Study: Oilfield customer satisfaction could equal billions

FROM ISSUE 2
By North American Shale magazine staff | April 10, 2018

Customer satisfaction in the oil and gas industry is worth more than $2 billion. A new study completed by Texas A&M University’s Mays Business School and Rice University’s Jones Graduate School of Business, shows that 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. The study found that customers with extremely dissatisfied customers netted $6.4 billion in sales while companies with extremely satisfied customers recorded sales of $8.5 billion.

Conducted by surveying more than 1,200 energy managers, the survey’s goal was to provide an evidence-based approach to understanding drivers of sales, margins and earnings, according to the authors.

Vikas Mittal, professor of marketing at Rice, said oil and gas companies need to emphasize customer experience now more than ever. “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 earning.”
“Meanwhile,” he added, “customers only demand more features and become accustomed to lower prices.”

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.