TRC

By Rajan Sambandam

Background

The summer of 2000 was particularly bad for California based energy utilities. In response to the de-regulation introduced a few years earlier, firms had altered some of their energy management procedures. Our client had a voluntary cycling (load shedding) program in place that allowed them to manage heavy loads by reducing the energy supplied to participating households. With seemingly high supplies and low prices, a flat fee based program was in effect that compensated customers for the level of cycling used by the utility. No attempt was made to understand customer perceptions or the differences between customers. When the energy crisis hit California that summer, the utility had no choice but to cycle extensively. This led to droves of customers leaving the program as they did not want to endure long and unpredictable hours of power outage for small compensation. The utility decided that it was time to understand customer perceptions better and re-design the program to make it attractive to customers to enroll.

Design

Working with the utility we decided that a discrete choice conjoint study offered the best prospects for understanding the trade-offs customers make in choosing to join the program. The importance they place on various aspects of the program including the compensation would give the utility enough information to re-design the program effectively. Accordingly a discrete choice conjoint study related to cycling intensity (maximum number of minutes per hour, hours per day and days per month), while two features related to price (fixed seasonal payment and variable per day payment). A phone-mail-phone methodology was used (given the low level of internet penetration at that time), whereby the conjoint tasks were mailed out to pre-recruited customers and answers were collected by follow -up phone calls. [Please refer to white paper Deriving Value from Research: The Use of Conjoint Analysis for Product Development for a more detailed explanation.]

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