Decisions made around money and valuable goods tend to follow certain patterns, and those patterns can make or break people and businesses. Just consider the case of utility rate increases.
Utility usage is considered inelastic in economic terms, meaning that the amount demanded doesn’t proportionally decrease when the cost increases. In other words, even if COVID-19 rate hikes or some similar increase in pricing squeezes consumers, consumers will continue to consume utilities — and they often grow irate at the greater cost. Such anger may hinder utilities’ long-running goals, such as completing vital infrastructure improvements.
This post will discuss the most effective techniques for communicating a rate increase, how to minimize negative customer reactions, and a sample letter that will help you craft your own unique rate-increase notice.
Messaging is the Most Important Factor to Successful Rate Increases
While those associated with utilities understand that they can’t simply raise rates on a whim and must obtain approval from an applicable Public Utility Commission, fewer consumers understand that reality. It’s no wonder why. Reporting on a study conducted by Hahn Public, industry periodical WaterWorld reported that roughly two-thirds of consumers have seen at least one utility bill increase over the past five years and only one-fifth believe those bills are essentially fair.
That poses a problem for utilities, because they face numerous circumstances that would seem to call for rate increases. Still, rate increases don’t have to turn into wars between utilities and customers. In the following sections, we will show how customer-focused messaging can help you successfully sell a rate increase.
Framing and Justifying the Rate Increase
One of the biggest problems with rate increases is that they’re compulsory, requiring customers to accept them no matter if they want to or not. That’s why the way in which you frame your rate increase is of utmost importance.
In a 1981 study published in Science, Amos Tversky and Daniel Kahneman discovered that they could obtain “systematic reversals of preference by variations in the framing of acts, contingencies, or outcomes.” In other words, by describing a problem in one way or another, they could change the ways in which individuals responded. This simple insight opens up a wealth of persuasive possibilities — and a useful tool for utilities seeking to navigate rate increases.
In its study, Hahn Public found that four communication frames did little to convince customers about the importance of raising rates. They included stating that new rates:
- Were required to continue service (30 percent convinced)
- Part of a regular pattern of small increases (28 percent)
- Are in line with what others pay (24 percent)
- Bring in better jobs (23 percent)
By contrast, the most successful framings stated that new rates:
- Were guided by safety as a top priority (73 percent)
- Still included savings if consumers followed utilities’ tips (72 percent)
- Were needed to help consumers benefit in a rapidly changing field (66 percent)
- Partially supported renewable energy (65 percent)
These latter four should form the focus of your outreach efforts.
Hone Your Messaging to Customers and Be Clear
After selecting one or more of the above framing messages, you should ensure that you carefully formulate it in a clear manner that all staff can succinctly communicate to clients. (See the section “Make Sure Your Team Is Aware of the Increase” for more information.) Once you’ve done so, communicate directly to consumers well before the new pricing comes into effect, using means such as:
- Bill inserts
- Social media
- Announcements printed directly on statements
- Announcements connected to online bill calculators
- Direct mailers
Time Your Announcements with Customers in Mind
The timing of rate-increase announcements may vary from one utility to another, but they all should follow a single, simple rule: You must give your customers ample warning prior to any rate adjustment. A large margin between the initial communication of price changes and their implementation allows end users to reassess their own personal budgets and mentally adjust to the coming changes.
Equate Higher Pricing with Better Service and Quality
In addition to implementing the frames mentioned above, make sure your customers know that higher pricing does more than merely guarantee that service continues. It also means that they will receive better and higher-quality service. Note that many customers have a high opinion about renewable energy sources such as wind and solar, and if your utility plans to implement, improve, or maintain some of these, you should consider highlighting that fact.
Make Sure Your Team is Aware of the Increase
Few things make utility customers as angry as hearing conflicting reasons for a rate increase from different utility employees. Whether or not you believe you might face stiff resistance to a price change, unifying your message across your team simply makes sense. Not only does it facilitate goodwill with your customers, it avoids exacerbating any irritable reactions.
Putting it all Together: Rate Increase Letter Template
What does all of this look like in practice? Well, below you will find a short sample letter from the hypothetical utility Bryte4U Power that may give you a place to start communicating with your customers:
Dear [CUSTOMER NAME],
Due to Bryte4U Power’s ongoing commitment to making safety our top priority, we will be increasing our power rates by [PERCENTAGE INCREASE] starting on [DATE].
We know that no one enjoys receiving news of increased rates. Please note that this increase will help fund infrastructure improvements that will provide you with safer, more reliable, and more efficient power. Additionally, these investments will be partially backed by renewable energy sources that will safeguard our environment and the wider world.
In order to minimize the impact of this rate increase, we’ve published a number of power- and money-saving tips at StayBryte.com/save. We truly appreciate your business, and you can reach us with any questions you may have by calling (888) 555-1212.
Customer Care Advocate