It is impossible to address this question without referring to the impact that deregulation of a public utility has had recently in California. The concept behind all deregulation is simple, and one that is based on free market equilibrium. With a level playing field, all entrants would stand an equal and a fair chance, and the customers would be the beneficiaries, usually in terms of better service at lower prices. Such was the scenario envisioned by the California legislature in 1996, when the electric utilities were deregulated, and the free market was allowed to be "free." It is impossible to predict what the outcome of the California situation will be; but even the most optimistic observers cite the need for re-regulation, and the prospect of the State of California becoming the supplier of last resort for the energy that is needed to allow this state to continue to thrive. With the benefit of hindsight, it is easy to chart where the vision became blurred, and where the mistakes were made.
Until deregulation of public utilities, profits were limited by regulation and managers were not under pressure to maximize either shareholder profits or customer satisfaction. Customers were generally limited to a single provider of utilities within a given geographic region, and thus could not exercise economic pressure on providers to improve service, decrease prices, or otherwise focus on customers' satisfaction. Now, in an increasingly deregulated environment, managers must focus not only on customer satisfaction, but also on maximizing shareholder value, a sometimes-seemingly contradictory set of goals.
In fact, the goals have become so confusing at times that some academic scholars and business commentators are beginning to take notice. Petrof (1997) presciently observed that there has emerged a "new-old" concept of relationship marketing as a means of providing customer value while at the same time obeying the rigors of c...