Dr. Peter Bishop is an Associate Professor of Strategic Foresight and Director of the graduate program in Futures Studies at the University of Houston.

On November 9, the University of Houston hosted the first Future Day in the U.S. based on a study (soon to be published as a book) by the Bertlesmann Stiftung Foundation entitled, Megatrends in Global Interaction. The study reviews the long-term future of six sectors – Global Governance, Demographic Change and Migration, Energy and Natural Resources, Global Security, Biodiversity and Economic Globalization – as well as the interaction of each sector with each other, and with the broader population and its future. As a Tier-One University with a strong energy tradition, UH has chosen to focus on the future of energy and natural resources based on the chapter written by Dr. Stephen Brown, Professor of Economics at the University of Nevada, and Joel Darmstadter, Senior Fellow at Resources for the Future.

Brown and Darmstadter present a balanced, comprehensive overview of the future of natural resources, especially energy resources, using the economic model of scarcity. Scarcity, in their formulation, does not mean ‘less of.’ Rather it means that natural resources are increasingly more difficult to obtain since the most accessible reserves are exploited first. Scarcity also means that meeting the demands for energy and resources is increasingly difficult in an era of increasing population and economic growth. Though scarcity tends to increase prices, technology improves both the effectiveness of obtaining the more difficult resources and of using those resources more efficiently to meet the demands of growth. So, the future is a mix of factors that both drive availability and prices up or down, depending on one’s assumptions.

Of course, the big news in energy these days is the leap in domestic reserves of petroleum and natural gas due to the development of hydraulic fracturing (fracking). That technology is bound to increase domestic energy supply and thereby reduce dependence on foreign supplies. Another effect is to shift electricity generation away from coal and toward more natural gas. While gas is more expensive than coal, it is also easier to handle and, most importantly, it emits only half the carbon dioxide per BTU than coal does (Natural Gas, US EPA). That means that natural gas could reduce the amount that the generation of electricity contributes to CO2 emissions. But just how much reduction can we expect? Will the switch to natural gas make a significant dent in the U.S. emissions?

To find out, I made that calculation based on projections from the U.S. DOE’s Energy Information Administration (EIA). The EIA reports that the U.S. currently generates about 3.8 trillion kilowatt hours (TKWh) per year. They project that this number will rise to 4.5 TKWh in 2035, a 20% increase. In doing so, the emission of greenhouse gases (in CO2 equivalent units) will increase from 5.5 to 5.8 billion metric tons per year, which is only an 11% increase. The difference is that the power generated from coal increases by only 12% and the power generated from natural gas increases by 27%, generating half the emissions that coal would, and that the power from renewables increases by 47%, although it will still represents a small 14% of all generation.

Nevertheless, the net new emissions from coal and natural gas both increase—coal by 182 million metric tons (MMt), an 11% increase, and natural gas by 59 MMt, a 14% increase. Overall, the electricity sector increases its emissions by 11% in 2035.

But what if the shift from natural gas to coal does not take place? What if the power generated from natural gas was the same in 2035, and all that new power was generated by coal? Just how much emission does the shift account for? I calculated that adding the new power expected from natural gas to the amount expected from coal would more than double its emissions from 182 to 450 MMt. That in turn would increase the growth of emissions (2012-2035) from 11% to 21%, a considerable increase. And since electricity production generates about 40% of U.S. emissions, the shift to natural gas just about cuts in half the increase emissions overall from 8.2% to 4.4%.

So does natural gas “solve” the problem of carbon emissions for those who care about that? Doubling the power generated by coal doubles the emissions from electricity generation. So the shift mitigates the effect of electricity production, but it does not eliminate it. It reduces the growth in 2035, but the growth is still there. Much more would need to be done to eliminate that growth or even decrease the emissions at that time.

• AEO2012 Total Energy Supply and Price Summary
• AEO2012 Electricity Generating Capacity

Dr. Peter C. Bishop is an Associate Professor of Strategic Foresight and Director of the graduate program in Futures Studies at the University of Houston.

“Likely to Recommend” Has a Shelf Life

Saurage Research and Pennwell Publishing’s Oil and Gas Journal Online Research Center measured the likelihood to recommend an oilfield services provider in The Edge syndicated reports. It was uncovered that as the time between a supplier’s interaction with a customer increases, the likelihood that the customer will recommend the products and services of that supplier decreases.

Based on the study of over 500 oil and gas industry professionals who purchase or influence the purchase of goods and services from production services, well testing, drill bits, and pressure pumping services, net promoter scores decreased as the time since the last purchase from a supplier increased.

The following information is based on the data received in the 2009 Saurage Research/Pennwell Publishing’s The Edge Report:

Net Promoter Segments by Customer Type

From the percentages provided above, the following Net Promoter Scores are provided by company type.

Net Promoter Scores by Segment

As indicated in the information provided above, current customers are most likely to recommend the products and services of an organization, with that likelihood diminishing significantly over time. Those who are familiar with an organization, but have never purchased from them, are least likely to recommend that organization.

 

What is Net Promoter?

Net Promoter® is both a loyalty metric and a discipline for using customer feedback to fuel profitable growth in your business. Developed by Satmetrix, Bain & Company, and Fred Reichheld, the concept was first popularized through Reichheld’s book The Ultimate Question, and has since been embraced by leading companies worldwide as the standard for measuring and improving customer loyalty.

Saurage Research obtains the Net Promoter scores by asking respondents a single question that utilizes a 0 to 10 rating scale. This standard question is: “How likely is it that you would recommend [company] as a provider of [service]“. Based on the respondent’s responses, they are segmented into one of three groups:

1. Promoters : Respondents who provided a rating of 9 or 10
2. Passives: Respondents who provided a rating of 7 or 8
3. Detractors: Respondents who provided a rating of  0 to 6

Net Promoter is calculated by subtracting the percentage of Detractors from the percentage of Promoters.

Proponents of the Net Promoter approach claim the score can be used to motivate an organization to become more focused on improving products and services for customers. They further claim that a company’s Net Promoter Score correlates with revenue growth.

The Edge reports provide the Net Promoter Scores for oilfield services companies such as Schlumberger, Halliburton, BJ Services, Baker Hughes, and Weatherford.

For additional insights regarding Net Promoter®, The Edge Reports, or any marketing research needs, please contact me at rcisneros@saurageresearch.com.

 In other words, to gain understanding into what is really driving brand satisfaction, reputation, perceived value or awareness, an organization should gain insight and understanding into the brand promise areas that impact brand equity.  Armed with this information, a fully-integrated management team can devise a well-informed strategy to implement change and foster growth.

A company’s brand promise typically centers around 5 key areas: Mission, Vision & Strategy, Communication, Operations & Logistics, Products & Services, and Value & Behaviors. These brand promise areas have a strong correlation to a brand’s equity.

Saurage's Brand Promise Model

 Mission, Vision & Strategy

Schlumberger has established itself as the leading oilfield services provider, that is trusted to deliver superior results and improved E&P performance for oil and gas companies around the world.  By continually keeping sight of its promise to deliver superior results to its customers, Schlumberger enjoys market leadership in many of its oilfield service product and service offerings.

Unlike Schlumberger, which competes in many specialities, other companies have strategies that are centered in a single area of specialization. Houston, Texas based  Seahawk Drilling has a strategy to improve the profitability, efficiency and reputation of its core business: providing jackup drilling services to the exploration and production industry in the Gulf of Mexico.  By focusing on jackup rigs, Seahawk Drilling can effectively fine tune its operations and growth potential by delivering outstanding value in a single area of interest.

Furthermore, having technical experts in the area of interest can lead to being a preferred supplier for the most challenging jobs. This leads to trust, significant market share, and customer loyalty.

Mission, Vision & Strategy is a critical component to the brand promise model, because, unlike most brand equity measurements, it allows success to be measured internally. In other words, how a person describes one company, should not be how they describe every company in that category. The perception of a brand should be unique, and should match closely to that brand’s strategy.  If everybody is the worldwide leader, then nobody is.

Communication

Are you listening to your customers?

 According to energy studies conducted by Saurage Research and Pennwell Publishing’s Oil and Gas Journal Research, there is a positive correlation between overall satisfaction and companies that listen to their customers and understand their needs.  In a production optimization industry, such as energy, listening to and understanding customer needs can lead to solutions that were previously unconsidered. Furthermore, constructive communication fosters trust. Trusted companies are strong companies.

Additionally, using advanced survey techniques, such as conjoint analysis or maximum difference scaling, organizations can optimize their product and service offerings based on the voice of the customer. Gaining deep insight into customer issues will also allow companies to avoid creating a solution to a symptom rather than solving a deep-seated problem.

The ability to work with customers as problems arise, being customer friendly, and having a professional and knowledgeable sales staff are important communication areas of focus.

Operations and Logistics

A customer cannot insist on a provider, if that provider is not available or has no presence in the market. For global oilfield service companies like Halliburton, Weatherford, or Baker Hughes, having an international presence provides a feeling of trust. Additionally it delivers on the brand promise by providing support where ever a company may have a need.

Does your company operate where your services are needed?

Especially in the oil and gas arena, the ability to consistently deliver high-quality service is an important attribute that impacts the reputation of an organization. Consistently delivering on this brand promise increases the likelihood of repeat business and the chances that customers will promote a brand rather than detract from it.

Products and Services

Companies promise solutions, not products because customers seek solutions. A key brand equity component that is often measured is differentiation, an area of key differentiation can lie in the products and services that companies offer. How well a company delivers on its promise to provide reliable products, high-quality products, or its ability to offer a wide variety of solutions, may very well set it apart from the competitive set and build the equity in its brand.

Hughes Christensen could not have established itself as a leader in oil field drill bits had it continued to only provide the  two-cone drill bit that it launched in 1909. Because of the needs associated with the different drilling formations, such as soft formations like unconsolidated sands or clays, or medium formations like calcites or shales, customers were seeking solutions for their drilling needs. Since then, Hughes Christensen has developed three-cone drill bits and PDC bits.

Values and Behaviors

Customers don’t buy based on price alone, they buy based on value.  As much as companies like to differentiate themselves from one another, customers can be segmented based on how they define value. Having an international presence may be of value to a major oil company like Shell, ConocoPhillips, or Chevron but of very little value to an independent like Cabot Oil & Gas or Spindletop Oil & Gas.

However one thing is certain, every customer sees value in attributes such as having operations that are proven in formations relevant to their operations, being a good value for the money, or helping companies achieve significant gains in productivity. Organizations that consistently deliver on the values of promise, enjoy loyal customers.

Summary

Every company has an obligation on the promise that it makes to its customers. Without continually delivering on its promise,  a company cannot expect to grow or remain stable. While many organizations and brand strategy firms measure brand equity, the underlying factors that result in brand equity scores often go unmeasured. In order to affect change and improvement in brand equity, an organization should also gather information into the areas that comprise the brand promise. 

About Saurage Research

Saurage Research is a full-service marketing research firm. Which means we not only provide the answers — accurate, usable data — but we package it in a way that you can understand it. And act on it.

We’ve been around since 1987, providing relevant revelations to grateful clients in many industries. We’ve helped advertising agencies redirect foundering campaigns. We’ve helped business-to-business clients define and reach new customers. And we’ve helped energy companies tap into new markets and have given healthcare companies a shot in the arm.

Our expertise includes:

• Brand Strategy Development
• Brand Positioning and Differentiation
• Competitive Analyses
• Segmentation Analysis
• Adapting initiatives to time frames
• Determination of Value Drivers
• Exploration of communication channels
• Formulating Key Messaging
• Brand Development

Is the brand a logo, a mission, an identity, the name of a company? Well, that is part of it. However, the logo, the mission, the identity, the name of the company all represent a promise.

A brand is a promise to consistently deliver an exceptional and valuable experience to employees and consumers.  When you think of the brand Mercedes-Benz what comes to mind?  Luxury? Quality? Expensive? State-of-the art? What is te promise of that brand? What, as a consumer, would you expect in terms of product quality, service, and value from buying a Mercedes-Benz product? And finally, why are those expectations in place? Is it because so many people can afford and have experienced driving a Mercedes-Benz? No, the image and the expectations are based on Mercedes-Benz consistently delivering on its brand’s promise to the consumer.

In the oil and gas industry, growth and sustainability can be tied directly to the equity in a company’s brand. In other words, how well one pressure pumping service delivers on its promise to provide its customers with the most advanced products, services, and technology in the business  may give it a competitive advantage over another. Granted players in this arena, like BJ Services, Key Energy,  Halliburton, Schlumberger, and Weatherford may all have similar promises in this specialty, but who delivers on the promise the best is the one who enjoys market leadership, sustainability, growth, and the ability to charge a premium price for its services.

What is Brand Equity?

Brand equity is the amount of trust that stakeholders have in a company’s promise.  It is a matter of trust. Trusted brands are strong brands.

There are four major components that comprise brand equity:

Awareness

Have you ever purchased a product that you knew absolutely nothing about? Have you ever insisted on a product or service without even knowing the name of the provider? How many times have you been surprised to learn that a particular company offered products and/or services in an area that you were unaware of.  I am an avid tennis player and dabble in trumpet playing, while most know the brand name Yamaha for its motorsports or home electronics, I am most familiar with the brand as a maker of tennis rackets (I am not certain it still produces rackets) and musical instruments.  However, someone new to music may not even be aware that Yamaha competes in this space.

The same can be said for oilfied service companies. Many oilfield service companies have an integrated approach and offer a wide array of products and services.  Because of this, many may not be aware of ALL of the offerings of a company. Are just as many people aware that Schlumbergeroffers subsea solutions as are aware that Cameron does?  What is most critical to point out is that a consumer cannot insist on a brand if he is not aware that the brand exists or operates in that space.

 Accessibility

Consumers are not able to buy products/services that are not available at the time they are needed. When drilling a well, how long do you think a company like Atlas Copco Secoroc would remain in business if its drill bits were not available when customers needed them? Production and exploration will not cease, customers will just go to other suppliers to get the products and services that they need.  Rain checks are unacceptable.

Accessibilty is very important because it builds brand equity by satisfying a brand’s promise to efficiently and consistently provide not only high-quality products, but also provide them at the time that they are required. Additionally, the promise of accessibility goes beyond the promise of having products available, but also having sales people, technical experts, billing, technical information, service representatives, and an easy to navigate website available to customers or potential customers.

Differentiation

 The most important thing a brand can deliver is differentiation. However, the differentiation must be significant and of value. In markets where products act as commodities, relevent differentiation can be attained from non-product characteristics such as customer service or technical experts who stand head and shoulders above the rest.

Marketers in the oil and gas industry often struggle in an attempt to differentiate their product from products that are being marketed by competitors. However, unique or different are not necessarily good terms in the energy arena in terms of products. As Jeff Thull, president and CEO of Prime Resource Group indicates in his piece entitled Product Differentiation in a B2B Market:

In complex products and services markets, the majority of customers do not care how “cool” your solution is. Business-to-business customers care about their strategies and how to execute them and their problems and how to solve them. This is why problem-oriented differentiation, or Diagnostic Marketing, is the most effective way to bring complex solutions to market. The goal in Diagnostic Marketing is to craft targeted messages that engage customers and move them along the “progression to change.”

Successful differentiation effectively makes the consumer consider a new way to solve their problem. It is the experience with the brand and its products that set it apart from the competitive set.

Value

The product and/or service that a company offers must be worth the price to acquire it. Those whose products/services continually meet or exceed the promise of the brand, are able to command a price premium for their products/services. Furthermore, it is typically the non-price characteristics of a product or service that enables a company to charge more.

This doesn’t necessarily mean that each and every company competing in a space necessarily wants to be the luxury price provider.  For example, among those competing in electric submersible pumping systems (ESPs), Schlumberger, Weatherford, and Centrilift all compete. However, not all three companies provide the exact same solutions nor can they each command premium pricing to acquire their products or services.

Because the purchase decision process in the oil and gas industry often requires the input of several stakeholders, the value proposition must be attractive to at least three different levels of decision maker. Communications efforts must consider multiple points of view as to what constitutes value.

• C-level Executives  – How is this product going to help my company be more successful and make more money?
• Engineering – How is this product/service going to fit my process and what advantages does it bring over competing technologies?
• End-users – How easy is this going to be to use and how is it going to help me do my job better and more effectively/efficiently?

Summary

Strong brands are trusted brands. Companies that continually monitor their brands performance against the attributes and needs that customer value most, build a strong and trusted brand. A consistent and satisfactory customer experience leads to brand trust and the willingness to recommend the brand. This leads to strong brand loyalty and continued growth and security.

If a brand-new oilfield product or service becomes widely used in less than a decade, that’s fast. The fact is that the petroleum industry is one of the most conservative when it comes to adopting new technology.

Understanding the barriers to adoption and the facilitators to help overcome these obstacles are critical to getting a product out of development and into use. However, before bringing a product to market, a company must first conduct sound marketing research in order to understand if the product will ever have a chance of being accepted and utilized. Harvey MacKay, author of the New York Times bestsellers Swim With The Sharks Without Being Eaten Alive and Beware The Naked Man Who Offers You His Shirt says it best:

“Failures don’t plan to fail; they fail to plan.”

How many times have we as professionals had that “gut feeling” or said, “I just know it will work” only to have  ideas squashed by one of the first people with whom the idea is shared? It happens quite frequently.

The problem is not that new products often fail to bring improvements to what is already available. The problem lies in the fact that, in order to use new products or technology, the customer MUST change his/her behavior. In other words, you have to convince them of a new way to solve an old problem.

Understanding the Needs

Often times new products fail because they fall short of satisfying a true need in the industry. This happens due to a single reason or a combination of several:

• Product does not really satisfy a need
• Satisfies the need of such a niche market that the potential sales do not satisfy the costs of production
• Product offers a “bandage” and not a solution
• The product is not optimized to meet all the needs of the end user

In other words, the idea of “let’s build it and they will come” is a sure-fire way to ensure that your new product fails. The first step in developing a new product is to test the concept or the idea with industry experts. Then, provide the customer with a convincing NEW ALTERNATIVE to solving a problem.

Unfortunately, many companies rely on only their sales force to get an understanding of customer needs. This is good customer service, but more often than not, poor research. Marketing research companies who specialize in the energy industry, like Saurage Research, will conduct face-to-face interviews with those whose input is highly valued. This third party perspective allows for the free flow of ideas, an in-depth discussion about the true nature of the problem, and the beginning of understanding new ways to solve problems.

Additionally,  new product concepts can be tested and an evaluation of its strengths, weaknesses, competitive products, likely distribution, product features, probable purchasers, initial thoughts of costs, etc. can be tested. Often this type of research results in eye-opening views and perspectives that provide the developer with new uses or applications of his or her idea. However, findings can inform that the product will likely fail due to any number of obstacles that had not yet been realized.

A hole in the wall may be patched with putty, but have we really solved the problem?

Another challenge in product development is understanding the problem that is to be solved. Many “patches” have been created for a vast number of problems, but what is the real need. Would  higher quality cementing techniques or more elaborate MWD systems have prevented this ongoing problem from occurring the first place? Again, talking with customers, understanding their needs, and most importantly, understanding the root causes of problems can cut product development costs if an upgrade in complimentary products is really all that is needed. In other words, build a better wall and there will be no holes.

What is ABSOLUTELY NECESSARY and what would be nice to have?

Understanding that every bell and whistle is not necessary for new products is imperative. Survey research, and especially the use of conjoint analysis, an advanced data collection technique  is a great tool to understand, if you find the right audience. Survey research makes it easier to find:

1. The product features that will get you the most interest and purchase likelihood of a product
2. The combination of features that will provide the best bundling of product features
3. The optimal price that buyers would expect to pay for the product (given a specific scenario to which it could be applied)

In other words, if 95% of the market indicates that a stimulation monitoring service that provides visualization to 5,500 feet meets all of their needs, why go through the expense of creating a service that provides visualization to 7,000 ft? Though a select few of potential customers might need this depth, the market potential, or lack thereof, does not justify the additional costs associated with product development.

The Risk of Failure

Finally, oil and gas companies have been successfully drilling and producing wells for decades. Proven technology has stood the test of time and, though not as efficient as one would hope, gets the job done. The risk of losing thousands, even millions of dollars, due to failed equipment and unproven technologyis great. Therefore, even new products must be validated in field trials by respectable companies before they stand a chance of wide utilization in the oilfield.

David Reid, VP E&P Business and Technology Global Account at Houston-based National Oilwell Varco (NOV) writes:

Developing and implementing new oilfield technology demands a clear understanding of how the overall process should work to be genuinely effective. Specifically, instead of a general game plan about taking ideas from concept to customer usage, management needs to delineate new product focus along the lines of delivering diversity, quality, and value. In so doing, each new technology or comprehensive drilling solution should ideally include technically advanced,   field service systems that increase drilling efficiency; enhance health, safety, and environment programs; and maximize customers’ lifecycle economics.

Getting new technology out of the design room and into the oilfield is not impossible. But understanding the needs, providing an effective alternative solution and a new way of thinking is absolutely necessary.  In order to successfully get new products accepted into the oilfield, developers must conduct sound research to understand the problem and its roots, the  current solutions, if any, that are available, and the overall perceived value of a solution. Understanding these issues can inform a winning marketing strategy.

Trade shows like the Offshore Technology Conference or Renewable Energy World Conference are a great forum for companies to highlight their new products. It’s one of the few opportunities for oilfield service companies to have potential clients willingly come to them.

Ellen Bechert from the International Association of Assembly Managers indicates:

 For the first time, companies are spending a greater percentage of their marketing dollars on face-to-face event marketing as opposed to print or online advertising or other forms of marketing, a recent study conducted by American Business Media reports. The fact is, face-to-face marketing experiences, such as exhibiting at trade shows, can provide unique advantages for your company if you take full advantage of the experience. To do this, consider both the strategic goals you hope to achieve by exhibiting, and address the tactical logistics involved. Today’s exhibiting companies are finding they get more out of event participation when they consider it to be part of a marketing cycle before, during and after the actual event, instead of considering the show an isolated three or four day effort. 

On a recent blogpost by Skyline Exhibits, some tradeshows are experiencing double-digit drops in attendance. Pre-show promotions are very important activities that draw attendees to the booth. I don’t want to regurgitate Skyline’s blog, but drawing interest to the booth is critical to lead generation.

Additionally, exhibitors should include tradeshows in their strategic planning process. Setting objectives for your exhibiting programs ensures that you are aligning the short term (tactics) with the long range (strategies). Not every trade show offers the same audience, so the strategic goals of each tradeshow should not be identical. The communication at each show should change according to the composition of the attendees. I know it sounds simple, but conducting pre-show research will allow the exhibitor to highlight the products and/or services that meet the audience’s interests or needs. 

Even though I find both tradeshows fascinating, I would not expect for Agilent Technologies to highlight the same technology or have identical communications at  ATC-SPE and at Pittcon. However, I would expect Agilent Technologies to have a presence at both events.

As will be illustrated in the upcoming study from Saurage Research in its partnership with PennWell Publishing, it is imperative that exhibitors have technical experts on hand to answer any questions that potential buyers may have, clearly demonstrate the technology that is being promoted, have collateral that is relevant to the audience, and most importantly FOLLOW UP ON THE LEADS GENERATED AT THE TRADESHOW!  The value of exhibiting at tradeshows may never be realized if exhibitors do not follow up on leads.