IBM energy survey shows UK utilities must refocus to win customer loyalty
Lack of trust and focus on price demonstrates need for value-added services, says IBM
LONDON, UK 21 July 2011: According to a UK Energy Survey by IBM (NYSE:IBM), 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. Securing customer loyalty will be critical to the success of future energy market changes.
With the survey finding 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.
“Utility companies face a changing world, with some serious challenges ahead,” commented Jon Bentley, Smarter Energy Lead, IBM Global Business Services, UK and Ireland. “New entrants to the market, particularly customer service heavyweights such as some well-known UK supermarkets and retailers, are already challenging their market share. They will use their signature capabilities and existing relationships with customers to win the battle for customers' loyalty: delivering relevant, innovative products targeted at customers needs and wants and doing so at the right price point and with great customer service.”
Driving customer loyalty
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.
Key findings from the independent survey of over 2000 consumers include:
• 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.
What causes customers to switch utility?
Looking forward more challenges are likely to impact utilities. 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.
"Now is the time for energy suppliers to learn the lessons from other industries that, once staid and commoditised, are now highly innovative and competitive." Bentley explains. "The imperatives sound simple: really understand your customers, ensure you meet their needs and do so in a way that they value. But doing this well requires innovation, real customer focus and the right use of technology. Banks, telcos and retailers use the data they have from credit card transactions, phone calls, loyalty cards and web-sites to really analyse and understand who their customers are, how they differ and what they want and are willing to pay. Knowing this isn't enough - you need to deliver what you promise in the way that the customer wants and is prepared to pay for and you have to do this better than everyone else. And, of course, you have to keep on getting the basics right, things like accurate bills and correctly addressed correspondence."
Methodology note: ComRes surveyed 2039 GB adults between 13th and 16th May 2011. Data were weighted to be representative of all British adults. ComRes is a member of the British polling Council and abides by its rules.