Oil And Gas Customer Satisfaction Leads To Increased Sales

By Staff | March 16, 2018

Oil and gas companies looking to increase sales during times of higher oil prices would do well to consider customer satisfaction—in addition to technical solutions—according to a new collaborative study.

Published by the Collaborative for Cubes, the 2017 Energy Benchmark Study found a steadily increasing association between customer satisfaction and sales in the energy sector. On average, a company with extremely dissatisfied customers had $6.4 billion in sales. However, sales for a company with extremely satisfied customers increased to $8.5 billion.

Study leader Vikas Mittal, professor of marketing at Rice University, urged oil and gas companies to focus on customer satisfaction, which he said is driven by factors beyond products and price. “For this, they need to carefully measure customer satisfaction and its drivers in a rigorous manner,” he said.

The study was conducted by Texas A&M University’s Mays Business School and Rice University’s Jones Graduate School of Business. It’s based on a nationally representative online survey of more than 1,210 managers in the energy sector. The study’s goal was to provide an evidence-based approach to understanding drivers of sales, margins and earnings in the oil and gas industry.

The research team simulated results for five companies in the energy sector—Targa Resources, Amec Foster Wheeler, Technip FMC, Conoco Phillips and Sunoco. For each company, sales increased by at least half a billion dollars when customers moved from their current satisfaction level to being extremely satisfied.

“Energy companies routinely embrace the product-features and pricing fallacy,” Mittal said. “To increase sales, they offer products with more technology and presumably better features at reduced prices. These technology investments, in many cases, only increase their costs and reduce margins, such that every bit of incremental sales only reduces margins and earnings.

“They also become progressively more reactive as their justification for more technology is typically lower prices or long-term value,” he continued. “Meanwhile, customers only demand more features and become accustomed to lower prices.”

Other members of the research team include Kyuhong Han at Rice and Shrihari Sridhar and Biwoong Im at Texas A&M.

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