STUDY: DEREGULATED UTILITIES MUST CHANGE MARKETING TACTICS
COLUMBUS, Ohio -- Electric utilities will have to change the way they market themselves to keep pace with deregulation, according to an Ohio State University professor.
"Aside from a situation like the California energy crisis, only one thing can kill deregulation -- people's unwillingness to shop around for new utilities," Roe said. "We found that people feel more comfortable about trying a new utility if they can base their decision on standardized information."
As it stands now, some electric utilities are free to distribute marketing materials in any format; depending on state regulations, they can include or omit any information they see fit. As a result, consumers can become confused when they try to make a comparison, Roe explained.
He likened the utilities' current marketing efforts to those of long distance phone companies -- each company explains its selling points in a different way, so a direct comparison is nearly impossible.
The research stems from work begun during Roe's tenure as a staff fellow at the U.S. Food and Drug Administration (FDA) Consumer Studies Branch. His branch chief at FDA and co-author on the current research was Alan Levy, who earlier in the 1990s tested and developed the standardized nutrition label that is found on nearly all packaged foods.
For this survey on utility deregulation, Roe and Levy collaborated with Mario Teisl, assistant professor, and Huaping Rong, graduate research assistant, both of the University of Maine, Orono. The results appear in the summer issue of the Journal of Consumer Affairs.
The researchers surveyed more than 1,000 adults in eight U.S. cities: Cincinnati, OH; Holyoke, MA; Houston, TX; Jacksonville, FL; Riverside, CA; Philadelphia, PA; Portland, OR; and Salt Lake City, UT.
Researchers visited shopping malls in different socioeconomic areas of these cities, and showed people marketing materials for three hypothetical utilities. Selling points for the hypothetical companies came from bits and pieces of the promotional materials of actual utilities from across the country.
Some people had to choose a utility based only on typical marketing materials, while others were also able to view a standardized chart that plainly outlined several key characteristics of the companies. Key characteristics included average monthly cost per customer, customer service ratings, the percentage of power obtained from environmentally friendly sources, and the amount of air emissions created relative to the national average.
People made more confident choices when they viewed the standardized chart, Roe said.
"The chart let consumers zero in on the factor that was most important to them," he said. "Whether they cared more about cost or renewable resources, they felt more confident making a decision when they could clearly see how each company stood on that issue."
For example, a company with a so-so environmental record may decide to omit that information from its marketing materials entirely. Potential customers who read these materials are likely to assume that the company's environmental record is much worse than it actually is.