Chapter 15
Improving Customer Relationships in a Monopoly Industry

The Emotional Triggers That Interpreted Mixed Messages

We are drowning in information but starved for knowledge.

—John Naisbitt

Nothing lasts forever. A company that operates as a monopoly today may someday face stiff competition. That’s why it’s important to establish positive customer relationships before it’s too late. This is the story about a utility, operating as a monopoly, that needed commercial/industrial leaders to support pending legislative and regulatory proposals. But before the company could build stronger relationships within this sector, they needed to clarify what appeared to be mixed customer messages. Emotional-trigger research uncovered critical nuances that helped the utility understand the issues that mattered to their customers and respond to them.

LESSON #12

Even when you don’t have to, act like a partner.

They Said What?

This was a company caught in the crosshairs. Under assault from every conceivable angle, management was reeling. The cost of raw materials was soaring. The delivery system was overwhelmed and antiquated. Commercial/industrial customers were livid about spiraling rate increases and beginning to explore alternative options that were emerging. Profit margins—to say nothing of actual profits—were shrinking. Government agencies and the legislature were applying pressure to contain expenses, while simultaneously demanding significant service improvements. Under the best of circumstances, it was a Herculean task.

As if that wasn’t enough, a sense of confusion pervaded the organization. Over a number of years, the company had routinely hired industry “experts” to measure satisfaction among commercial customers and, based upon the findings, provide specific actionable recommendations. Mirroring our own personal experience as corporate executives, senior management had shelves overflowing with every imaginable type of report, chart, graph, matrix, ranking, table, diagram, and related statistic. The information was sliced, diced, quantified, and measured on literally scores of dimensions.

They had it all with the singular exception of reliable or insightful answers. Why? Because trying to analyze the data was akin to reading tea leaves. Key “findings” were contradictory, leaving management no closer to understanding how best to connect with their customers. They received high scores for resolving problems quickly, but low scores for being customer-oriented or responding to customer needs. They were praised for delivering a quality service, while simultaneously chastised for decreases in service reliability. They were told it was important to look out for customer safety, even though taking preventative measures were ascribed a low priority. Most significantly, they were warned that commercial/industrial customers were up in arms over rate increases, yet these same reports suggested that customers believed the utility gave them their money’s worth.

What on earth did all this mean? No one had a clue. Management was convinced that recent rate increases were at the heart of customer dissatisfaction and bemoaned the fact that, as a regulated industry, it was an issue over which they had little control. Even so, they recognized the company was at a critical juncture. Without the support of their commercial/industrial customer base, any attempt to enlist governmental and regulatory agency cooperation for pending proposals would be non-existent. But before they could hope to forge stronger relationships with these customers, they needed to clarify all the mixed messages. That’s when they turned to emotional-trigger research.

It’s Not the Money Stupid!

Although management was correct that commercial/industrial customers were angry, previous findings oversimplified and distorted the issue of rate increases. These findings identified “reasonable rates” as a key driver, for which the utility was rated poorly. But none of these reports tapped into what customers meant by “reasonable rates” or their actual thought process. Instead, the findings were based on the presumption that rate increases were viewed unilaterally. In other words, anything that cost more money was unacceptable. Because the utility didn’t have the independent authority to raise or lower rates, management was left feeling both helpless and vindicated. There was just one problem. The presumption was based on a flawed interpretation. It failed to expose the hidden reason behind commercial/industrial customer dissatisfaction.

Naturally, every executive interviewed would have opted for lower rates given the choice. But it was not rates per se that surfaced as their principal concern, nor was it the issue that caused such an uproar. Rather, it was the method the utility employed to raise rates that made the topic so explosive. Customers felt exploited by what they described as the unfair manner in which they were charged for random spikes in usage. This was the emotional trigger at the heart of the rate issue.

“Words like egregious, outrageous, arrogant, and unconscionable were tossed around.”

The utility maintained that customers simply did not understand how little control they really had over rate increases. Not true. Commercial/industrial customers were far more informed and pragmatic than management imagined. Everyone understood that rates were regulated, and they conceded that the utility had to use a “worst-case scenario” plan in order to guarantee all their customers’ needs were met. It was not until they spoke in specific terms about how their rate increases had been determined that they became visibly agitated. Many described being saddled with a huge annual rate increase based upon a window as narrow as a one-time 15-minute usage spike. Words like egregious, outrageous, arrogant, and unconscionable were tossed around. And then things really started to heat up!

In marked contrast to previous findings, no one was particularly strident about rate increases in general terms, but there was deep resentment regarding what was considered an arbitrary and inherently unfair basis for calculating those increases. The utility was a “heavy handed” and “inflexible” monopoly. If the justification for rate increases was based on their “worse case scenario” argument, what happened when that “scenario” didn’t materialize? There was no corollary plan to provide rebates if projected usage levels were not met. The ill will this methodology generated was profound and threatened to undermine any hope the utility had of building a supportive commercial/industrial customer coalition.

Unfairness and Complexity: A Dangerous Brew

Not only was the methodology for establishing rate increases a sore spot, customers railed against the pricing scheme’s level of complexity, claiming it was surpassed only by the airline and telecommunications industries. No one understood exactly how the rate increases were assessed, but everyone was absolutely confident the system was unfair. Many of the utility’s own employees were unable to explain the formula. They were equally unclear and contradictory when it came to how the rate increases were computed.

The company’s inability to explain their actions or put forth a clear and consistent explanation had a chilling effect. Customers, already frustrated, were growing increasingly suspicious. Although a viable alternative did not yet exist, these commercial/industrial customers, pushed to their limit, vowed to find another delivery method.

The utility’s rate increase based exclusively on “indiscriminate” usage spikes certainly brought their customers together, just not in the way they had hoped. Instead of establishing positive customer relationships, companies large and small started to proactively investigate their options. Some spoke of considering major capital expenditures for equipment that would enable them to limit what they purchased from the utility. Others planned to explore how their entire municipality might band together to take on the monopoly. A third group expressed interest in subsidizing entrepreneurial start-ups committed to opening up the marketplace.

What Do You Mean We’re Not Responsive? We’re Here, Aren’t We?

Equally troubling was the contradictory feedback concerning responsiveness and being customer-oriented. The utility received high marks on being responsive to customer problems, yet was widely criticized for not being customer-oriented. But weren’t they really the same thing? The company was at a loss to decipher what seemed to be another serious mixed message.

Survey after survey documented customer satisfaction with the utility’s prompt response whenever service-related problems occurred. Management, proud of that achievement, proceeded to take that all too familiar but dangerous leap from what they knew to what they assumed. In the absence of genuine insight, they equated responsiveness with being customer-oriented. They used the two apparently similar measurement criteria interchangeably. Their marketing strategy positioned the utility as being customer oriented precisely because they responded quickly to customer problems. While the utility may have linked responsiveness with being customer-oriented, commercial/industrial customers did not. They held a decidedly different view.

Although commercial/industrial customers talked about the utility’s “responsiveness,” they conceded the company was quick to resolve emergency service related problems. So what? That was implicit in their “contract.” They paid their bills, and the utility honored their obligation to provide a consistent quality of service. Such an arrangement fostered satisfaction, but never rose to the level of loyalty.

Building strong customer relationships required more. The utility’s responsiveness to emergency service interruptions wasn’t enough. To be truly customer-oriented, they had to go beyond solving the “exceptional” common problems and demonstrate a commitment to the needs of particular companies. Suddenly these mixed messages became clear. The utility was commended for the manner in which they handled their core business when emergencies occurred, but criticized for what was characterized as their indifference to the concerns and problems of individual customers. The company was faulted for being reactive, rather than proactive.

Senior executives within the commercial/industrial sector were angry. Technically, the utility was just another vendor, and they weren’t used to vendors calling the shots or being indifferent to their needs. It was an upside down situation. Making matters worse, they had no immediate recourse, and they knew it. This one-sided relationship bred resentment that did not bode well for the future. Yes, the utility was great during an emergency, but that was no excuse for ignoring their day-to-day problems. Every customer had a story. Few had happy endings.

There were ongoing difficulties when a dispute occurred with the utility. Without an advocate, many customers found themselves enmeshed in red tape. Others told tales of attempting to upgrade faulty equipment or address service disruptions unique to a geographic location. The utility’s mantra never changed. They were always “looking into it,” but a resolution was elusive. Commercial/industrial customers said the utility operated like a corporate giant. They weren’t approachable. Monopoly or not, they were still a service provider and needed to act like one.

Either You’re With Us or You’re Against Us

The utility’s lack of responsiveness to individual company needs was a consistent trigger among commercial/industrial customers. And, within this context, the most emotionally charged topic of all was technology. Manufacturers were upgrading their plants with increasingly sophisticated, computer-controlled equipment to help them realize quality improvements, reduce payroll costs, curtail waste, and benefit from process re-engineering enhancements. But the more precise the equipment, the less tolerance there was for service interruptions. Depending upon the level of complexity involved, service fluctuations that once fell within acceptable ranges could now cost customers hundreds of thousands of dollars in damage to their equipment and lost business. Executives complained the utility had failed to keep pace with major technological advances; their equipment was no longer in sync with that of their customers. This was a serious problem that customers complained was met with nothing but platitudes and empty promises. It was also a textbook example of how, in the absence of genuine insight, the utility completely misinterpreted what commercial/industrial customers expected of a customer-oriented company.

As the case studies in this book have consistently revealed, the headline tends to distort the true story. Without benefit of interpretation, the utility accepted the fact that rate increases, in general terms, were the reason for customer dissatisfaction. On the flip side, they mistakenly congratulated themselves for being customer-oriented, because they responded quickly to emergency service problems. In both instances, they failed to uncover the crucial emotional triggers that explained why relationships with commercial/industrial customers were strained.

The Method Is the Message

The clear message from the emotional-trigger research was that a “monopoly” dictates, but a “partner” has a team mentality. Although it was true that as a regulated industry the utility did not have complete autonomy, they still had choices. The opportunity to establish more meaningful customer relationships depended entirely on how they proceeded to navigate within the framework set by the legislature and regulatory agencies. Within that context, the utility had to position itself as a vendor dedicated to satisfying the needs of their customers, rather than as a monopoly providing a “take it or leave it” service.

Commercial/industrial customers understood the dictates that bound the utility. That’s why, despite numerous findings to the contrary, they were not resistant to rate increases as such. However, they expected those increases to be based on reasonable criteria, instead of a formula that was viewed as arbitrary, inconsistent, and unfair. The solution required a three-step plan.

The utility had to re-examine their method of setting annual rate increases exclusively on short term one-time usage spikes. That meant aggregating a greater number of usage spikes and averaging them together to determine the annual rate increase, exploring a partial credit if the actual usage varied by more than 10 percent from the estimates, and switching from setting increases based upon a 12 month rolling period to a shorter time frame. Then, they had to launch an aggressive initiative to provide commercial/industrial customers with tangible and workable recommendations for achieving substantive reductions in usage spikes.

Finally, they had to implement a company-wide training program to ensure everyone within the organization who interacted with customers understood and could explain the rationale for, and process by which, rate increases were set. Additionally, they had to publish easy-to-read explanations of the charges and why they served as the basis for the commercial/industrial customer rate structure.

Communicate and Collaborate

Emotional-trigger research also provided the pivotal, but previously elusive, insights the utility needed in order to grasp the distinction commercial/industrial customers made between being “responsive” and being “customer-oriented.” They finally understood it wasn’t enough to resolve emergency service interruptions. That was considered a given. Dramatically improving customer relationships required something else entirely. It required maintaining an ongoing dialog with their customers to understand the challenges they encountered and collaborating with them on an ongoing basis to address those challenges.

At the top of the list was demonstrating a greater sensitivity to the disparity between the utility’s antiquated system and the major technological improvements their customers were investing in. Short term, it wasn’t possible to implement a system-wide upgrade. Nevertheless, the utility had to take positive steps to bridge the gap as a demonstration of goodwill. Once they acknowledged the seriousness of the problem, they could begin to solve it.

The first step was to conduct an internal evaluation to identify geographic regions with the highest instances of service fluctuations. That enabled the utility to prioritize upgrades by geographic clusters, based upon the number of manufacturers that experienced equipment malfunctions due to technology incompatibility.

They also began work to create and implement an alert system that would give companies a 60-minute warning whenever the utility had advance knowledge of a possible service fluctuation. The utility was committed to investing in the future, as resources permitted. In the meantime, providing advance warnings, whenever possible, was tangible evidence of their intention to become more customer-oriented.

At last, after years of mixed messages and false starts, the utility finally understood the story behind the headlines. Emotional-trigger research unlocked the insights that were needed to improve relationships with commercial/industrial customers.

SUMMING UP
IMPROVING CUSTOMER RELATIONSHIPS IN A MONOPOLY INDUSTRY

Situation

A large utility operating as a virtual monopoly still encountered challenges on numerous fronts. Both legislative and regulatory agencies demanded they hold down rates. Their commercial/industrial customers were investigating emerging alternative options. Profit margins were shrinking. Within this charged atmosphere, the utility recognized the importance of solidifying relationships with key commercial and industry customers in order to gain their support for pending legislation amid mounting public pressure. But before the utility could forge stronger relationships with this sector, they needed to clarify what appeared to be mixed customer messages. Previous survey results suggested their biggest problem was anger over recent rate hikes. This same survey, however, also included contradictory scores relative to service and responsiveness. Recognizing the need to understand what customers really meant before they could respond appropriately, the utility turned to emotional-trigger research for answers.

Commercial/Industrial Customers’ Emotional Triggers

Manufacturers were outraged by what they described as an arbitrary basis for raising their rates, not the rate increases per se. They were angry and felt cheated by a formula that locked in annual charges based on narrow usage “spikes” rather than the norm. And they were equally upset by the utility’s lack of responsiveness to technological advances. Commercial/industrial customers felt defenseless to protect their equipment when the utility’s outmoded systems caused their own more sophisticated technology to malfunction.

Genuine Insight

Everyone understood rates were regulated. It was the practice of assessing an annual rate increase based on a particularly narrow window that generated so much ill will. Further, while the utility earned high marks for responding to emergencies, customers did not equate that with good service. Responding to emergencies resulted in customer satisfaction, but sensitivity to their particular business needs on a day-to-day basis is what fostered loyalty and built relationships.

Solution

The utility had to position itself as a vendor dedicated to satisfying customers, rather than as a monopoly providing a “take it or leave it” service. That meant aligning their priorities with those of their key customers, beginning with the “usage window” to assess annual rates. Then system upgrades had to be clustered geographically based on the number of manufacturers experiencing equipment malfunctions due to technology incompatibility.