Public Utility Improves Customer and Shareholder Value.

The management team at a large Midwestern utility was faced with a perplexing situation.  Despite providing gas and electricity at prices that were at or below any neighboring utilities, customers believed that they were paying more than customers in neighboring states, and more than the services were worth.  Since the utility company clearly didn’t have a pricing problem, the management team recognized that they may, instead, be facing a value problem.  Recognizing the relative nature of value, but not having any direct, local competition, the management team decided to examine their value propositions in terms of neighboring utilities, and one deregulated utility in another part of the country.

 

customer value analysis revealed that the utility was merely an “average” value provider in each of its product/markets

MVS’s customer value analysis revealed that the utility was merely an “average” value provider in each of its product/markets.  That analysis, however, also revealed comparative weaknesses on key quality drivers that represented value-enhancing opportunities.  Among residential customers of electricity, the greatest opportunity was one of more proactive communication, especially as it pertained to safety, outages, restoration, and the utility’s involvement in community improvement projects.  Small and mid-sized business customers placed greater emphasis on the need for an effective energy advisor and responsive resolutions to energy use issues.  And the Competitive Value Matrices confirmed that the pricing issue was more of a perceptual problem than a real one.

The development and deployment of strategies based on these opportunities has led to a 38% increase in margins through value-based cost reductions, and a doubling of the utility’s stock price over the past four years.  Not surprisingly, this company has also ranked in the top tier among utilities in the J. D. Powers Customer Satisfaction surveys in each of the last two years.  As reported by their Vice President of Marketing,