A national retail customer survey by North Salem, NY-based RKS Research and Consulting found that residential consumers like the familiarity of their local utility and don’t mind paying more for new products and services as long as the charges aren’t tacked on to their monthly bills. The study, however, also concluded that utilities will need to overhaul some longstanding practices in order to compete successfully with established retail suppliers, contractors, and competing energy providers.

For example, nearly half the customers surveyed — 47% — would rather pay in full with cash, check, credit or debit card for new products and services at the time of purchase. They rate charges to their monthly utility account as the least attractive option for handling major purchases. By a 3-1 margin, consumers prefer a direct rebate on their purchases to a credit applied to an existing account.

The study also found utilities lacking in factors that drive customer purchase decisions, such as pricing and warranties. These findings on customer purchase incentive and payment preferences contain important implications for traditional utility marketing and billing systems, the study suggests.

There’s a definite opportunity for utilities to increase sales of new products and services, such as real-time pricing, home energy efficiency audits and comprehensive warranties, as long as those offerings are combined with quality customer care.

RKS drew these conclusions after a national sampling of 1,000 heads of households. RKS invited 245 participants to rate and rank a number of possible product and provider attributes. The consulting and research firm then analyzed, weighted, and reported the findings to project sponsors at the beginning of May. The survey shows that customers who are satisfied with their electricity provider are willing to pay a higher price and are open to purchasing more products and services as they do business with that supplier. But in an important insight, the data also reveal that success is not assured; it may by unsettlingly easy to lose the same highly satisfied customers to a competitor.

“This finding demonstrates that customer satisfaction alone does not lead to customer loyalty,” said David J. Reichman, president of RKS. “Utilities will need to realign their practices in such areas as pricing, warranties, marketing, and billing in order to extend their relationship with residential customers and compete successfully with manufacturers, retailers, and contractors for product and service sales.”

Among the new product offerings tested in the RKS exercise, three concepts showed potential: whole-house energy efficiency audits, warranty coverage for home heating and cooling, plus major appliances, and a flexible rate plan combined with free furnace or air conditioning service. In each case, participants expressed a preference for purchasing these services from their local electricity supplier. Consumers say they are willing to pay a premium to be able to purchase the energy audit service from their local utility.

Affluent customers — households with annual income in excess of $75,000 — are less price sensitive but still tend to compare options and shop around. In contrast, consumers below the $75,000 level are more cost-conscious and prefer doing business with their local utility. Overall, customers who believe their utility delivers good value show a willingness to pay slightly higher prices for new products and services from this same source.

“These results demonstrate that customers’ satisfaction and perceptions of value received from their energy provider are prerequisites for a successful launch of new products and services,” Reichman said. “Because of their strong local franchises and positive customer relationships, many utilities are in position to win new business from contractors and retail chains.”

More information is available on the RKS web site: www.rksresearch.com.

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