NCI: Attitudes to Customer Service Across Europe

SUMMARY

Introduction

In the seven markets in Europe and the US investigated, service expectations are rising. However,different customers demand different types and levels of service. Utilities must see service as away to positively differentiate themselves from their competitors. Datamonitor identifies fiveemergent consumer trends and segments and advises utilities on how they can respond to theseeffectively.

Scope

• A quantitative assessment of five key global service-related trends and the impact they have forutilities
• Detailed value-added analysis of primary research across eight markets in Europe and the US
• An investigation into four customer types, their service expectations, preferences and needs inrelation to utilities

Report Highlights

25% of consumers are highly service conscious and their needs should be identified and met byutilities wherever possible. However, investing in internal service processes and complaintsprocedures will ensure that the occurrences of poor service are kept to a minimum.

With 34% of US adults accessing the Internet via broadband in 2004, garage influentials are aminority segment with the power to influence many. Garage influentials may be potent sources ofviral marketing but their expectations of service are higher than the average consumer and utilitieswill have to impress them both off-line as well as online.

Experiential consumers value lifestyle experiences rather than material possessions and, with 33%falling into this category, are a significant and growing segment. Utilities should offer servicesand products which emphasise connectivity, comfort and well-being or forge partnerships with brandspromoting experiences of travel, culture or home.

Reasons to Purchase

• Understand consumer attitudes to service and be in a position to meet expectations and soincrease customer retention and acquisition
• Fine-tune marketing and advertising campaigns to address current and emerging consumer trendsand behaviour
• Examine how price, choice, competition and brand influence relationships to service and designproducts that appeal to a variety of customer segments

TABLE OF CONTENTS

CHAPTER 1 EXECUTIVE SUMMARY

• This report identifies five key trends in consumers attitudes to service and developsrecommendations for how utilities should respond
• Relationships to service and price are complex; some consumers have high expectations of both,others do not
• More choice and less trust has led to a reduction in loyalty and an increase in switching
• Peoples online experiences are raising their expectations of offline customer service
• Garage influentials seek responsive, reliable service; targeting them is vital since theirinfluence is widespread
• Experiential consumers value doing things rather than having things and seek a reliable andtailored service
• Recommendations

CHAPTER 2 INTRODUCTION

• The report is aimed both at marketing and operational executives, and is based on researchconducted in eight European countries
• What is this report about?
• Who is the target reader?
• This report examines the role of service in consumer behaviour and leverages the expertise offour Datamonitor business units
• This report examines the role of service in consumer behaviour and leverages the expertise offour Datamonitor business units

CHAPTER 3 THE COMPLEXITY OF PRICE AND SERVICE

• Relationships to service and price are complex; some consumers have high expectations of both,others do not
• Datamonitor classifies respondents as high, low or moderately service conscious
• Service conscious consumers are more likely to be female, over 45 and moderately price conscious
• 25% of consumers are highly service conscious and this group should not be ignored by utilities
• The importance of highly service conscious consumers is heightened by their tendency to pass onexperiences to others
• Some customers want both good service and low prices, others do not worry about either - it isimportant to identify them
• Within the altruist and egoist segments, consumer attitudes vary significantly, althoughpredictably
• A competitive price is vital, but companies should see apathy as opportunity and focus onbranding and product offerings
• Egoists have the greatest propensity to switch, extreme altruists the least
• Although high expectations of service are linked with a higher propensity to switch, priceremains the key driver
• Confronted with high expectations, utilities must invest in branding and diversifying productranges
• Offering all-in-one packages will help retain egoists as savings incentives will persuade themto commit to a contract

CHAPTER 4 MORE CHOICE, LESS TRUST, AND MORE SWITCHING

• More choice and less trust has led to a reduction in loyalty and an increase in switching
• Rising Internet usage and improved transport has resulted in more choice for the customer
• More choice has resulted in higher expectations: consumers demand both competitive prices andhigh levels of service
• Not only is there more choice but consumers are also becoming less trusting
• Increased product choice and reduced trust has been accompanied by reduced customer loyalty
• Switching has become more common in the insurance market and utilities sector, less so in retailbanking
• Increased competition does not change the relative importance of service: everything is moreimportant, including service
• Whilst Dutch and Swedish consumers take multiple products from utilities, in other marketssuppliers brands will only stretch to dual-fuel
• Switching levels are higher in the UK and Sweden yet customers still expect rewards to the samedegree as elsewhere
• To win customers trust suppliers must compete on brand, service and price
• As switching becomes more commonplace, the importance of delivering a consistently good level ofservice increases

CHAPTER 5 THE RISE OF THE INTERNET

• Peoples online experiences are raising their expectations of offline customer service
• The Internet is a fast-growing means of communication which enables consumers to gatherinformation and form opinions quickly
• The Internet is often preferred over the mail and the middle-man as a method of switchingservice providers
• The Internet has raised customer expectations of service by increasing personalisation andresponsiveness
• Offline retailers are having to evolve their service in order to parry the challenge of onlinecompetitors
• Recommendations of good service by word of mouth are essential to on-line businesses
• Although price is the key concern for most utilities customers, as with banks, one in eight isunhappy with service
• A responsive and reliable complaints procedure as well as all-in-one packages can preventcustomers switching
• Although expectations of service are high, in reality, switching numbers are low across four outof five liberalised markets
• In the event of service failure, customers expect utilities to resolve the issue promptly andprovide compensation
• Complaint management and customer communications: the building blocks of satisfaction, loyaltyand so retention

CHAPTER 6 GARAGE INFLUENTIALS

• Garage influentials seek efficient, reliable service: there are not many of them but theirinfluence is potent and growing
• Garage influentials; a minority of Internet users with the power to persuade a sizeable portionof on-line consumers
• A small group, but their importance goes well beyond the numbers
• Consulting Internet forums has become a plausible way of finding out in advance about productand service providers
• Garage influentials want to simplify, de-stress and experiment
• Garage influentials expect high levels of service as they translate on-line experiences intooff-line expectations
• The Internet is the platform for targeting garage influentials; do this effectively and berewarded by their powerful advocacy
• Bad reviews by garage influentials have a greater impact than positive ones
• Consumers who consult Internet forum frequently are more likely to switch suppliers
• Utilities should treat garage inflluentials reviews as a medium for positive advertising andexploit the potential of web-links
• A consistent and reliable off-line service is vital as positive on-line experiences will notcompensate for off-line blunders

CHAPTER 7 THE EXPERIENTIAL CONSUMER

• Experiential consumers are looking for rewards from new and exciting experiences rather thanmaterial possessions
• In the eight markets, one in three consumers is an experiential with the largest proportionliving in Sweden and the UK
• Forty percent of experiential consumers are egoists. Service is a priority but so is comfort,experimentation and simplification
• Experiential consumers will pay more for quality and customisation
• From idealism to materialism: Mastercards adverts capitalise on the experientials belief thatsome things cannot be bought
• Utilities are to a degree insulated from the experiential trend since price rather than serviceis still the key switching
• In the event of unsatisfactory service, experiential consumers will opt to complain rather thanmove energy suppliers
• Most experiential consumers prefer to switch energy suppliers in person or over the telephone
• Experientials will take more than one product from utilities, particularly if they offer a senseof comfort or well-being
• Utilities should offer services or forge partnerships with brands promoting experiences oftravel, culture or home

CHAPTER 8 RECOMMENDATIONS

• Introduction
• All five of the market trends examined are pertinent to utilities, either for retail ormarketing strategy, or both

CHAPTER 9 APPENDIX

• Definitions
• Research methodology
• Future Readings
• SPP writing team
• How to contact experts in your industry
• List of Tables
• Table 1: Adult population in eight countries, broken down by service consciousness rating
• Table 2: The state of energy retail liberalisation and pre and post market opening commoditybundles
• Table 3: On-line applications and switches, having already surpassed those made by post, arefast becoming as popular as those conducted over the telephone
• Table 4: Garage influentials (GIs) per country, also expressed as a percentage of the totaladult population
• Table 5: Number of sensory consumers in the eight countries surveyed
• Table 6: The price and service sub-segments
• List of Figures
• Figure 1: 80% of consumers are moderately or highly service conscious
• Figure 2: With age comes a greater desire for a tailored and high standard of service
• Figure 3: Service oriented consumers are keen to provide and listen to the recommendations offriends and family
• Figure 4: 28% of consumers are altruists, 28% egoists
• Figure 5: Extreme egoist consumers are the most proactive and opinionated whilst extremealtruists are less demanding than their more moderate affiliates.
• Figure 6: Utilities must avoid one-size-fits-all strategies and offer a product range as diverseas their customer base
• Figure 7: Over half of highly price and service conscious egoist consumers have switched,compared to only 15% of extreme altruists
• Figure 8: High expectations of price rather than service drive switching
• Figure 9: Highly service conscious consumers are less likely to switch utilities than highlyprice conscious consumers, particularly if the brand is unknown
• Figure 10: This festive period in the UK, online shopping more than doubled, overtaking otherpurchasing methods in popularity
• Figure 11: Location is no longer a priority for consumers; expectations of service arerelatively higher than they have been in the past
• Figure 12: Across industries, levels of trust are not high and businesses looking to build up aloyal customer base should look to improve these.
• Figure 13: Customers do not unanimously agree they should be rewarded for their loyalty and donot view switching as troublesome
• Figure 14: In the UK, 56% of consumers have switched mobile telephones and, whilst the number ofswitchers is less for utilities, the market has not been open for as long
• Figure 15: Consumers service requirements are not entirely fulfilled
• Figure 16: A pre-market opening multiple commodity status makes it easier for the likes of DutchNuon to continue offering more products whilst the likes of BG are limited
• Figure 17: More than a third of consumers in the Netherlands and the UK have switched yetexpectations of loyalty rewards are no less than in Spain and Germany
• Figure 18: Trust levels are currently low, but utilities can improve customer perceptions byinvesting in a strong brand
• Figure 19: There is a marked discrepancy between consumers service expectations and ratinggiven to the service they have received from utilities
• Figure 20: Whilst Internet user growth is greatest in France and the Netherlands, penetrationrates are low for the former yet one of the highest for the latter alongside Sweden
• Figure 21: Consumers are more impatient when using technology. 37% of consumers would beunwilling to wait longer than 3 minutes on the telephone or on-line
• Figure 22: Customers have become accustomed to a quick and personalised service
• Figure 23: 40% of consumer tell people about products or services they have purchased once aweek or more
• Figure 24: Despite 64% of consumers prioritising price when choosing their utilities, one ineight - almost the same as for banks - are dissatisfied with the service
• Figure 25: In the event of bad service, duel-fuel packages can persuade the 16% of customers tostay whilst the number opting to complain is, in reality, the majority
• Figure 26: Whilst customers hypothesise that they would switch in the event of bad service, inreality, those who have switched is much lower
• Figure 27: 46% of utilities customers expect power to be restored within 3 hours after a majorstorm, whilst 42% expect compensation for power cuts lasting less than 4 hours
• Figure 28: Improvement and investment in complaint management and customer communications arenecessary to increase loyalty and retention
• Figure 29: Garage influentials are keen to share their experiences off-line as well as on
• Figure 30: Most respondents are consulting Internet forums once a week
• Figure 31: Garage influentials are not afraid to experiment and want to simplify their lives asmuch as possible
• Figure 32: Access to a wide range of information has resulted in garage influentials beingharder to please in terms of service
• Figure 33: The components of on-line customer satisfaction
• Figure 34: Such accounts of poor service cannot be directly controlled but can causeconsiderable damage
• Figure 35: 27% of consumers who consult Internet forums twice weekly or more have switchedsuppliers, compared with 18% of the less frequent visitors
• Figure 36: A satisfied customer shares the good news
• Figure 37: Despite positive reviews of its on-line service, Scottish power is losing out oncustomers due to short-comings in its offline service
• Figure 38: Red Letter Days: A response to the demand for cultural and outdoor experiences ratherthan material possessions
• Figure 39: Experiential consumers are keen to experiment and de-stress and are enjoying moreindulgences to ease the pressures of everyday living
• Figure 40: Experiential consumers value good service and will consider paying more in order tomeet their needs
• Figure 41: MasterCards campaign exploits the growing consumer trend favouring experiences overmaterial possessions
• Figure 42: Experiential consumers are likely to switch for a better price but are less likely ifthey are unfamiliar with the companys brand
• Figure 43: Experiential consumers are reactive rather than passive but would complain firstrather than switch
• Figure 44: Face-to-face and over the telephone are the most popular methods of switching forexperientials
• Figure 45: Whilst product uptake is generally low, experiential consumers are most likely toconsider taking a green energy tariff
• Figure 46: The environment, the home and affiliations with experiential companies appeal most tothis segment