Customer Satisfaction and Demand for Quality in Public Utilities - Essay Example

Satisfaction and Demand For Quality In Public Utilities Introduction: The original reason for nationalization of monopoly industries like coal, rail, shipbuilding, steel and public utilities was that it was too easy to earn profits in them. However when the state took over, the opposite happened and the industries plunged into huge losses. In private businesses everybody from the entrepreneur to the workforce was benefited if the business succeeded. If the business was not able to attract customers it simply dissolved. On the other hand if a public utility failed the state pumped in more money to salvage it. (Macrae 1991) Although there is a strong case for privatization of industry, in many countries the political forces of welfarism were far too strong to turn such public monopolies into private enterprises. Many governments found a via media approach, in deregulation of industries. This is the process by which governments removed restrictions on businesses in order to encourage competition that would not only improve efficiency and lower prices but also protect the rights of the consumers. For instance, the board for public utilities of Newfoundland & Labrador, Canada states its mission as: "ensuring the state's public are well served in a changing environment, achieving an equitable balance between the interests of consumers and service providers in the electric utility, automobile insurance, petroleum products and motor carrier industries." ("Newfoundland & Labrador Board " 2005). Similarly, in its 2006 Handbook, the department of Consumer Affairs - Industry, Canada has given useful tips not only to save money on their utility bills, usage of natural resources responsibly and protecting the environment but also contacts and mechanisms for redressal of grievances in case of problems with public utilities. ("Canadian Consumer Handbook" 2006) The argument for total deregulation was that the regulated industries often influenced the government regulatory bodies tilting the scales in their interests. Although the regulatory bodies might have started functioning independently, many of them have fallen prey to the industries they sought to regulate and were in many cases influenced by them. Ironically the same pattern could be discerned even in the process of deregulation. Some of the perceived failures of deregulation have found favor with the proponents of re-regulation for a calibrated approach for each case separately and in consonance with the winds of change that are sweeping across businesses such as liberalization and globalization of markets. According to the 1989-1992 Electricity Act, British consumers can choose their electricity supplier. Regional electricity companies not only have to meet the standards specified in the act but also face fierce completion from others. It is no different for water companies. They face enhanced pressure for improved customer service, reduced wastage and environmental damage. The standards of service are driven not by the regulator but by the industry and customer expectations. The challenge would be to achieve high levels standards to meet heightened consumer expectations without increasing costs. Public utilities long considered slow and unresponsive to the market are forced into making investments to remedy their shortcomings. (Mansell-Lewis 1994). Customer satisfaction: It is well known that customer satisfaction largely leads to customer loyalty. Loyal customers bring in a higher share of their expenditure, repeat business, referrals and word-of-mouth publicity. As deregulation and liberalization increases the number of players competing in an industry, the net effect for the service providers is heightened customer expectations. According to a national opinion polls (NOP) survey commissioned by Olista, a 'service experience assurance' company, users who encounter problems while using mobile data services would simply give up rather than seek assistance. The report is headlined "impatient mobile data users aren't prepared to give operators a second chance." The survey polled 1000 adults in the UK in September 2005. Sixty four per cent of the respondents said they gave up after one or two attempts to use a mobile data service such as picture messaging, ring tones and gaming downloads; two percent would seek assistance from the operator and twenty five per cent would try until it worked. The survey was aimed at finding how mobile users react to poor user experience - which in other words means poor customer service. Forty three per cent of the respondents surveyed felt that easier-to-use-services would encourage them to use more mobile data; fifty three per cent wanted lower prices and thirty two per cent pointed out that better help and advice at the point of sale would influence them positively. The survey highlights the need for a more proactive approach to customer care. Oren Glanz, CEO of Olista, said that operators need to be able to discover a problem before the customer became aware of it and contact him/her with a solution. This would turn the customer's experience into a positive one. "It should never be too late to assure service experience and understanding the mobile content experience from the end user's point of view can be the key to ensuring customers use your service again. " ("NOP survey reveals" 2005) 35 Communications, the independent business communications company specializing in branding and corporate reporting, polled 1,400 British utility consumers between the ages of 18 & 65, in a simulated exercise to elicit their opinion about some of the best-known brands and organizations. The survey was to probe key factors effecting customer relationships such as trust, reliability, responsiveness and appeal - the components that determine the reputation of an organization. The results were indeed revealing: although trust is at the heart of any brand promise, one-third of UK consumers distrust large organizations; energy utilities have the lowest credibility rating at an average of 42% with Thames Water at the bottom of the list; 70% of organizations provide reliable service; financial services is perceived as the most reliable industry; the energy sector the most un-reliable; Thames Water featured again at the bottom as the worst performing business across all sectors reviewed; just over half of the organizations are likely to treat consumers courteously; only 59% feel they are treated like adults and 17% of the organizations are perceived to show interest in consumers. Over 53% of energy companies are perceived to be smoothing over problems than listening to consumers' problems. Just over a third of the respondents welcome an association with some of the most established UK companies and only 25% in the energy sector, making it the worst performing commercial sector. ("Customer Satisfaction"2007). Measuring customer satisfaction: How do we measure customer satisfaction assuming that this will lead to loyalty There is no specific answer for this. There are a number of possible questions that may be included in a customer satisfaction survey but the following are the most common and important: 1. How satisfied are you with the quality of our products 2. How satisfied are you with the reliability of our products 3. How satisfied are you with the value for money of our products 4. How satisfied are you with our sales and after sales service 5. How satisfied are you with our speed of delivery 6. How satisfied are you with the reliability of our delivery 7. How likely or unlikely are would you be to recommend us 8. How satisfied are you overall with us (Adapted from Hague et al. 2004) It is necessary to record answers to these questions on a simple scale of not more than 1 to 10 in order to make it convenient for the respondents and to keep the record for benchmarking. Customer satisfaction measurement, in order to be able to drive organisational goals must be integrated into the marketing strategies. However, it must be understood that satisfaction may not result in loyalty. This is because satisfaction is an attitudinal attribute, which indicates how a consumer feels about a company, product or service whereas loyalty is a behavioral attribute, which indicates how a consumer behaves in relation to a company, product or service. Will the consumer buy the product or service again Will he recommend it While there is no guarantee that a satisfied consumer will not defect, a dissatisfied consumer is sure to switch to others at the first available opportunity. Behavioral loyalty depends on the perceived value of the product or service. The key for success in business is to understand what the consumer perceives as value and delivering it. The perceived value may sometimes be irrational, but that is what the consumer wants and that is what a marketer should deliver. The best way to obtain customer satisfaction and convert it into customer loyalty is by adopting customer relationship management techniques: exit barriers and switching costs (for e.g. switching to a product/service competitor might require installation of costly equipment); customer education or customer learning curve; process integration; personalization of services; mass customization; risk reduction and trust; loyalty programmes; brand affinity; customer collaboration and setting standards or 'become a standard'. Improving customer service: In order to monitor and improve its customer service, North West Water has invested large sums in IT to outsource its facilities management. At the risk of a temporary slow down, the company contracted out its primary billing. The quality of service when outsourced is generally better and less expensive than in-house. Many other public utilities followed suit. In some cases the move helped the companies in staff rationalization and savings on related costs. (Collins 1995) As public utilities face increased competition, they are forced to meet competition by luring consumers, cutting down costs, improving services and in order to protect their bottom line by diversifying into other businesses. The electric utilities have faced in the 1990s, the free-for-all that the telecommunication sector faced in the 1980s. The US electric companies are looking at business process re-engineering and supply-chain management in order to improve their profitability. Additionally companies, which restricted themselves to power-generation, have been taking to transmission and distribution services and even toying with the idea of leveraging their investments in information-technology into entirely new business arenas (Sheridan 1995). Conclusion: A direct consequence of these trends with increased choices, reduced prices and public utilities shedding their image of being indifferent to consumers' woes, is to greatly benefit consumers. Public utilities, like other businesses will have to focus on customer relationships such as trust, reliability, responsiveness and appeal - the components that determine the reputation of an organization. Bibliographic References: "Canadian Consumer Handbook 2006." Office of Consumer Affairs - Industry Canada (2006). Retrieved April 9, 2007 from consumer.ic.gc.ca/epic/site/oca-bc.nsf/en/ca01513e.html Collins, Tony.(1995) "Source of discontent (Special Report: FM and the Utilities) (facilities management) (includes related articles for and against outsourcing) (Industry Trend or Event)."Computer Weekly(Oct 5, 1995):40(4).British Council Journals Database.Thomson Gale.British Council. Retrieved April 1, 2007 from: . "CUSTOMER SATISFACTION: Regaining customer confidence (in energy industries)."(2007). Marketing Week(March 22, 2007):28.British Council Journals Database.Thomson Gale.British Council.Retrieved April 1, 2007 from . Hague P., and Hague, N., (No date). "A White Paper on Customer Satisfaction Surveys." B2B International Ltd. Retrieved April 9, 2007 from: http://www.b2binternational.com/whitepapers3.htm Macrae, Norman."A future history of privatisation, 1992-2022. (Britain)."(1991). The Economist (US)321.n7738(Dec 21, 1991):15(4).British Council Journals Database.Thomson Gale.British Council.Retrieved April 1, 2007 from . Mansell-Lewis, Emma."Are you being served (UK's newly privatized utilities seek to ensure customer satisfaction) (includes related articles on Scottish Hydro Electric, South Western Electricity Board, East Surrey Water)."(1994). Computer Weekly(April 14, 1994):28(2).British Council Journals Database.Thomson Gale.British Council. Retrieved April 1, 2007 from . "Newfoundland & Labrador Board Of Commissioners Of Public Utilities. 2004-2005, Annual Report." (2005). Retrieved April 9, 2007 from http://n225h099.pub.nf.ca/down/AnnualReport2005.pdf "NOP survey reveals impatient mobile data users aren't prepared to give operators a second chance." (2005). European Communications. Online Press. 04 Nov 2005. Retrieved April 9, 2007 from http://www.eurocomms.co.uk/online_pr/online_pr.ehtmlo=167 Sheridan, John H.(1995) "Utilities: an uncertain future.(electric utilities)."Industry Week244.n6(March 20, 1995):21(3).British Council Journals Database.Thomson Gale.British Council. Retrieved April 1, 2007 from . Read More