i would like to know why utility companies spend millions on advertising when no one gets to choose their co.?

Question

they spend money on adds and no one has the luxury of choosing where they get their electric or water from . all the while raising our bills to ungodly high rates . am i the only one who is truly disturbed by this

Answer 1

...well, I wouldn't say no one!

In Texas, we have a TON of choices for our electricity provider. In my location, I can choose from among about 15 different providers. From what I understand, many other states have explored similar legislation to increase consumers' choices for electric service! It could be that you're seeing more advertising for the electric provider in your area because that company is aware that it may face competition soon and wants to build strong brand awareness now!

...and the phrase "ungodly high rates" suggests another reason for significant adveritising expenditure! Increasing sales isn't the only purpose for advertising...many companies use advertising for image building and to create goodwill. Your electric company knows that people aren't happy with the prices they charge so they use advertising to communicate "warm fuzzy" things about the company (like ads saying "we are greener than other companies" or "we give back to the community"). They are hoping to keep customers like you from supporting future legislation like we have in Texas OR from participating in potential lawsuits for price gouging.

Funny thing...before the law in Texas, our area had only one supplier, CPL. The company still exists but now it has to do competitive advertising to keep customers from switching to a lower priced provider. The theme of the CPL advertising is that "we're your friend"...one ad had a dad telling his son that he had found a cheaper kid and he would have to let him go...the son says "but dad, you've known me all my life, what if some strange electric company came along, would you leave CPL?" Dad says no and reconsiders. I have to LAUGH myself silly...like who cares if they know me...the only thing they need to know is that when I hit a light switch, I want the lights to come on!!! ...and since every other company does that (they all use the same lines owned by a different company that's still a monopoly so all the current from different sources is basically mixed in), price (and perhaps some environmental issues) is the most important criteria!

Answer 2

Platinum had a partially correct answer. Most utility companies who are also monopolies (unlike the Texas example) advertise ... primarily to show that they are good corporate citizens.

Typically, though, if your state public service commission is doing its job (which it usually is) the cost of this advertising is charged to shareholders, and is not passed on to consumers in the form of rate increases.

This may seem like a rather fine distinction, but it is a real distinction nonetheless. Your rates are not higher because the utility advertises. The shareholders believe this is a valuable use of their money, usually for political reasons.

This answer does not apply to all 50 states, of course, but it is generally true.

Answer 3

It is not advertising in the sense of attracting new customers - it is more of a show-off on how good is this company as being a caring 'corporate citizen'. Electrics often go with campaigns for energy saving bulbs or moderate consumption of climatic installations during the summer and things like that. Also, monopoly companies, as a general rule are major sponsors for festivals, culture and sport events.
Of course, they charge us for all their expenses but unfortunately that's how it works. Fair competition will make their executives more money cautious but as long as the electricity is monopoly that's the way it will work.

Answer 4

I think there are a few things going on here. One is that historically utility companies had bad images and they use marketing to improve them. Second, I think this has to do with Monopoly laws. The utilities have to spend a certain amount of money educating people on energy usage.

Those are my theories. I'd be interested in other points of view.

Answer 5

Texas and new york are de-regulated, but there are 2 basic reasons, one is to maintain customer satisfaction through propaganda, they make the company look like "the good guys" which slows down public dissent when they lobby politicians for better policies and laws that favor the company, And advertising dollars are a tax write-off.

Answer 6

I'm certain they calculated that the funding within the promoting might translate right into a benefit. I do not feel they purchased the advertisements as a "bleep you" to the American core-magnificence or due to the fact their CEOs wanted the ego spice up or anything it's you probably implying

Answer 7

The main reason comes from Marketing 101.

Marketing is about reinforcing a brand more than it's about "getting new customers. It doesn't matter if it "seems" like it's a monopoly either.

Answer 8

It may be thanks to deregulation, because there may be a more competitive climate where you live. (Not the case where I live, sadly.) As a rule of thumb, though, companies will spend as little as they have to on advertising.

At least, that's been my consumer and professional experience.

Answer 9

you're not the only one with this question. I've always pondered the same thing myself.

Answer 10

i don't know