Benchmarks

Three keys to heighten customer interest.

A recently completed analysis of innovative ratemaking in the electric utility industry by Platts Re-search & Consulting found a handful of customer-centric utilities expermenting with novel innovations in ratemaking, although most continue to miss the boat on this form of product differentiation.

Product differentiation is a method used by competitive product firms to increase customer satisfaction by more accurately addressing each consumer's specific desire. The consuming public does not operate under a one-size-fits-all paradigm. Each consumer makes purchase decisions based on different wants, needs, levels of sophistication, and so on.

Take, for example, orange juice. Homestyle juice is for the customer who likes juice a little pulpy; calcium-enriched juice is for those fearing osteoporosis; low-acid juice is for sensitive stomachs; and house-brand juice is for the price conscious. Long-distance telephone service and toothpaste are just two more examples of this strategy.

Electricity today is in a position similar to that of the aforementioned products several years ago. Very few people think about electricity. A kilowatt-hour is a kilowatt-hour; each one accomplishes the same thing. But opportunities for differentiation can be found mostly in the categories of source, price structure, and reliability.

Through various green pricing programs, we know that the source of the electricity is important to a certain segment of the market.