he notes, "It costs four or five times more to get back a customer than to keep one."

But holding on to customers could prove problematic.

Ware Adams, vice president of the strategic consulting firm Dean & Co., in Vienna, Va., building on his previous work with banking, airline and telecommunications industries, advises utility executives to plan to spend three to five times as much on marketing as they do now.

Marketshare and the length of customer relationships will change, Ware says. Today a utility has, on average, a 10-year relationship with a customer, with a turn-over, or "churn," rate of 10 percent. MCI, on the other hand, has a churn rate of 110 percent every 11 months.

Incumbent companies should also prepare to lose perhaps 50 percent of current marketshare as competition arrives, says Ware. In airlines, he notes, mergers, takeovers and bankruptcies shrunk a 13-company industry to five major players, whose share of market value rose from 55 percent to 91 percent. F

Lori M. Rodgers is associate editor with Public Utilities Fortnightly

The 10 Deadly Sins of Advertising.

1. IGNORING THE CUSTOMER.

Forget corporate citizenship.

Forget environmental stewardship.

Focus on the customer base.

2. MESSAGE OVERLOAD.

Avoid too many ideas in one ad.

3. SKIPPING THE RESEARCH.

Always test ads.

Try using customer focus groups.

4. DOING IT IN HOUSE.

Go