For both residential and commercial customers, Brand Trust in their utility has never been higher. Each year, Escalent names the Most Trusted Brands and Trusted Business Partners among energy utilities, recognizing the top-performing utilities on this important metric. Because customers generally don’t have a choice in their energy provider, we are sometimes asked why regulated utilities should care about their brand perceptions. We see five key business benefits to having a strong brand as a regulated utility:
Among both residential and business customers, there is a whopping five-and-a-half-point (on a 0-to-10-point scale) difference in trusting their utility to set fair and reasonable rates between customers who have low Brand Trust (0–400 on a 0-to-1,000-point scale) and those who have high Brand Trust (over 600). In jurisdictions with elected utilities commissions, this can translate to more support for candidates that take a favorable view of utility rate case filings. In jurisdictions with appointed commissions, this can result in less political pressure to intervene in opposition of rate cases.
Utilities with a higher share of customers opting in to utility programs such as e-bill and self-service channels reduce the cost to serve their customers. Additionally, many utilities are now focusing on program offerings that generate non-commodity revenue—such as home warranties, rooftop solar and backup generation. Regardless of where the utility business is focused, residential customers with high Brand Trust use, on average, two more programs than those with low Brand Trust.
Even more striking, business customers with high Brand Trust use twice as many offerings as those with low Brand Trust! This increased use translates into higher revenue and/or EBITDA for utilities that have cultivated strong brand perceptions among their customers.
While customers in most areas may not be able to entirely switch energy providers, they increasingly have options to reduce their dependence on their utility (e.g., rooftop solar) or interactions with it (e.g., digital disintermediators Arcadia). Customers who go down these roads use less of their utility’s commodity, putting upward pressure on rates, and are less likely to be receptive to existing and future utility offerings. When asked whether they would switch energy providers if they were able to, both residential and business customers with high Brand Trust are a point (on a 0-to-10-point scale) less likely than those with low Brand Trust to say they would switch, indicating higher loyalty.
Things happen. Significant weather systems, accidents and mistakes are all part of utilities’ reality. However, we find that utilities that have built strong Brand Trust with their customers see a faster and stronger recovery not only in brand perceptions but also in satisfaction after an event that negatively impacts customers.
Investors are increasingly focused on the ESG performance of companies in their portfolios, and particularly so for energy utilities that have significant environmental implications from their operations and service. Utilities have been at the forefront of decarbonizing the US economy and have a strong social impact story to tell as well. Despite having those “good news” stories on ESG, not every utility has communicated its activities—and successes—to its customers and investors equally well. Utilities can improve customer perceptions by positioning themselves as environmental, social, and governance leaders. Reinforcing that story can then lead to improved perceptions on Wall Street.
Although questions of “why brand?” are reasonable to ask, we find compelling reasons for utilities to invest in their brands. And, fortunately, regulated utilities increasingly understand these positive outcomes of strong Brand Trust and are investing in the people, systems and activities that help build Brand Trust among their customers.
If you are interested in understanding how your utility’s brand stacks up against industry leaders and what they’re doing to achieve their leadership position, please reach out to me!