What is Transparency in Business Relationships?
While many businesses fear revealing too much to customers and employees, transparency can have a powerful effect on improving trust and loyalty, thereby helping businesses in the long run.
When companies disclose their costs to consumers, so that the buyers understand how the final price is determined, sales can ultimately rise. Cost transparency actually has a greater impact on purchase interest than when companies emphasize their personal relationship with a customer, according to research published by Harvard Business School (HBS), conducted by Bhavya Mohan, an assistant professor at the University of San Francisco, and Ryan Buel and Leslie John, an assistant professor and associate professor respectively at HBS.
Although the researchers found that the benefits of business transparency weaken as companies increase prices relative to costs, their experiment with an online retailer found that cost transparency still led to a 44% jump in daily unit sales.
Aside from price transparency, other types of information are also appreciated by consumers and lead to positive effects for the company doing the sharing. For example, 37% of consumers said they would switch food brands if another company shared more detailed product information about what’s in the food, according to a study by Label Insight.
Similarly, another study by Buell, along with Tami Kim, a doctoral student at HBS; and Chia-Jung Tsay, an assistant professor at University College London, found that in a restaurant, customer satisfaction went up by 17% when cooks and customers could see each other, and service was 13% faster, according to results shared with Harvard Business Review.
The Takeaway for Utilities
While the way utilities interact with their customers has very little resemblance to restaurants, the lessons on the value of transparency still have merit.
Without transparency, particularly on price, businesses could easily misunderstand how utilities operate and grow resentful as their monthly bills fluctuate seemingly without reason. Even though in some markets utilities’ profits are decoupled from how much energy they supply or deliver, consumers may not know that and think their utility company is inflating the price, mistakenly believe they’re not interested in ethical business practices.
How Utilities Can Increase Transparency
In order to help customers understand what’s behind their monthly energy bills, utilities can introduce their customers to energy analytics software (EAS). This technology combines historical and real-time data so that customers can gain clear insight into their energy usage and how that affects pricing.
For example, businesses may be unaware that certain spikes in energy usage result in higher overall charges. They may think that they are not using a lot of energy overall, and thus their bills should be lower. Yet with EAS, customers can see how those usage spikes result in demand and capacity charges and what can be done to minimize these costs.
By using EAS to educate customers on how they are charged for energy and the factors that cause costs to rise, utilities can position themselves as trusted energy experts to their customers. This which would in turn increase customer satisfaction and engagement, and remove the notion that costs increased simply because the utility is trying to increase their profit margins.
Beyond getting customers to understand their energy bills, EAS helps increase transparency in businesses and awareness around the energy efficiency measures that a specific business can implement to reduce costs and improve sustainability.
As many utilities are currently mandated by regulation to reduce grid demand, it is critical that they effectively reduce the energy usage of their customers. To reduce overall grid demand, virtually all utilities have created incentive and financing programs to subsidize the adoption of commercial and residential energy efficiency measures.
By leveraging EAS, utilities can better understand the energy usage nuances and patterns of their customers across different business and industry types. Utilizing this data, the utility can discern which incentive programs best align with specific customers to greatly improve the targeting and adoption of their energy incentive plans.
This two-way transparency ends up being win-win for utilities and their customer, as regulatory mandates are achieved and utility customers improve their profitability.
Request a complimentary energy efficiency assessment to find out how Artis Energy’s RTIS® energy analytics platform can provide you with the visibility and insight to transform energy from a fixed cost into a distinct competitive advantage.