The Anatomy of the Switcher

Ghost-written article for Gunda Lapski, director of Utilities and Telecoms, J.D. Power and Associates Europe.
Published in Utility Week magazine, UK, November 2002.

Fortunately for UK utility suppliers, a public autopsy with a high media profile is not necessary to analyse who amongst the UK populous switches utility suppliers and why. J.D. Power and Associates is one of the leading companies specialising in the evaluation of customer satisfaction and has been in existence since 1968. Best known for its surveys in the automotive industry, for the last three years it has been analysing the utility industries in the UK.

And people do switch suppliers - in the latest survey of the UK domestic electricity industry covering interviews with over 4,500 customers, six per cent said they were “extremely” or “very likely” to switch from their current electricity supplier in the next 12 months. This figure varies considerably across the different supplier groups with some having a figure of potential switchers as high as 11 per cent, and some as low as three per cent. However, even the figure of three per cent is substantial when related to the customer base of the leading suppliers. When looking at the UK as a whole the same three per cent relates to a potential £24 million in revenue, with an average monthly bill of £29.58 and around 27 million households in the UK.

So, what is the profile of the switcher?

He or she spends slightly less per month than average, probably because price is one of the major reasons for moving suppliers. The switcher tends to have a slightly higher income than average and more pay their utility bills by direct debit than other methods (48 per cent vs. 40 per cent). There is a much higher penetration of owner-occupiers (75 per cent vs. 68 per cent) amongst the switchers and they are slightly younger than average.

A common feature across most of the different industries surveyed by J.D. Power and Associates is the fact that switchers are also more likely to be ‘techies’ in that they have higher computer ownership and are likely to be greater users of the internet. This is also reflected in the electricity survey: over half of switchers had a computer with 43 per cent having internet access at home, compared to 38 per cent for non-switchers. More switchers had visited the website of their electricity supplier (nine per cent) than those customers who had never switched had. This spells it out for the suppliers – use the internet or e-mail to communicate with these customers – it’s how they like to work.

Switchers are also more demanding and inquisitive – more have called customer service. Are they more likely to recommend their current supplier than those who have never switched – no, with less than half saying they would recommend their supplier compared to 61 per cent of the non-switchers.

Finally, are switchers more likely to switch again over the next 12 months than non-switchers? The answer is yes. Amongst customers who have never switched, five per cent said they were extremely or very likely to switch compared to eight per cent of switchers.

Moreover, as those switchers continue to move their satisfaction levels drop off as highlighted in the accompanying chart. So the message is to try and keep those new customers – they are in communication more than your existing customers so the opportunity is there to make them aware of the benefits of your services. This also may explode a few myths about poaching customers from other suppliers – the work is not finished when your newest customer joins. In fact, the honeymoon period of a new customer is likely to be their most critical time.

However more importantly make sure that your loyal customers are not ignored. A subsequent article by the writer will deal with the important facets of keeping your customers. Until then, the biggest clue would be that those suppliers who were ranked top in our survey were much better at communicating with their customers than those suppliers ranked at the bottom, especially if something goes wrong with supply.