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Winning Strategies in Energy E-Commerce: Atlanta Gas Light After Deregulation
By Patricia Kurtz, Senior Project Manager
Polaris Marketing Research Inc.
After Atlanta Gas Light Co. became the first natural gas utility in the nation to fully deregulate, the company turned to the Internet to rebuild its customer relationships so it could market its product and maintain its customer base.
Market Scenario
Initially, everyone thought deregulation would get AGL out of the marketing business. After all, once the Georgia Public Service Commission deregulated the market in 1998, Atlanta Gas Light transformed itself from a product and services company into a services company delivering gas for multiple marketers.
The independent marketers competed with each other to sign up AGL’s previous business and residential customers. AGL started charging a fixed rate for gas delivery, which was added to consumer gas bills by their marketer. Under the PSC scheme, the marketers would do the marketing of natural gas.
Concern Over Customer Retention
It didn’t take long, however, for AGL to notice a problem not being addressed by the individual marketers, whose primary concerns involved luring customers away from their competitors. The uncertainty of the marketplace was taking its toll on the customer base: more and more consumers were abandoning natural gas for electricity and propane.
AGL first conducted an internal customer erosion study to make sure their suspicions were correct, according to Michelle L. Fallon, manager of marketing for AGL. Looking at its customer records dating back to 1992, AGL established a typical seasonal customer pattern and factored out the regular customer churn.
“Sure enough, we discovered a dramatic change in the
customer pattern post deregulation. There were a lot more customers staying
off the system and we were very concerned about that. But we needed a
lot more information,” Fallon told participants in the American Society
for Quality’s 10th annual Service Quality Conference in New Orleans
in September.
Fighting Fire with Research
To track down the exact nature of the problem, AGL turned to Polaris Marketing Research Inc. With focus groups and telephone surveys, AGL began to determine the factors that drive consumer decisions on energy use.
The focus groups told AGL that natural gas users trusted AGL and wanted the company to stay in their corner. Customers thought, “they’ve been good to us in the past. They should watch out for us now.”
Polaris surveyed residential and commercial customers who had recently received a service visit from an AGL representative, as well as those who hadn’t talked with the company recently.
Tracking studies showed a steep decline in customers’ perceptions of natural gas as a better value than electricity. Customers also reported deep confusion over deregulation and a desire for some place to go for reliable information.
Polaris also surveyed former natural gas customers, those who had terminated their service with AGL. The lost customer research discovered that when people terminated their service because they had a new energy provider and had purchased a new appliance, the need for a new appliance came first.
Migrating To A New Marketing Model
Polaris recommended to AGL that they reach customers as
they changed appliances to try to influence their buying decisions –
by informing them of natural gas solutions, promoting the benefits of
natural gas and by offering incentives for choosing natural gas appliances.
For AGL, that meant multiple changes. For instance, the customer service
call center had to be transformed. The representatives had to be trained
to promote natural gas solutions and a system was put in place so they
could refer customers to nearby natural gas appliance sales outlets. Also,
AGL established partnership programs to work with heating and air conditioning
installers, home and commercial builders, manufacturers of natural gas
products, architects and engineers, and other trade allies to promote
natural gas as the fuel of choice.
AGL’s web site, however, became the focus of its new marketing efforts.
“We wanted to turn the web site into a portal that consumers could use when they started their research on a new appliance,” Fallon said.
The site was transformed to serve as a source of information on natural gas in general – with a library and glossary, a calculator for annualizing energy dollars used to operate appliances, and a custom home audit feature to estimate energy usage. The site added a store in which AGL recommended residential product sales outlets and commercial installers. In addition to explaining how the natural gas industry works under deregulation, the web site also included links to the web sites of the independent marketers operating in Georgia.
“The web site is part of an integrated marketing strategy
that includes enabling our sales teams and customer care center with information
and working with our external resources, such as marketers and builders,
to reduce up front capital expenses and implementation time,” Fallon
said. “We needed everyone marching together in the same direction.”
Figure 1: An Integrated Marketing Strategy
Introducing A New Communications Channel
The web site was a key to AGL’s marketing objectives, which were to:
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increase customer loyalty and retain customers, by promoting natural gas as the fuel source of choice, increasing the number of burner tips in the home and creating a forum for customers to leverage AGL’s natural gas expertise,
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project a new brand, a new personality, as a company that is modern, forward thinking, dependable, trustworthy, approachable and available, and
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focus on residential and mass markets, particularly the low- and fixed-income customers, and the medium- and high-income customers.
Figure 2: AtlantaGasLight.com
Driving Website Usage
Once the web site was up and running, AGL launched an advertising campaign designed to drive people to the web site.
The fall 2000 campaign succeeded: hits went from an average of 45,000 to 600,000; the number of unique user sessions quadrupled, and the average length of a visit increased from just over two minutes to 14 minutes. “When they got there, they stayed,” she said.
The web site contributed to thousands of sales of gas logs,
space heaters, water heaters and generators. Sales continued until people
began receiving their January bill, which was substantially higher than
previous months due to a national supply shortage.
“We had the strategy in place to anticipate that,” Fallon said.
“We then switched all of our advertising over to emphasize the audit,
the library and all the information the web site contained. We stopped
selling and we started educating very hard, because we knew that was what
people needed at that point.”
A second advertising campaign, in the spring of 2001, focused on promoting natural gas grills in partnership with area Publix grocery stores and grill dealers. The AGL web site added a special Grill Master section to include recipes, master grilling tips and a sauce encyclopedia. This campaign resulted in sustained web site hits of over 500,000 and lured 5,000 customers into contests to win grills and other prizes.
Continually Improving Customer Contact
In fiscal 2002, AGL plans to expand its web offerings for commercial and industrial customers and to open new residential appliance stores.
AGL’s research program with Polaris will help it monitor consumer awareness and use of the web site.
“These guys have been tremendous partners for us because they’ve given us information that we can act on,” Fallon said. “We’re not done. We need to tweak this stuff. We need to continue to communicate. For as many customers we’ve reached, there’s still a tremendous number we haven’t reached. We know that.”
Going forward, AGL must continue to monitor feedback from its stakeholders – its customers, its employees, the regulating agencies and the financial community. As is true for any organization, the key is keeping the research program current. Changes to the AGL program include new ways to measure awareness and use of the web site, and determine customer awareness of various natural gas products and service. The revised customer satisfaction tracking research also assesses product loyalty; specifically identifying which customers are likely to switch energy sources when they buy new appliances.
As AGL learned, it’s not an easy business environment out there. You’re going to get some lemons. You have to take them as business opportunities, like Atlanta Gas Light did, and go back out there and sell some lemonade.
Reprinted with permission by Competitive Advantage, Fall 2001, a publication of the American Society for Quality.
Patricia Kurtz is a former senior project manager for Polaris Marketing Research. For further information, contact Polaris Marketing Research at 404-816-0353. Polaris is a full service marketing research firm, headquartered in Atlanta, specializing in helping clients build their customer relationships.
