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Off Peak

Fortnightly Magazine - August 1998

WHEN IT COMES TO PLEASING CONSUMERS, THE electric industry can learn something from telephone companies. A recent study by Aragon Consulting Group suggests that more consumers nationwide are satisfied with their local phone service than with their electric service.

This conclusion stems from a sampling of 3,375 consumers from all regions of the country. Nationwide 65.2 percent of local telephone customers said they were satisfied with their service, compared with only 54.7 percent of electric utilities customers (see Chart 1). Yet both utilities received poor marks from about 10 percent of their customers.

Breaking satisfaction levels down by region shows that consumers in the South generally are more satisfied with their utilities (69.4 percent, telephone; 58.6 percent, electric) than consumers in the Northeast (63.5 percent, telephone; 50.9 percent, electric).

"Generating the highest levels of customer satisfaction becomes crucial as industries are deregulated," said Gary Miller, chairman of Aragon. This statement leads to another key question: When options become available, how much loyalty can electric and local phone industries expect?

According to Aragon, not very much. The study did not find much of a correlation between customers' satisfaction levels and loyalty. "[W]e can safely conclude that high satisfaction levels ... do not produce a sense of loyalty," the report says.

In fact, more of the highly satisfied customers appear willing to switch for smaller discounts. Study participants were asked what percent discount would motivate them to switch providers (see Chart 2). For both electric and telephone customers, a discount between 20 percent and 29 percent would attract the largest portion of each industry's consumers. Nationwide, 25.9 percent of all customers (unsatisfied to completely satisfied) were willing to switch at this level, compared with 38 percent of the most satisfied customers.

About the same number of electric and telephone customers say they are willing to switch for the same discount level. About 7.5 percent of consumers would switch phone companies for a discount of less than 10 percent; 7.8 percent would switch electric companies for the same. Unthinkable discounts -- 40 percent or more -- would draw away less than 70 percent of consumers either industry.

"[I]t has been suggested that satisfaction is a necessary but no sufficient cause of loyalty," according to the report.

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