The Retail Electricity Service Business in a Competitive Environment
Retail electricity markets continue to change. These changes are driven by restructuring, the advent of competition, and increasing needs to influence the pattern and/or amount of energy use. Branding, attitude and image measurement, and understanding cus
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Clark W. Gellings1
Abstract Retail electricity markets continue to change. These changes are driven by restructuring, the advent of competition, and increasing needs to influence the pattern and/or amount of energy use. Branding, attitude and image measurement, and understanding customer preference and behavior are paramount to electric service providers in this new world. Keywords: retail electricity sales, competition, branding
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Clark W. Gellings is Vice President of Technology at the Electric Power Research Institute in Palo Alto, California, United States of America. A. Bausch and B. Schwenker (eds.), Handbook Utility Management, DOI: 10.1007/978-3-540-79349-6_32, © Springer-Verlag Berlin Heidelberg 2009
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C. W. Gellings
Enter Competition
Whether retail electric competition is inevitable within a given country or region or not – all electric service providers, whether incumbent distribution utilities or new market entrants, are facing a new competitive future. As they do, a few key issues emerge. First, as a result of having other market entrants in their traditional market, they immediately turn to branding. Then, in order to establish what brand image they are and how to change it, they turn to attitude and image measurement. Finally, as the realization of marketing in a competitive environment takes root, they begin to analyze their customers’ preferences and behavior. These subjects are addressed in this chapter.
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Branding
With the advent of retail electric competition, a host of threats and opportunities confront electric energy service managers. With the loss of market share as the primary concern, competitive threats for one company can be another company’s opportunity. For some companies, retention will be their primary business strategy. Other companies will have a strategy of expansion regionally, nationally, or internationally. In either case, much has been discussed regarding the value of keeping the utility’s name, either to retain loyal customers or to attract new customers outside of traditional franchise territories. As retail markets open, not all utility executives are convinced that the historical name of the utility has any value at all outside of the existing franchise area. In areas where the electricity market is restructured, a plethora of name changes follows. When retail markets open up, branding becomes a topic for frequent discussion. Why? Because new entrants to the electricity market are looking to achieve market share quickly and without sacrificing profitability. Some view branding, or more precisely building brand equity, as 'the solution'. However, the vast majority of marketers view branding simply as a name game. In most cases, utilities should stick with their existing name. Electricity is tasteless, odorless, and invisible. While the production, transmission, and distribution of electricity can vary in cost, reliability, and quality, the actual energy delivered to customers does not. Consumers do not consider their electricity usage as a purchas
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