With their inability to meet quarterly revenue and profit targets evident, there is rising skepticism about oil and gas companies as purveyors of energy efficiency.
Amy Myers Jaffe, senior fellow for energy at the Council on Foreign Relations, recently stated, “What shareholders are paying the leaders of these energy companies to do is to craft a strategy that no longer focuses 100 percent on adding reserves to the balance sheet, which was the traditional focus in the past. We’re now looking for companies to actually make the judgment about what mix of energy investments to do going forward.”
Can their judgment be trusted?
In our 2018 survey of 1,150 managers, employees and executives of companies buying goods and services from oil and gas companies, only 36 percent trusted their own industry leaders as providers of information on using energy more efficiently. In contrast, 51 percent of these customers trusted environmental groups, and 67 percent trusted the academic/scientific community to provide such information.
Have things improved since then? Our 2019 survey of over 6,000 such managers, employees and executives showed 37 percent trust the oil and gas companies, 54 percent trust environmental groups and 66 percent trust the academic/scientific community as providers of information on energy efficiency.
From 2018 to 2019, the percentage of survey respondents who trusted federal government agencies as providers of information on efficient energy use increased from 38 percent to 43 percent, and their trust in media to do so increased from 34 percent to 39 percent.
While trust in oil and gas did rise one percent year over year, trust in other sources rose more. Oil and gas companies must face up to this stark reality: they are now dead last in the trust race, especially among their customers.
The strategic focus of many oil and gas companies continues to feature an internal fulcrum with an unhealthy fixation on cost-cutting and operational efficiencies. On the heels of recently slashing investor payout by almost 20 percent, Black Stone Minerals CEO Thomas Carter Jr. stated, “We are taking a proactive approach to strengthen our balance sheet and enhance our financial flexibility with the expectation that 2020 may be a challenging year in terms of commodity prices and overall drilling activity.”
In a private conversation, the CEO of a prominent exploration and production company stated, “We don’t have customers; it’s just some traders who set the price of our product.”
During the 2012 CERAWeek, then-Shell CEO Peter Voser said, “We need to do a better job of listening and responding. As an industry, we should insist on strong regulation and enforcement to ensure everyone in the industry does the right job.” Almost a decade later, the industry has demonstrated its inability to respond.
Our research has shown that cost-cutting does not increase revenues or stock price — only customer focus does.
Customer focus should not be confused with customer persuasion through communication, public relations, branding, marketing and promotion. Customer focus requires alignment and accountably around their most important needs, such as cultivating trust. Companies in the oil and gas sector that achieve this customer focus meet or beat earnings expectations while enhancing customer trust.
Vikas Mittal is the J. Hugh Liedtke Professor of Marketing at Rice University’s Jones Graduate School of Business. Shrihari Sridhar is the Joe Foster ’56 Chair in Business Leadership and Professor of Marketing at Texas A&M University’s Mays Business School.
