pressure also leads to innovation and improvement of the service. By contrast, under a monopoly market, this is not an option. Regulators realise this pressure cannot be imitated by regulation. To respond to this gap in assessing regulated businesses, regulators have enshrined customer engagement within company’s decision making processes. Consumer engagement, why is it important? In a competitive market, consumers have the ability to choose the type of service and who is their service providers. They are likely to base this decision on price and type of service provided. Because of this, there is benefit in the service providers engaging with and understanding what customers value and what they are willing to pay to receive the service. This becomes a driving factor for a successful business, and it also drives down cost and, therefore, the price the customer pays. Further benefits arise as the information company’s gather from customers directs where the company will benefit most from investment. That is, if the customer wants it and is willing to pay for it, the company can profit from it. Generally, monopolies do not have this motivation as they are not competing against companies to capture customers, and are able to recover costs regardless of whether the service is wanted or needed by the customer. This results in prices being higher than in a competitive market. Regulators engage in non-competitive markets (normally at the direction of a government) to prevent companies taking advantage of market power, which allows them to price above what a competitive market would. Although wording may differ, the main of objective of economic regulators is to protect the long-term interests of consumers of regulated services. Regulators may do this by limiting what the company can charge customers and by setting required service standards. Part of the regulatory process in setting prices and service standards is to guarantee service levels are needed and are what consumers want. Although the need part of this is possible to work out through technical expert and theoretical input (such as engineers for costing), the want part of the setting process is harder to achieve. In a competitive market, for example car manufacturing, the customer can pick and choose what attributes they want in a car. The car companies pay attention to the customers’ preferences. Contemporary regulators undertake, or expect monopolies to undertake, customer engagement to incorporate customer preferences in the price setting process. A further reason to have customer engagement is to the risk of the regulator being captured by the regulated industry. Customer engagement is seen as an effective mechanism to provide
pressure also leads to innovation and improvement of the service. By contrast, under a monopoly market, this is not an option. Regulators realise this pressure cannot be imitated by regulation. To respond to this gap in assessing regulated businesses, regulators have enshrined customer engagement within company’s decision making processes. Consumer engagement, why is it important? In a competitive market, consumers have the ability to choose the type of service and who is their service providers. They are likely to base this decision on price and type of service provided. Because of this, there is benefit in the service providers engaging with and understanding what customers value and what they are willing to pay to receive the service. This becomes a driving factor for a successful business, and it also drives down cost and, therefore, the price the customer pays. Further benefits arise as the information company’s gather from customers directs where the company will benefit most from investment. That is, if the customer wants it and is willing to pay for it, the company can profit from it. Generally, monopolies do not have this motivation as they are not competing against companies to capture customers, and are able to recover costs regardless of whether the service is wanted or needed by the customer. This results in prices being higher than in a competitive market. Regulators engage in non-competitive markets (normally at the direction of a government) to prevent companies taking advantage of market power, which allows them to price above what a competitive market would. Although wording may differ, the main of objective of economic regulators is to protect the long-term interests of consumers of regulated services. Regulators may do this by limiting what the company can charge customers and by setting required service standards. Part of the regulatory process in setting prices and service standards is to guarantee service levels are needed and are what consumers want. Although the need part of this is possible to work out through technical expert and theoretical input (such as engineers for costing), the want part of the setting process is harder to achieve. In a competitive market, for example car manufacturing, the customer can pick and choose what attributes they want in a car. The car companies pay attention to the customers’ preferences. Contemporary regulators undertake, or expect monopolies to undertake, customer engagement to incorporate customer preferences in the price setting process. A further reason to have customer engagement is to the risk of the regulator being captured by the regulated industry. Customer engagement is seen as an effective mechanism to provide
deregulation-of-the-energy-industry-australian-experience.docx