I mean, if you are watching the ad, you are already a customer. Are such ads supposed to make you turn on more lights and use more energy? Smile when you cut that monthly check? Delay installing those solar panels and that windmill? Or (gasp) conserve energy?
Along the same lines, why do McDonalds, Coke, and Pepsi advertise so much? If these companies did NO advertising for a month, would millions of Americans be scratching their heads trying to figure out where to get a hamburger? Is there anyone on the planet who does not know there are two huge cola companies? And does anyone actually prefer Pepsi because of that [sarcasm on] darling [/sarcasm off] little girl?
(Apologies in advance if this best belongs in IMHO.)
For the electric company, I can see two reasons. First, public relations; and second, energy conservation information. We don’t all want to end up in the dark like California.
Electric companies may also be hoping you’ll invest in their stock. Some are trying to create a brand name so when deregulation comes, you’ll choose them.
It’s something I’ve wondered about for years, but not just for the electric company. I first noticed this probably 25 years ago when some company was advertising it’s big mother earth-moving equipment during golf tournaments - it just seemed very out of place among the shots of golf balls and Canadian Tire ads!
I’m constantly amazed at the number of large specialized companies that do mass-market advertising. For instance, Nortel or Oracle and other highly specialized, and very expensive products - sorry “solutions” - are being heavily advertised on TV these days. (BTW - I’m in Canada, so I don’t know if this is the US experience or not.) Yes, people who make decisions on whether they’re going to include Nortel in their company’s network infrastructure plans, or whether they’re going to run their database with Oracle, watch TV. But the proportion of such decision makers these companies are reaching in this medium must be very, very small. It always seemed to me that there would be much more cost-effective ways of communicating with this target.
Conversely, Microsoft sells business “solutions” that have no relevance to consumuers. But when they advertise on TV, they advertise their retail products (currently MSN). They ain’t slogging VB or SQL Server - products with a similar sort of target to Oracle and Nortel.
WAG - is it to drive up interest in their stocks in the retail equity market? Are they really trying to reach personal investors in order to sell stock?
As an aside - I do think this is a question for GQ assuming we talk about the objective realities of reaching an appropriate target through advertising.
Not to mention the fact that there may be more than one electric company in town; as well, the electric company may provide more than just electric service.
Case 1 - I lived for awhile in the Syracuse (NY) area. The major electric provider was Niagara-Mowhark Power Corporation, which basically charged sky-high rates. They controlled power and rates to most of the city and county with the exception of one area: a small village called Solvay (just outside the Fairgrounds).
Solvay created its own electric company, as there were 3 major industries in the area: Halcomb/Crucible Steel, Allied Chemical (a division of Arm & Hammer) and a local tool-n-die company. All three were [Crucible is at half employment, AC pulled out of the area, and the tool company went bankrupt] were large consumers of electricity, so as part of locating in the area, they helped to finance the powere company in return for lower rates. IIRC, our bills were something like .02/kilowatt hour vs. Ni-Mo's .08 (or some obscene extreme to that effect). Damned straight a lot of people were trying to move into Solvay for the rates. Ni-Mo advertised a lot, Solvay didn’t have to (except for reminder informative brochures about electric safety and conservation).
Case 2 - My local company (Kissimmee Utility Authority) also provides internet service. Easy - pay one bill for power and internet service at the same time. I don’t believe Orlando Utilities Commission offers internet service. I am always seeing ads for KUA net: product recognition and ease of payment.
I don’t know what the situation is where you live, but several states (including my own) have “energy choice” programs where consumers pick which electric company they get their electricity from. This seems an appropriate reason for the advertising.
Oh, good. It’s not just me wondering about these commercials. The ones that first got me thinking were the commercials for BASF, Georgia-Pacific and AA Midland.
Why do these companies need to advertise? I never thought of the stock angle, though. That’s a good point.
I see as I go to type this that people have already hit on the two most obvious reasons–attracting investors and attracting new customers. Residents within the city of Cleveland for example, can choose between CEI and Cleveland Public Power.
It’s called “image advertising,” when a well-known company with a highly established brand name and a solid market continue to advertise. In the particular cases you mention, market shares tend to differ among competitors by very small amounts, so any marginal business attracted through image advertising helps their bottom line. They might be introducing a new product line within the brand, or a price special, or targeting a particular demographic among whom they need to build sales.
Sorry - I got so focussed on the first paragraph of your OP, I neglected to help out with this one.
Mass market companies such as these advertise to build or maintain the level of awareness of their products. Advertisers believe that sales of a brand and awareness of a brand are highly correlated. Whether any cause and effect relationship exists - well, that’s probably more an issue for GD.
So no, if McDs decided to lay off for a month, their sales probably wouldn’t suffer significantly. But if they laid off for a year? Probably would. What these guys are after is a knee jerk reaction - I want a hamburger. Where should I go? I know - McDonalds! They want to ensure to the extent possible that when someone thinks of hamburgers, there’s a good chance they’ll think of McDonalds.
This is why so much advertising doesn’t tell you much about the product - it’s all about maintaining awareness and creating a “brand image” that the target will relate to, which can be exploited the next time they need to make a purchase.
Where I live there is no choice as to electricity. That is why I chose them instead of the gas company. Tho I guess there may be some alternatives across entire viewing areas, I certainly have never heard any individuals say they were moving to a particular place because of the electric service. Some companies, yeah. But as was mentioned, I doubt that decision was made after watching a Sunday golf tournament.
Moreover, our electric company has lately had a terrible record of safety in nuclear plants, incredibly high rates, difficulty meeting peak demands, unreliable infrastructure, etc. I would think it would take a heck of a lot of ads to outweigh the negative pub next time a poorly maintained transformer blows blacking out a neighborhood. Don’t know if they can. And I would imagine most folk would prefer seeing those $ put into updating equipment, insuring reliability, or reducing costs, than flashy feel-good ads.
There aren’t all that many major consumer choices where you have to decide between electricity and an alternative power source. And I have been unable to note any conservation content in the adds.
How exactly do TV ads work to convince people to invest in utilities? If I have the least amount of investment savvy, if I decide I want to go into utilities to any extent, I ain’t gonna necessarily go with the local team just because they have pretty ads.
pld, any idea how effective “image advertising” is? I understand how in a huge market, minor market swings can be significant. But advertising isn’t exactly cheap. I wonder if McD’s decided to go a month without advertising, how much they would save, vs how much they would anticipate missing out in sales, etc.
I’m not sure they do. I was only raising the speculation. I’m NOT suggesting that significant numbers of people would invest in a company solely because of the advertising, I do, however, recognize that people tend to be more comfortable about things they are familiar with. And one way of buying familiarity is to advertise. What I’d love is for a media buyer for an electric company, a Nortel or an Oracle to enter this discussion and say who the hell their ads are targetting.
Anyway, it really is a misconception that advertising is going to “make” anybody to anything. I.e., advertisers know that the following scenario is unlikely:
I want to buy a car. I really liked the ad for X kind of car. I’m going to buy the car based on that.
What advertisers are suspecting happens is:
I want to buy a car. You know, when I think of cars, I’m interested in X, Y, and Z (that’s zed not zee! chuckle). Those are the ones I’m going to check out first.
The reason they advertise, is to make sure that their car is one of X, Y, or Z that gets considered.
One way to get into that subset of cars to be considered is to create the impression that their car (or hamburger, or beer, or whatever) is suited to a particular type of person.
That’s why ads are carefully targeted to a partiular type of buyer, and generally the advertiser doesn’t give a damn about what anyone outside the target thinks.
D18
PS - apologies for my previous simulpost with pld!
I work for an electric company. We USED to advertise mostly for public relations. Now, however, the area we service is deregulated. This means that the customers in our area have a choice for their electric supplier. Most states are now deregulating the electric companies so every company has to advertise to get business. We also offer a number of other services that we want to let potential customers know about.
Uh, am I the only one who sees a McDonalds commercial and thinks [Homer]Mmmmm, Filet o’ Fish[/Homer]? Keeping the product in people’s minds almost certainly leads to better sales.
While we’re sort of on the subject, can someone tell me how having multiple electric companies works? I assume they’re sharing the same power grid; does that mean that whatever company you use is just the company the bills you, but all companies are supplying power to the grid? How is it determined how much each company contributes to the supply? And if you have a problem with the electrical service, whose responsibility is it to fix the problem, assuming the problem lies with the public lines?
I also work for an electrical utility company. Our advertising used to be mainly for public relations. Now it has expanded to let people know about services offered, such as night lights, street lights, etc. Also we support a lot of educational programs and our name may be mentioned in connection with those ads. During the holidays, the company does ads focused on family, and they actually do ads to tell their employees that they appreciate them, because many of us have to work during holidays. This year I’ll have to work Thanksgiving and Christmas, but it’s part of the job.
As far as deregulation goes, I believe that we will see a lot of disappointed people when this happens. At first you’ll get a terrific rate, but if you read the small print, the rate will only be good for a certain length of time. Then you’ll see your rates go as high as triple what they are now. It’s a great deal for the business consumers, but for the residential consumers it’s gonna be a heartache.
As evidenced in California, it’s not as easy to do as it looks on paper.
How it works varies from country to country, but often the local distribution grid remains in the ownership of your local utility, and the transmission grid is also in separate ownership. The generation companies market electricity to end-users, and pay the transmission and distribution operators “use of system” charges to carry their electricity, or else a supply company buys from a generator, markets to end-users, and pays use of system charges.
The amount of electricity you take out of the system is metered, and the amount of electricity each generator puts into the system is metered. They try to produce exactly the right amount for what their customers use, and have to trade with somebody to make up for any deficit or excess.
If there is a problem with the distribution lines, the distribution company’s linesmen go out and fix it.
Of course nobody can say whether the electricity you use is the “same” electricity that was produced by the company you buy from, but if it’s not, it doesn’t matter as long as they supply the same amount you use.
Well, then, what about cotton, or plastics, or cheese? Or beef, for that matter? Or the other white meat? I always scratch my head when I see those ads. Cotton? Does watching “The touch, the feel, of cotton! The fabric of our lives!” sway me from polyester? No! Cotton isn’t a brand name, it’s a fiber. Is this kind of advertising effective at all? Plastics kind of make sense, as an anti-environmentalist kind of ad - yeah, plastics aren’t biodegradable, but they save lives. Still, I’m buying plastics regardless of what’s advertised to me, because there isn’t much choice one way or the other. And cheese? I mean, it’s cheese. Why do national councils on whatever advertise? Is it effective? Does anybody have figures?
Warning: post may be affected by massive quantities of vodka consumed earlier this evening