Building Brand Shouldn't Be Only Advertising Goal
Prosper Business Development, a purveyor of interactive advertising systems, warns energy marketers simply "building a brand" won't be enough to compete for commercial and residential customers in deregulated markets. Key to success will be making advertising a sales tool rather than just a brand awareness vehicle, the company maintains.
In a report that briefly touts Prosper products, the company outlines mistakes it says marketers must avoid. For one, Prosper maintains clever ad campaigns aimed only at "building the brand" won't work in the commercial/residential market. "With more than 243 investor-owned electric utilities vying for the same customers, [marketers] can't afford to spend millions of dollars on lengthy campaigns that raise brand awareness only without selling energy," said Prosper President Gary Drenik. Prosper cautions marketers to beware of advertising agencies offering only brand awareness. "The 'building of a brand' will be one of the major campaigns agencies will sell. For them this means, 'Let's spend a lot of money so people will remember or recognize your name,'" the Prosper report reads.
Prosper questions the effectiveness of direct mail and cold calling, particularly when one considers the number of contacts required to reach so many residential/commercial customers. Margins won't be high enough to reward a sales force. "The cost of acquiring a customer must be in the $30 to $40 range in order to be productive in the competitive energy environment." Prosper cites industry sources and quotes annual utility advertising expenditures of $80 million. "That amount is expected to rise to more than $2 billion after the year 2000."
While companies strive to compete by offering diverse products and services, it doesn't take long before players are offering essentially the same things. "The product phase will be short lived because it doesn't create a unique competitive advantage and will be quickly integrated into the final phase, the marketing phase." The marketing phase requires a whole new set of skills, Prosper says. Telecommunications deregulation, often cited as a model for energy, is not analogous. "For example, there is no national AT&T type utility with over 80% market share as was the case prior to the 1984 break-up of AT&T. Specifically, just the opposite exists in the energy industry."
Prosper notes there are more than 3,000 electric utilities, 243 of them investor owned, with each serving a defined geographic market as a resident monopoly. "AT&T's biggest challenge was to retain customers whereas electric utilities will be battling two fronts - to retain customers in current service areas and find new customers in foreign service areas."
The company doesn't push its products in its report, but clearly the conclusions drawn are intended to support the use of its products. One of them, Direct to Market, puts a form in the hands of a supplier's prospective customers through direct mail or insert into publications. The end user fills out the form with data on current energy costs paid to the incumbent utility and faxes it to Prosper. The form is machine read, and a rate quote is generated and faxed back to the prospect with a contract. At the same time, information on the prospect is forwarded to the client or its call center. The supplier can then call the prospect for follow-up.
Joe Fisher, Houston
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