THE NEW LOGOS ARE SPLASHED ON BASEBALL CAPS AND COFFEE MUGS, GOLF
shirts and hard hats. There's the three-year, $42-million advertising budget and the slick newspaper, radio and TV ads. There's the NASCAR race, the Touchstone Energysm 300.
But in two, easy-to-understand sentences, what does the new Touchstone Energy do? For an answer, I turned to Michael L. "Mickey" Miller of Kentucky's Nolin Rural Electric Cooperative Corp. Miller chairs Touchstone's executive council.
"Touchstone Energy creates an alliance of more than 400 electric co-ops that serve more than 11 million customers. They tie that alliance together to be the second largest¼ utility network in the nation that serves about 40 percent, by revenue, of commercial-industrial accounts.
"It gives us a presence in¼ 28 states¼ it gives us, we think, a very distinct advantage over any competitors that are in the field by that presence¼"
Mr. Miller, to be fair, you've spelled out what Touchstone is, not what it does.
"OK, what it does," he says. "Well." He sighs. "I'm trying to phrase this so it will be easy for you and me to understand where we're going with it. I guess that presence we're looking for, we're already there. That's true. We're already there.
"We're already doing those things. It gives identity to those co-ops that have existed for 60 years¼ people may not recognize we are all here for the same business. We're all not-for-profit organizations.
"I'm still thinking I'm not answering that question you initially asked me."
To be fair to Mickey Miller, it isn't an easy question to answer, as electricity branding pioneers EnergyOne, Southern Co., Enron Corp. and others have discovered. Branding is like vapor: Easy to see, hard to touch.
Like the vapor pioneers, Touchstone is going to try to convince customers and prospects that something has changed. That the brand tying nearly half the country's co-ops doesn't just mean a rainbow logo, a catchy jingle (em The Power of Human Connections (em or even a new attitude. Miller's talking about added oomph, value that wasn't there before.
So the real question is: What has changed? Will change?
The co-op industry magazine, Rural Electrification, warns the Enrons of the world to beware. But what do competitors have to be wary about? Are co-ops going to supply energy en masse to chain stores? Will co-ops let others into their service territories so they can venture into neighboring regions to provide commodity resale? An energy brand does that, right?
Well, in most states, because of territorial laws and the lack of reciprocity provisions, competition may not unfold exactly as Touchstone's 400 co-ops would envision.
So why create a brand?
"I guess for true deregulation to really happen, some of those territories are either going to have to change or the walls are going to have to come down," Miller admits.
It's easy to see (em no blinding vapor here (em that when it comes to competition (universal access to meters, for example) legislative action will have to be taken before brands compete head-to-head. No logo or jingle will work without legislative change.
Yet Miller says that by building unregulated business, such as energy audit companies, co-ops will get their foot in the door. "We're trying to build that relationship, that brand, so that when [deregulation] does happen in those states, [customers are] already aboard."
Miller's co-op, for instance, sells Internet services.
"If we can provide more services and more products and more branded items to our consumers, whether we actually sell them electricity (em I'm not sure that's the critical point."
So Touchstone is heating up its branding iron for when the competitive herd starts trampling customers.
That trampling (em the phone calls, crazy deals and ad clutter (em is another reason Miller says co-ops have united. Not to mention that 40 states have either enacted or are considering deregulation legislation.
"I guess we're trying to bring some sense to all this," the co-op CEO says. "That's one of the things we're trying to set with this campaign. And it's not just an advertising or a media campaign¼ We're developing a relationship brand."
"You may have seen this analogy: True Value Hardware. The local hardware store has very little clout¼ and very little buying power, but if it can get under an umbrella (em "
So Touchstone will act as a buying group?
"You want to be careful there because that may not be one of the things we get into¼"
This only gets more confusing. But suddenly, Miller offers something concrete: "If we can establish this brand as we're trying to, we've got some standards set. A co-op has to meet certain levels of performance, levels of service¼ If our partners can't meet those, they can't be partners."
But surely that occurs already. And if the relationship exists, who will it be promoted to?
"The initial thrust of our promotion is going to be commercial-industrial and opinion-maker groups," Miller says. "We feel we can get more bang for our buck there."
Maybe the toughest question is this: Does brand marketing and advertising work? This might best be answered by the orange growers (Sunkist) and cranberry growers (Ocean Spray). But will the approach work for another kind of juice entirely?
For the EnergyOnes and the Enrons, the verdict has been out for some time. Says one energy company executive: "I don't think you can really measure it yet, because in effect markets aren't open. California, quote 'opened up' April 1, but it's really not open because there are no margins open to a retailer. The ultimate test to a branding strategy will be the income stream and the net income from people who affiliate themselves with the brand."
But absorb this, just in: Enron says it will quit the residential market in California. (Only 30,000 consumers signed up for Enron's power.)
Jonathan Frenzen, management laboratories director at the University of Chicago's graduate school of business, says Touchstone has a real challenge ahead, like the fruit growers before them.
"The opportunity is to standardize and get those scale economies and advertise and create that brand image," he says. "But it's not clear what they can put behind it. Is there any kind of quality of service? What does the brand name mean and is there anything to back it up?
"[If] there's no advantages to be gained¼ it's just a name like a gazillion other names in the marketplace."
The energy company executive says it's going to take as many as 15 million consumers "flowing across a retail infrastructure" to get the scale proportions needed to compete on a national level.
The co-ops have reach, but will they be able to organize to their advantage?
"Will they commit to one common infrastructure so they can get the scale benefits?" the executive asks. "Currently they're organizing state-by-state to provide those solutions¼ will they create a broad consensus across the co-ops to commit to a common back room?
"If they can organize sufficiently to gain the benefits of scale, they could be a competitor."
It looks like there could be an answer to my question. But it's up to Touchstone's partners to discover exactly what they have to do to find it.
Articles found on this page are available to Internet subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.