June 30, 2022 | Blog
Apogee Interactive researched the relationship between utility customer satisfaction and operating margin for several years. In 2019, we analyzed the customer satisfaction scores of multiple utilities and discovered a strong correlation between higher customer satisfaction and higher operating margin. J.D. Power has concluded that utilities with higher customer satisfaction tend to have higher returns on equity, as documented in the 2015 report “How Customer Satisfaction Drives Return On Equity for Regulated Utilities.” A recent study confirms and quantifies the actual operating expense reduction that can be attributed to improvements in utility residential customer satisfaction.
Doctors Morgan and Rego of the Kelley School of Business, Indiana University, and Doctor Bhattachary of the University of Groningen, Netherlands, collected and analyzed 478 firm-year of data for 38 utilities from 2001 through 2017. This data included customer satisfaction indices, financial performance, and customer demographic profiles. The primary source of economic data was the Energy Information Administration (EIA), the U.S. government agency responsible for collecting, analyzing, and disseminating energy information.
A summary of the finding was published in a blog by George Vlahakis entitled: Good customer service can lead to higher profits, even for utilities without competition.
The findings include:
Therefore, if a utility is seeking more efficient operating costs, they should focus on increasing customer satisfaction.
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