Customer loyalty critical to the success of future energy market changes
August 6, 2011
Utilities need to focus on customer service, adding value and building trust to win the customer loyalty battle as the industry continues to be driven by price and challenged by new entrants according to a UK Energy Survey by IBM. Securing customer loyalty will be critical to the success of future energy market changes.
The survey found that 75% of consumers see high prices from suppliers as an important factor behind large energy bills (compared to their own usage habits), and only 38% trusting energy companies to make the right decisions to avoid future power cuts, there has never been a more challenging time for utilities.
The UK Energy industry is standing at a crossroads with decisions being made to protect the country's energy supply that will have significant implications for everyone in the UK. To drive customer loyalty during this time utilities need to offer value-added services to help their customers bring the cost of energy down. Smart meters offer new opportunities for suppliers to engage customers and provide information and advice to help customers reduce their energy bills; when surveyed customers said that if they did have a smart meter, they would view their consumption frequently, over half (55%) would check it at least once a week, and over a quarter (27%) would check it every single day.
One immediate action that utilities can take is helping customers understand how energy is calculated so they know how their bills are created. The survey found that currently when faced by high energy bills, rather than blaming their own usage of energy, people primarily blame high prices from their suppliers - 75% of people saw this as an important factor. Own energy usage was just 69%. Inefficient appliances (45%) and poor insulation (40%) were also mentioned but not as high on the list as perhaps they would be if customers really understood the cost of these inefficiencies.
Report highlights:
- Responsibility: Consumers feel the future rests on their shoulders, with 79% believing that it is every individual’s responsibility to monitor their own energy usage to avoid wasting the country’s energy supply.
- Customer service: Consumers rated utilities lower than banks on customer service. At a time when utilities need to aim for the highest level of customer service, over and above their normal practice, only 19% said that gas companies provided a very good service and 22% believed electricity providers offered a very good service. This is less than banks (33% said they provided a very good service) and supermarkets, as well as internet, mobile phone and landline providers
- Price: Price comparison websites (77%) and money saving websites (78%) are the most popular sources of better deals for customers rather than information provided by utilities. This is more than would look to recommendations from traditional sources like advertising (24%) or information direct from the supplier (64%).
- Trust: Despite advertising being a significant investment for energy companies, it is relatively ignored - only a quarter (24%) of consumers would use ads as a source of information on tariffs.
- Value: When asked what would make them change supplier, consumers feel that better value for money (70% said it was a very important factor) and cheaper prices (74%) were the key factors.
- Renewable energy: Although a fifth (22%) of people in the UK have no interest about where their energy comes from, 77% see the use of renewable energy as an important factor in why they would change energy suppliers.
More challenges are likely to impact utilities in the future. Energy prices are rising as a result of increasing commodity prices and are set to rise significantly further with the need to replace much of the country's generating equipment and invest in low carbon energy technologies. On top of this Ofgem is campaigning for UK consumers to make more effort to shop around for better deals and for the utilities to make it easier for them to compare and switch.
The survey found the perception of unreasonably high prices causes some customers to shop around; half (45%) of consumers say they would be likely to look for a new supplier if their next bill is higher than expected. There is a striking disparity between this desire to find a better deal and the actual number of customers switching which averages around 20% which could well be a sign that both customer churn is set to rise with increasing prices and that the regulator will be placing more and more emphasis on this aspect of the industry.
