Energy #2 – “Engaging” the Customer

    –    by Jay Shepherd October 3, 2014

The new mantra at the Ontario Energy Board is “customer engagement”.  Does anyone have the vaguest idea what that means?

Clearly many electricity distributors don’t.  They are scurrying about – hiring “spin doctors”, commissioning polls, arranging focus groups, interviewing large customers – all with a view to asking their customers what they should be doing.

Seriously?

Electricity distribution is not a democracy.  Experts are put in charge of running the system.  They are supposed to know how to do that.  The public don’t want to have to supervise them, and even if they did they couldn’t do it properly.  That’s why they have experts running the system in the first place.

The proof of this is in the fact that, in order to do polling, or to run focus groups, the utilities are finding that the first order of business is to “educate” the participants.  In this context, “educate” means explaining how a distributor differs from a transmitter and from a generator.  “Educate” also means explaining where electricity comes from, and how it gets to the customer’s house.  In some cases, it means explaining the difference between electricity and natural gas.  Or, between electricity and cable TV service.

Then, having thus certified the participants as knowledgeable consumers able to give valuable advice, the market research firm asks them to make judgments on questions like “Should we let our assets break before we fix them?”, or “Should we bury more of our wires underground?”

People who run electricity distributors are usually pretty level-headed people.  Many of them are engineers, or accountants.  So, ask yourself the question:  if the regulator were not forcing you to do this, would you be asking your customers to tell you how to run your business?

In fact, every utility executive knows that if they really ask the customers what they should do, the answer will be:  “Keep the lights on.  Don’t spend too much money doing it.  And stop asking us these silly questions.”

It only takes about eight nanoseconds to realize that this is precisely the right answer.  When you go to the doctor, he or she doesn’t say to you “I’m trying to decide whether to use ampicillin or tetracycline to treat your infection.  What do you think?”  When your IT consultant is fixing your server, he or she doesn’t say “Computers are logic machines that do a lot of calculations very fast.  Do you think I should replace your dual bus kernel with a fourth generation parallel processor?”

The bottom line here is:  Don’t ask your customers what you should do.  You are supposed to know what to do already.  If you don’t, then maybe someone else should be running the utility.  It certainly isn’t going to inspire confidence in your customers if you are asking them what to do.  They know that they know nothing.

Does this mean that talking to your customers is a waste of time?  Not at all, but be very clear on what you are trying to accomplish.  You don’t need instructions on what to do.  You need information.  What information do you need from your customers in order to do a good job?

For most distributors, the central value of real customer engagement is in understanding how their decisions will affect the customers, or particular groups of customers.

The funny thing is, most distributors already do this quite well.  Distribution companies are key parts of their local communities, and most utility employees are personally invested in serving their customers, who are their neighbours and friends.  For this reason, among others, distributors already know and understand their customers, and care deeply about how their decisions affect those customers.  Further, if they get the decisions wrong, their customers will provide vocal feedback to help them understand.  (Quote from a utility manager:  “If we don’t meet our customers’ expectations, I’ll hear about it the next time I am standing in line at the supermarket. I don’t need surveys for that.”)

There is still specific information that can help.  More focus on gathering that information can only be a good thing.

A good example is momentary outages.  Some customers are sensitive to very short-term loss of power, or even voltage variations.  Finding out more about that is important in making decisions about feeder reinforcements, or redundancy, or even system configuration issues.  If you have an area in town with a lot of offices, perhaps, where the customers are particularly sensitive to these issues, you may be faced with a decision whether to spend capital dollars on those feeders to solve the problem.  That capital spend then has to be weighed against the customers’ other potential solutions (on-site backup, enterprise level UPS, etc.) to see if it is the right answer.  As an engineer, you can’t reach a good judgment without having the facts, which means involving the customers.

The key is, you’re not asking them what to do.  The decision – whether to build redundancy into a particular circuit to reduce momentary outages, for example – is still yours to make.  To make it well, you need information on both the costs and the benefits of the proposal, and its alternatives.  The customers have some of that information.  It is data you are looking for, though, not opinions.

Another example is the fancy new office building you’re planning.  The decision to build or rent, and the decision as to how much space you need, and other things like that, are all decisions that engineers and accountants running the utility can and should make.  The decision whether you build in the expensive downtown location, with fountains and sculptures out front, or whether you locate in the industrial area in the north end, is at least in part informed by customer perceptions and expectations.  Some of that decision is an expert decision, but some of that decision is also about the message your customers will perceive if you do it.  You probably already understand your customers well enough to know how far you should go, but if you don’t, going out to talk to them, and assessing their reaction, is not a bad idea.

Many of the issues on which your customers’ expectations and data may be valuable rest at the intersection between reliability and price.  Note that neither is a useful area of inquiry by itself.  If you ask customers whether they are willing to pay more, they will say no.  It is not complicated.  If you ask customers whether they can accept lower reliability (i.e. more outages), they will say no.  Same story.

Indeed, you wouldn’t ask either of these questions, because you already know the answers, and in any case the answers don’t help you make decisions.

For some customers, though, asking questions at the intersection of price and reliability can be revealing.  Ask the Director of Finance of the local school board whether they would spend an extra $10,000 per year (say, a 1% rate increase) so that each of their 125 schools only has one one-hour outage every five years, instead of two, and they might say yes.  Ask them if they would spend an extra $50,000 per year (a 5% rate increase) for that result, and the answer might be different.  If you ask a residential ratepayer similar questions, the answers could well be on a completely different scale.

This type of information is about understanding the impact of your decisions on the customers.  It can help you make better decisions.  But, make no mistake.  They are still management decisions.

Customer engagement sounds like it is probably a good thing;  but, only in the same way as a populist political slogan sounds good.  Like the slogan, it is the implementation that makes it actually good or bad.

Customer engagement in the “ask them what we should do” sense is just abdication of management’s responsibility for running the utility.  Most of the polls and focus groups and key account interviews currently being done are in this category.  They are a waste of time and money, exactly what the ratepayers want you to avoid.

On the other hand, customer engagement in the “know your customer” sense is just a normal part of running any business.  Most distributors have been doing this for years, and know its value.  It is about asking questions to get information that will help you make better decisions.  All of a utility’s customer “engagement” should be measured against this test.

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About Jay Shepherd

Jay Shepherd is a Toronto lawyer and writer. This site includes a series on energy issues, plus some random non-fiction on matters of interest. More important, it includes the Lives series, which bridge the gap between fiction and non-fiction, and now some short stories. Fiction is where I'm going, but not everything you want to say fits one form. I am not spending any time actively marketing what I write, but by all means feel free to share if you think others would enjoy reading this stuff.
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One Response to Energy #2 – “Engaging” the Customer

  1. Pingback: Energy #18 – How Bad is the OEB, Anyway? | Articles and Stories

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