Utility differentiation in competitive markets

The accepted wisdom has been that differentiation can take place through providing excellent customer service. Cutting prices is also seen as a way of building market share.

A recent survey commissioned by DST Innovis measured the attitudes of residential customers regarding utilities, and particularly issues surrounding competition after re-regulation. The survey revealed that while good customer service and utility prices are certainly important factors in determining consumer utility choice, the utility ‘brand' appears to be another important influence on consumer purchasing decisions. The survey consisted of calls made in seven major cities (Philadelphia, Boston, Chicago, Dallas, Seattle, Sacramento and Los Angeles) in both regulated and re-regulated utility markets.

Respondents reinforced the view that price is by far the most important factor when residential customers select their utility. Unfortunately, prices often tend towards a common level in competitive markets – as do all commodity prices – and the ability of a utility to differentiate on the basis of price for very long is thus severely limited.

The survey revealed that customers are already very satisfied with the quality of customer service they receive from their utilities. This satisfaction level varied little between electric, telephony, water and cable companies. It appears that most customers have either never called their utilities, or called extremely infrequently. It will be extremely difficult for a utility to differentiate during these rare contacts with customers.


The survey went on to explore consumer attitudes about utility branding, one aspect of which is name recognition. The survey showed very high name recognition, with nearly 71% of respondents knowing the name of their utility. Only 9% could not name their local utility. The remainder did not have a direct relationship with the utility – for example, they indicated that they rented their residence and utility services were handled by the property owner.

When surveyed about their knowledge of their utilities' logo, almost 60% of respondents could describe it. This again represents a very high brand awareness among those surveyed. Those who said they could remember what the logo of the utility looked like were asked where they remembered seeing it, and a large majority (57%) indicated that they remembered seeing it on a utility bill. A further 28% remembered seeing the utility logo on a letter sent to them. This finding indicates that existing methods of communication used by utilities can be very important in building brand values.

Most Important Factor In Selecting Utility

When a survey panel was asked whether the bill was an important medium for building the brand, a surprising 34% said that it was, and nearly 30% thought it was somewhat important. In other words, the consumer bill is more than merely a means of communicating the amount of money owed to a utility. This communication method can be used as a way of changing customer attitudes about the utility brand.


The survey then questioned respondents about whether they would consider purchasing non-utility products from their utility. Although the majority (70%) said they would not be interested in buying such products, 30% were interested. This represents an enormous opportunity for utilities. Of those who were interested, 28% said they would be interested in buying something if it was a unique item, and 72% would be happy to buy something if it was priced right. This indicates that the power of the utility brand can be extended to help sell other products and services to the utility client base.

Knows name of their utility

In summary, the survey showed that branding is an important method of differentiation. Utilities need to build on their existing brand values by the use of billing and customer relationship management systems. Utility brands can be built on several factors, such as charitable support, affinity schemes, heritage (regional names/history) and ‘greenness', all of which can be communicated and reinforced via billing and CRM systems.

Do you know the logo of your utility

Bills can deepen customer relationships by creating more personalised communications and enabling cross selling. Other opportunities arise from the leveraging of the Internet in billing and CRM activities. Customers can access their own information in an environment where brand values are communicated through relevant information provision and the consistent application of corporate identity.

Where do you remember seeing the utility

This is an extract from a paper presented at the Metering Americas 2001 conference, held in Miami, Florida