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Customer loyalty, a literature review & analysis
Marketing Strategies & Consumer Policy Working Group
As of 1st January 1998, UNIPEDE and EURELECTRIC have formed a Joint Secretariat situated in Brussels. UNIPEDE and EURELECTRIC are organisations with a separate identity, co-operating closely to provide effective and coherent assistance to their Members, in order to ensure and develop the Industry's competitiveness and in order to offer and develop competitive and environmentally sound products, in the interest of its customers. In doing so, UNIPEDE and EURELECTRIC will pay due respect to the specific missions and responsibilities of other international organisations of the European Electricity Supply Industry. UNIPEDE is the association of the European Electricity Supply Industry and of world wide affiliates and associates that operates as a centre of strategic expertise and that acts as a liaison with other international associations and organisations with the aim to identify and respect the common interests of its Members and to assist the Members in deciding on the solutions to be implemented and in co-ordinating and carrying out the necessary action. EURELECTRIC is the association of the European Union Electricity Supply Industry representing it in public affairs, in particular in relation to the EU institutions, in order to promote its interests at the political level. The reports published by UNIPEDE are the result of the work of its structure of expertise: they represent one of the most direct methods of circulating knowledge and information throughout the sector, on subjects of common interest. They are intended for wide circulation both within the electricity supply industry and outside it. Ä Please do not hesitate to ask for the latest available printed UNIPEDE/EURELECTRIC publications catalogue (with currently about 200 summaries of UNIPEDE reports) from:
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Customer loyalty, a literature review & analysis
Working Group Marketing Strategies & Consumer Policy
Paper prepared by:
Jacques Rossat (CH), Jan Larsen (NO), Drahomir Ruta (CZ), Manfred Wawrzynosek (PL)
Copyright © UNIPEDE, 1999 All rights reserved Printed at UNIPEDE, Brussels (Belgium)
addresses and electricity demand is no longer sufficient. price reductions. nature of customer loyalty. payment options and dual or combined packages of fuel and electricity services. it seems that the percentage of customers that are switching is now fixed at a steady 25-30 % rate. etc). In doing so. In a liberalised electricity market. The propensity may appear rather low in the first years following the opening as a result of “a wait and see” syndrome. It might also be limited due to the hassle caused by switching. a database storing customers’ names. It clearly arises from a number of studies that customers are very sensible to the quality of services (reliability. s The report also examines the propensity to switch in fully liberalised electricity markets. In the UK.EXECUTIVE SUMMARY This report on Customer Loyalty comprises of a first part devoted to a theoretical approach of customer loyalty and a second part focusing on the electricity sector. the employees and the investors. Though underlining the difficulty to define loyalty. With regard to the electricity sector. simplicity. it is worthwhile for marketers to explore the range of services that can be developed in view to meet customer’ needs. in particular in the UK and in Norway. -not to say elusive-. his emotional reactions and feelings. In fact. the authors of the report endeavour to establish what are the needs and wants of the electricity customers. namely through zero defection schemes or by carrying out studies on defections and complaints. this does not entail that a satisfied customer is loyal. but implies a whole virtuous management of the company. and how important it is to retain them. Therefore. such as cash back incentives. tariff options. customer loyalty creates value and anything that might undermine it should be identified and eliminated. In other words. If a loyal customer is no doubt a satisfied customer. they also emphasise that electricity companies need to improve their understanding of their customers. It emerges from market research studies that price is the main driven criteria of customer’ needs and wants but it would be hasardous to only take into account this s aspect. guarantees. the report addresses the incentive issue that can be successfully used to attract customers. the report analyses in practice how profitable loyal customers are. . Finally. Special attention should be paid to the subjective component of the customer. a satisfied customer remains very likely to switch to other competitor’ products. “Customer satisfaction is not customer loyalty” warns this report so as to highlight the rather complex. s One of the main insights provided by this report is to point out that the loyalty question does not just consist in looking at the customer in relation to products / services on offer.
1. Customer satisfaction ________________________________ _______________________ 3 2.2.2. 5. Target the "right" customers ________________________________ ________________ 8 5. Defection costs ________________________________ ____________________________ 10 6. Satisfaction-Loyalty link ________________________________ ____________________ 4 3. 4.4. 4.1. Loyalty model __________________________________________________ 4 Consequences of customers loyalty________________________________ 6 Toward "zero defections" ________________________________________ 7 5. Incentives ________________________________ ________________________________ 22 6.2. 2. 5. Introduction ____________________________________________________ 2 Definitions _____________________________________________________ 2 2.1. a literature review and analysis Working Group Marketing Strategies & Consumer Policy CONTENTS Part 1: Brief Survey of Current Trends and Theories 1. Analysis of defections and complains ________________________________ __________ 9 5. 7.Part I: Brief Survey of Current Trends and Theories Customer Loyalty. Customer loyalty ________________________________ ___________________________ 2 2. Measure of loyalty______________________________________________ 10 Conclusion ___________________________________________________ 11 STATISTICS____________________________________________________________ 13 BIBLIOGRAPHY _________________________________________________________ 14 Part II: Customer Loyalty in the Electricity Supply Industry 1.3. Barriers ________________________________ ________________________________ _ 21 5.3. Loyalty ________________________________ ________________________________ ___ 2 2. 3. 2. Introduction ___________________________________________________ 15 Needs and wants ______________________________________________ 15 Propensity to switch____________________________________________ 17 Reasons for switching __________________________________________ 20 Barriers / Incentives ____________________________________________ 21 5. Conclusion ___________________________________________________ 24 BIBLIOGRAPHY _________________________________________________________ 26 1998-330-0018 1 December 1998 .
Definitions 2. There would be no customer loyalty without loyal employees as there would be no loyal employees without long term investors. We will later focus on the customer side. More than a limited customer approach. half their employees in four. The fundamental mission of a business is oriented toward the creation of value for the customer and profit becomes a consequence of value creation. and the statistics seem to bear them out. the U. and more interdependent than we have ever imagined. We know that "very satisfied" to "satisfied" customers sometimes switch to competitors. 1998-330-0018 2 12/98 – MS&CP WG . Let's first settle what customer loyalty is not (Prus & Randall. loyalty is not dead. who should be targeted. Satisfaction is a necessary but not sufficient criterion. We will also. it remains a dominant key of success. corporations now lose half their customers in five years. now and then. 2. but the implementation of such a culture does not go without posing problems. who should be responsible for these changes. Reichheld views loyalty as a value-creation theory. This theory will be developed in the loyalty model described in chapter 3. the experts proclaim. 1996). Introduction Loyalty is dead. It turns out to be a mean rather than an end. and how should these changes be conducted are some of the questions we will try to answer in this compilation of some classical theories of the day (1998). 2. This theory gathers the firm's resources toward one unique goal: creation of profit. 1995): Customer loyalty is not customer satisfaction. On average. The advantages of loyalty are numerous. show the implications of such a three dimensional environment in which creating value for customers has become a strategic issue.1.Part I: Brief Survey of Current Trends and Theories Part 1: Brief Survey of Current Trends and Theories 1.S. No. solid profits and steady expansion. the corporate leaders in loyalty – that apply a strategic loyalty-based management – have enduring records of productivity. Loyalty Reichheld opposes loyalty to the actual profit-theory. In fact. What should be done.2. the loyalty effect should be viewed as a wide context in which all the key players of a firm are far more powerful. Customer loyalty Customer loyalty is not always easy to construe and many definitions have been proposed. but the employees and the investors problematic should be kept in mind during the entire process. and half their investors in less than one (Reichheld. further reaching.
1978). or relief. by expectations and the gap between perceived quality and expected quality. Customer loyalty is not a strong market share. The figure below shows the predominant linkage of this process. They are very much inclined to respond to a competitor's incentive.3. 1996 1998-330-0018 3 12/98 – MS&CP WG . in the end. Satisfaction is influenced. It is the result of a complex process that requires understanding the psychology of customers. It is driven by customer satisfaction. commitment to the company demonstrated by a resistance to switching to a competitor) and behaviors (repeat purchasing.Part I: Brief Survey of Current Trends and Theories Customer loyalty is not a response to trial offers or incentives. Keiningham. purchasing more and different products or services from the same company. Prus & Randall then describe customer loyalty as follows: "Customer loyalty is a composite of a number of qualities. High level of market share can also be influenced by other factors such as poor performance by competitors or price issues. Expectations "Objective" Quality Perceived Quality Disconfirmation Future Expectations Satisfaction Source: Rust. Some of your consumers choose your products because of convenience or habits and they can be tempted to defect for any reason. Taylor. Zahorik. surprise. called "expectancy disconfirmation". yet it also involves a commitment on the part of the customer to make a sustained investment in an ongoing relationship with a brand or company. Customers who react to incentives are often highly disloyal and they often leave as fast as they came. The range of emotion is wide with. recommending the company to others)". customer loyalty is reflected by a combination of attitudes (intention to buy again and/or buy additional products or services from the same company. for example. Finally. 2. Customer loyalty is not repeat buying or habitual buying. willingness to recommend the company to others. Newman. Satisfaction is an emotional or feeling reaction (Westbrook. contentment. Customer satisfaction Satisfaction is often confused with loyalty. pleasure.
Defects can doubtlessly be explained by a lack of value for the customer. "Loyalty is inextricably linked to the creation of value both as a cause and an effect. 1996) As an effect. Reichheld describes it as follow: ü Revenues and market share grow as the best customers are swept into the company's business. we would be tempted to believe that the link between satisfaction and loyalty is a simple.. instead. employees. there is always a chance you will see your customers be lured away (Jones & Sasser Jr. This high level of satisfaction will produce increased customer loyalty. Satisfaction-Loyalty link High-quality products and associated services designed to meet customer needs will create customer satisfaction. the creation of value for the customers. linear relation. loyalty creates a chain reaction.Part I: Brief Survey of Current Trends and Theories 2. Because the firm's value proposition is strong. and investors . The decisive key in this model is not profit but. 1995). Unless they are totally satisfied.that play an important role in the enterprise form the forces of loyalty." (Reichhled.4. 1996 3. building repeat sales and referrals. these forces can be measured in terms of cash flow. Zahorik.customers. it can afford to be more selective in new customer acquisition and to concentrate 1998-330-0018 4 12/98 – MS&CP WG . and profits exists. Since a linkage between loyalty. The three forces . Impact Dissatisfie d Satisfaction scale Delighted Source: Rust. Loyalty model Most present-day strategic plans focus on a profit target and work backward to arrive at required revenue growth and cost reduction. As a cause. The relation reacts differently according to time and circumstances. loyalty measures permanently whether or not the company has delivered superior value. Keiningham. But reality proves us wrong: it is neither linear nor simple (see figure "The effect of satisfaction" below). Time spent on studying loyalty leaders has convinced Reichheld to develop a totally different model (see loyalty model below). According to conventional wisdom. value.
which further reinforce employee productivity. They stabilize the system. which further enriches the customer value proposition and generates superior productivity. Long-term employees learn on the job how to reduce costs and improve quality. Sustainable growth enables the firm to attract and retain the best employees. 1996 1998-330-0018 5 12/98 – MS&CP WG . they learn how to deliver still more value. compensation growth. which makes it easier for the firm to attract and retain the right investors. and loyalty. Consistent delivery of superior value to customers increases employee's loyalty by giving them pride and satisfaction in their work. The Right Customers Surplus Cash Reinvested Customer Loyalty Superior Customer Value Investor Loyalty Growth The Right New Employees The Right New Investors Compensation Advantage Profits Employee Loyalty Cost Advantage Superior Productivity Source: Reichheld. Spiraling productivity coupled with the increased efficiency of dealing with loyal customers generates the kind of cost advantage that is very difficult for competitors to match.Part I: Brief Survey of Current Trends and Theories ü ü ü ü its investment on the most profitable and potentially loyal prospects. Loyal investors behave like partners. and ensure that appropriate cash is put back into the business to fund investments that will increase the company's value-creation potential. Furthermore. which further reinforces both customer and employee loyalty. as long-term employees get to know their long-term customers. Sustainable cost advantage coupled with steady growth in the number of loyal customers generates the kind of profits that are very appealing to investors. lower the cost of capital. further simulating sustainable growth. The company can then use this productivity surplus to fund superior compensation and better tools and training.
Finally. and that they can be acquired more cheaply. therefore. ü Satisfied customers may sometimes pay premium prices ü Retaining customers makes it difficult for the competitors to enter a market or increase their share. In fact. consistent orders and. this model demonstrates that a company willing to follow a loyalty-based management should concentrate its resources in order to offer a superior value. ü The cost of acquiring and serving new customers can be substantial. A higher retention rate implies that fewer new customers need be acquired. We could also add that a loyal customer is more willing to give feedback on his dissatisfaction and becomes this way a sort of quality controller. ü Satisfied customers often refer new customers to the supplier at virtually no cost. All these explanations become evident on the figure below. The same ascertaining can be demonstrated for the employee or investor's point of view. usually cost less to serve. 4.Part I: Brief Survey of Current Trends and Theories To sum up. since it is almost impossible to measure a competitor's retention rate. loyalty is an excellent weapon. the acquisition cost of a new customer is three to five times more expensive than retention cost. 60 50 An nu al Cu st o m er Pr ofi t 40 30 20 Price premium Referrals Cost savings Revenue growth Base profit Acquistion cost 10 0 -10 0 1 2 3 Year 4 5 6 7 Source: Reichheld. Consequences of customers loyalty Businesses with high customers' loyalty rates have proven to reach great financial results. 1996 1998-330-0018 6 12/98 – MS&CP WG . Buchanan & Gillies identified six reasons explaining why long-term customers are more profitable than others are: ü Regular customers place frequent. ü Long-established customers tend to buy more.
The second tactic consists in plugging the leakage. Toward "zero defections" Any way. A hole in the bucket causes a loss of water. or customers who are currently linked to a competitor. and investors. We have now seen the numerous advantages of having loyal customers. or if the investors reacted only to short term profits. But zero-defection does not mean there will be no further loss of customers. In order to keep at least the same level of activity. Keiningham. The first one would be to find more customers coming in than those going out. loyalty has to become a strategy and should be applied to customers. Customers that leave the market New to market customers Customers that switched to us form competitors Market share Customers that switch to the competition Source: Rust. Zahorik. we now have to compensate by attracting new customers. 1996 This scheme is quite easy to understand. It's exactly what a zero-defection program aims. Because of the interconnection of these key players. it is not possible to operate on only one. the process of acquiring new customers and retaining the old one can be illustrated by the image of a bucket of water (see the figure below). 1998-330-0018 7 12/98 – MS&CP WG . In fact. There are two ways of reacting if you ascertain a leak. It has to be considered as an indivisible system. The objective is to target the good customers and retain them. employees. The same happens with customers.Part I: Brief Survey of Current Trends and Theories 5. For example it would be a non-sense to concentrate on customer loyalty if employees were not formed to do so.
This is a kind of customers having no rule and reacting in unpredictable ways. It explains why this customer is so easy to serve. the loyalist is a happy customer who has had good experiences with the company and who is ready to return on a regular basis. The worst defector a company can dream of is called the terrorist. These people are angry because no one was there to respond. From there. 1996). All customers are not good to keep. low unhappy commitment unable to switch. or even satisfied customers. his experience brings him so much more satisfaction than he expected. the terrorist". Target the "right" customers Before retaining all the customers at any price. Individual Customer Satisfaction. This customer has endured a bad experience and he cannot wait to communicate his frustration and anger to others. or seek change for the sake of a change" (Jones & Sasser. Second. First. pay promptly. who are your more profitable and loyal customers? You will look for those who spend more. trapped Source: Jones & Sasser. Loyalty. require less service. the apostle is so overwhelmed. it is very important to identify your core customers. The number of merely dissatisfied customers or satisfied customers who have encountered failures and defect can be quite impressive. and eliminating the most dangerous type of defector or hostage. neutral. The Hostage. and Behavior Satisfaction Loyalist/Apostl Defector/Terroris e t Mercenar y Hostage high low to high medium low to medium Loyalt y high low to low to medium high medium Behavior staying and supportivehaving left and leaving or coming and going. two. "These customers are often very expensive to acquire and quick to depart. the apostle. Even if they are highly satisfied. The Defector and the Terrorist. The Loyalist and Apostle. Defectors' ranks include very dissatisfied. long-term relationship. listen or correct the failure they encountered. There are three easy questions you can ask yourself (Reichhheld. That's why it is critical to know the characteristics of the customers you target. pursue fashion trends. that he share his strong feelings with others. quite dissatisfied. Jones & Sasser enact what should be every company's ultimate objective: "Turning as many customers as possible into the most valuable type of loyalist. In most cases. and the more you increase the chances to have loyal customers. which of your customers are worth more to you than your competitors? The more customers fitting one. The Mercenary. and prefer stable. This customer has a need and the company provides exactly the product or service that fits him. Third. buy on impulse. It would be a huge error to let them go since the company has the tools to turn them into highly satisfied customers.Part I: Brief Survey of Current Trends and Theories 5. they will show almost no loyalty. Even more enthusiastic than loyalists. These individuals are stuck in a monopolistic environment.1. which customers place the greatest value on what you offer? Those for whom the product fits best to their needs. They chase low prices. or three of these groups you attract. 1995 1998-330-0018 8 12/98 – MS&CP WG . Jones and Sasser have identified four different ways consumers behave. These customers have endured the worst the company has to offer and still have to accept it. 1995). A resume is proposed in the frame below.
Analysis of defections and complains "Any defection is the result of a lack of value". listening. you give your company the means to correct the mistakes done while processing with customers. You will be surprised to see what has been found by Gerson. by creating a data base on the reasons expressed by your customers for leaving. on her side. 1998-330-0018 9 12/98 – MS&CP WG . has identified 6 types of defectors: Price defectors. They switch because of poor service.2. If you look closely at these numbers. Technological defectors. You are maybe one of many skeptical who thinks most of the defections are natural and cannot be controlled by a company. 1996) The defection analysis has a double purpose. De Souza. and find a way to repair the damages can transform a rather unsatisfied customer into a loyal one. These customers are lost but not to a competitor since they leave the market. (Gerson. it is a very convenient and reliable indicator of customer loyalty. These customers are lost because of internal or external political considerations. Service defectors. View it a warning signal and take advantage of it. (Reichheld. Customer loyalty is often calculated in terms of satisfaction.Part I: Brief Survey of Current Trends and Theories 5. Organizational defectors. showing you care. and from the 91 % of them who will defect because they think it would be of no use to complain". One way to collect this information is to listen to the customer and analyze his complains. They switch to a lower price. Market defectors. but none of these rates give the results retention rate has. First and before anything. you will find out that you can indeed overcome 96 % of the reasons why a customer stop buying your products or services. Most of the time. They switch to superior product. The reasons a customer invokes could lead other customers to defect too. Second. repurchase. Product defectors. Your customers stop buying your products because: 1 % die 3 % move 5 % look for replacement solutions or develop other relationships 9 % go directly to your competitors 14 % are not satisfied with the product or the service 68 % are displeased with the way they have been treated. 1995) This gives us a good justification to conduct interviews with defectors. You should now that "only 4 % of customers complain. They switch to convert to a product offered by companies outside the industry. This means that a company will probably never hear about 96 % of her clients. But paying attention to complain is not enough.
This company sends 30 to 50 thousands letters in order to record 1000 adhesions. or both.3. it allows the company to identify its weaknesses and control it has reached its objectives. the company will not benefit of the free advertising and recommendation a loyal customer can make. he takes everything with him. Indirect effect can also be stated with indicators such as revenue growth (increases as a result of repeated purchases and referrals). Measure also establishes the feedback loops. 1996).). Defection costs No existing accountable system can measure the costs of a customer defection. promotion. etc. a loss has to be compensated by the acquisition of a new customer. Of course. During the time a relation lasts. Nevertheless.Part I: Brief Survey of Current Trends and Theories 5. establishment of a personal file. The mission that consists in delivering superior value can be measured by customer loyalty. the customer spends more each year and the costs of processing diminish in regards of experience and volume. costs (declines as a lower acquisition expenses and from efficiencies 1998-330-0018 10 12/98 – MS&CP WG . But companies often forget to consider the potential profit a loyal customer represents. The figure below illustrates the case of a credit card company that has a return rate of 2 or 3 % for direct marketing. recruitment. Measure is a necessity in every system. This figure also shows that the company will not make any profit if it does not keep its customers for at least two years 87 79 72 66 40 0 1 2 3 4 5 -80 Age of account (years) Source: Reichheld. Measure of loyalty "Measurement turns vision into strategy and strategy into facts" (Reichheld. This task is not easy. best expressed by retention rate. which are essential for any organizational learning. How can we measure what drives customer value? First it is important to understand the cause-and-effect relationships between loyalty and value creation (see model at page 4). 1996 6. share of purchases. When he leaves. We know these costs can be very expensive (advertising.
You can manage only what you measure. a culture made by the entire company. Loyalty leaders have found the way to put it in practice and with their zero-defection program they now climb the hill for consistent superiority. Choose your associates carefully and be sure you share the same important values. Treat the others as you would like to be treated. Conclusion As a conclusion. Even if these clichés are known by all. employee retention (increases because job pride and satisfaction increase. it is worth repeating them one more time. Profit is not everything. creating a loop that reinforces customer loyalty and reduces costs of hiring and training and productivity rises). analogous to balance sheet and income statement in financial accounting. Net Present Value (NPV). They seem obvious but surprisingly. It would be composed of two basic reports for each of the three sectors (customers. Loyalty is not a strategy decided by the marketing department. that is profit (increases as costs go down and revenues augment). employees. and new-customer gain rate (see figure above). loyalty is a commitment. lifecycle cash flow. but more centered on human capital. Reichheld suggests building a reporting system that will focus on a couple of factors and would send a warning signal when the indicator leaves a certain range. Learn the lesson of each and every one of your mistakes. 1998-330-0018 11 12/98 – MS&CP WG . they seem to be forgotten with increasing frequency as companies look for short-term profits (Reichheld. We could also be tempted to measure a third order effect. In this system. all the data converge toward one main focus.Part I: Brief Survey of Current Trends and Theories of serving experienced customers). His sentences would be close to these: a business should serve its customers. 1996). and investors). People are your most important asset. Level 1 Customer-base Net Profit Value Level 2 Customer duration Lifecycle profits New-customer Gain rate Level 3 Investment Volume Cost Price Referral Level 4 Value drivers New customer Quality (yield rate) Source: Reichheld. This system offers the advantage to measure all three factors: customer duration. we could imagine a wise Chinese man discharging some of his favorite proverbs on customer loyalty. 1996 7.
these leaders have entered in the ascending spiral of profit. growth.Part I: Brief Survey of Current Trends and Theories focusing on the creation of superior value. 1998-330-0018 12 12/98 – MS&CP WG . and lasting value. By developing a loyalty-based management.
founder of MBNA1) Unless you have 100 % customers satisfaction – and I don't mean that they are just satisfied. sometimes more. 1995) Most of the customers who complain (54 to 70 %) will do business with you again if you solve their problem. (Gerson. And if you have 100 % customer satisfaction. you have to make sure that you listen just in case they change… so you can change with them. (Gerson. there are 26 other customers with unknown complains or non-solved problems – and 6 of them have serious problems. (Reichheld. 1996) Success is Getting the Right Customers… and keeping them (Cawley Charlie. But they are also people who can tell you how to improve your business. (Gerson. 1995) Happy customers. They are people you will probably never hear about. Customer loyalty and his long life value can be 10 times greater than the price paid for a single purchase. 1993) It has been found that a decrease of 5 % in defection rates can increase profits by 25 to 100 %. 1995) One unsatisfied customer will communicate his feelings to approximately 10 persons around him. 1993) Disloyalty at current rates stunts corporate performance by 25 to 50 %. (Reichheld. (Reichheld. (Gerson. 1995) You will need 5 to 6 times more time to acquire a new customer than to retain old ones. 1995) In most business. (Gerson. will talk to 3 to 5 people about their positive experience. 60-80 % of customer defectors said they were 'satisfied' or 'very satisfied' on the last satisfaction survey prior to their defection! In the interim. (Jones & Sasser Jr. I mean that they are excited about what your are doing – you have to improve. for whom you have found a solution to their complains.Part I: Brief Survey of Current Trends and Theories STATISTICS For each complains your company receives. 95 % of them will do business with you and there is a great deal of chances they will talk about you in a positive way around them. These 10 persons will then talk to another 5 people. 1995) 1 Maryland National Bank 13 12/98 – MS&CP WG 1998-330-0018 . and often does.. If they feel you react quickly and to their satisfaction. anything can happen.
"Learning from customer defection".. SANKAR RAVI. JR. "The loyalty effect. and lasting value. Marketing Tools Magazine. pp.... 1996 FORNELL CLAES.. Thomson Executive Press.. "Loyalty-based management". purpose. Warranty. 1994 WESTBROOK ROBERT A. The hidden force behind growth.. 1998 PINE II JOSEPH B. 64-73 ROMAN ERNAN. Harvard Business Review. profits. 7-18 GERSON RICHARD. 1995 HARVARD L'EPANSION. "Guarantee. Marketing Tools Magazine. 2/98. Les Presses du Management. "Understanding your customers". Winning and keeping customers". "Relationship marketing for competitive advantage. Harvard Business Review. ZAHORIK ANTHONY J. NEWMAN JOSEPH W.. 59 (April 1995). DON PEPPERS.". July-August 1996 RUST ROLAND T. Marketing Tools Magazine. pp. KEININGHAM THIMOTHY L. IRWIN Professional Publishing. AND SASSER EARL W. Chicago. March-April 1993. Harvard Business Review. 88-99 KEAVENEY SUSAN M. "Why satisfied customers defect".. Marketing Tools Magazine. and findings". May 1996 NAUMANN EARL.Fact or fiction?". 1995 O'BRIEN LOUISE AND JONE CHARLES.. & EVERITT BRYANT BARBARA. "Fidéliser le client". Vol. Loyalty". Marketing Tools Magazine. "Customer for life". "Customer loyalty: the competitive edge beyond satisfaction". " Comment fidéliser vos clients". Journal of Marketing. "Happiness isn't everything". Boston 1996 REICHHELD FREDERICK F. 75-82 PAYNE ADRIAN. pp. pp. Oxford. "Loyal customers.. "Customer switching behavior in service industries: An exploratory study". Butterworth Heinemann. Bilan. CHRISTOPHER MARTIN. CLARK MOIRA. November-December 1995. Journal of Marketing. April 1996 PRUS AMANDA AND BRANDT RANDALL D. Harvard Business School Press. TAYLOR JAMES R. "Satisfaction/Dissatisfaction in the purchase decision process". pp. VAVRA TERRY G. May-June 1995. pp. 70-74 JONES THOMAS O. PECK HELEN. "Do rewards really create loyalty?". CHA JAESUNG. Vol. Quirks Marketing Research. "Fidélisez à vie vos clients". Paris. "The American customer satisfaction index: nature. "Return on quality".. March-April 1995.. 1991 HENNARD DANIELLE. 56-69 REICHHELD FREDERICK F. Customer Service Review. 71-82 LOWENSTEIN MICHAEL W.. "Creating customer value". 54-60 1998-330-0018 14 12/98 – MS&CP WG . JOHNSON MICHAEL D. May 1996 REICHHELD FREDERICK F. Cincinnati..Part I: Brief Survey of Current Trends and Theories BIBLIOGRAPHY BARSKY JONATHAN.. Groupe Expansion Magazines. 60 (October 1996). "Do you want to keep your customers forever?". "Keep them coming back". July-August 1995 REESE SHELLY. pp. March-April 1996. Journal of Marketing 42 (October). September 1995 CSR.. ANDERSON EUGENE W. AND ROGERS MARTHA. pp. pp. 103-114 PRUDEN DOUGLAS. Paris. Harvard Business Review. Harvard Business Review.
giving supplier's choice to 1. The very competitive nature of first hand information about customer loyalty makes access to this information difficult to those outside of the circle of the studies' owners. even if it gives a valuable background. Needs and wants The first topic that should be explored in a customer loyalty's perspective is customers' needs and wants. "deregulation" gave household customers complete access to the market in 1995. As we assumed. At this writing (autumn 1998). This may seem evident but which company in the industry can truly state it possesses this information? Knowing what customers' expectations are and who these customers really are is the basis of the choice of any strategic option. Therefore.5 million businesses and 24 million households. it looks like they often don't know anything more. In the UK.Part II: Customer Loyalty in the Electricity Supply Industry Part II: Customer Loyalty in the Electricity Supply Industry 1. In Norway. the technical quality of the product "electricity" does not have an influence on domestic customer choice. Even if electrical companies have the advantage to know every single customer by her/his name. It is thus particularly interesting to compare the similarities and differences that may exist between theoretical knowledge and reality. Please note that the observations being exposed in this document have to be taken with a lot of circumspection and are by no mean a prediction of what will happen in other countries. a few countries such as England and Norway have passed through all the different stages and changes that will become unavoidable for most other developed countries in a very near future. customer loyalty is very often in the middle of the preoccupations of the industry since competition gives numerous opportunities to newly freed customers. 2. Introduction The aim of this paper is to review and to extract the teachings of open electricity and gas markets experiences in the field of customer loyalty. Obviously. this small number of information available does not allow any broad-based generalization. customers with a demand of 100 kW and over (about 52'000 sites) were also offered the chance to choose their electricity provider. This choice is therefore based on other factors that will be outlined below. In contrast to almost all other industries. All the remaining obstacles such as supplier switching fee were finally removed in the beginning of 1998. The databases used by most of electricity companies 1998-330-0018 15 12/98 – MS&CP WG . Later in 1994. This report focusses on customer loyalty of household customers. customer loyalty of small. The final phase of liberalization took place in 1998. as also the needs of these customers are different from those of domestic ones. medium and large size customers has to be analysed differently. This first step concerned about 5000 sites. the first customers to access the opening electricity market in 1990 were the largest industrial users who had installed power of 1 MW and over.
a good price. Yvan Laroche. The next ascertaining we can bring to light at the reading of the figures below concerns the advantage established suppliers have on new comers. Lisbon: Conference on Customers & Markets. a research (Lias. 1998 3 LAROCHE YVAN. But in our opinion. this lack of customers' knowledge seems to be also found in some companies operating on an open market. 1998 1998-330-0018 16 12/98 – MS&CP WG . However. Lisbon: Conference on Customers & Markets. flexibility. It builds trust and loyalty. finally. This saying carries a lot of truth. reassure skeptical customers. the tariff. security. the date of the contracts. (BOOZ·ALLEN & HAMILTON). gives a warning signal in case of problem within the organization. Yet often nothing about real needs and wants of the players who will dictate the market. We could add to the list. First. as presented in the graph below. Two hours spent with the salesman of a Norwegian utility. none of these results is fully satisfactory. sophisticated IT equipment and experience. then a good price and. and quite often ecological preoccupations. This is perhaps due to the fact that building such a base requires time. How can therefore a company create value for its customers? Offering a product without taking into accounts what customers want is a bet nobody can take anymore.S.Part II: Customer Loyalty in the Electricity Supply Industry still in monopolistic environment can be summarized to name. comes price (more or less important depending on the segment) and then follow: quality. good customer service but more precisely a range of services. Subjects like responsive emergency repair. value for money. The problem faced by the supplier is the difficulty to communicate this reliability and turn it into a decisive strategic advantage. session 4. uninterruptible power or protection against spikes. new products. All competitors will claim they are reliable but it is extremely hard for customers to compare unless some kind of guarantee is proposed. The data collected do not go deep enough in the reasoning process of customers. most of the time. forces your company to give a perfect service and help to identify weaknesses. but the result would be to emphasize on value creation for the customers. Another research2 illustrates the fact that large customers are more sensible to reliability than to price. customers' characteristics and segmentation are not taken into accounts. In addition. This value is worth paying attention to a few simple rules that assure the success of this strategy. 1997) concluded that customers needed familiarity. in his report3 at the recent UNIPEDE Lisbon convention identifies the basic demands. the bank details. Offering a guarantee is an approach commonly used with products but it also applicable to services. It shows the importance accorded to the track record and industry experience. ranked as important by customers would suit perfectly to a guarantee clause. The "electrically correct" common wisdom on the "real" needs of consumers in an open market is that these consumers want a good price first. session 2. This lack of data is responsible 2 DIAMOND M. shows you care about your clients. the impact can be negative for suppliers who neglected their customers before the opening. choice. the kind and age of the meter. Of course. electricity demand. the amount of the last bill. and attractive brands. it can be a strong competitive advantage. A misunderstood market opportunity". working his phone with potential customers is the best confirmation of this wisdom. In fact. "Large customers. Is this corroborated by available researches and studies? On the UK gas market. etc. simplicity. "Nouvelles opportunités de développement à 5-10 ans". The implications are numerous. address.
Reported in percentage of the total of households. Defection is often compensated by acquiring new customers.97 3. how many customers are tempted to leave. but at what cost! In Norway.17 4. In January 1998.13 6.76 3. Numbers for 1997 show that this trend is now slowly taking off. the figures for 1998 confirm an acceleration of the process. The total number of customers with a different electricity supplier than the dominant provider reached 13'900 in July. 7 6. around 89'000 customers switched. the acceleration pace is impressive.26 5 4 3 2 1 0 Re sp on siv e e m er ge nc y re pai El ect ric su ppl ier wit h a tra ck re co rd El ect ric su ppl ier wit h ind ust ry ex pe rie nc e Lo we st po ssi ble pri ce / k W h Re gul ar sal es re pai r co ntr act On e su ppl ier for en er se gy rvi co ce ms m odi tie s an d On e su ppl ier for ga s an d ele ctri cit y 5. how many actually put their threats into acts. It corresponds to the time needed for those who adopted a wait and see method to gently consider switching.75 % of the total population of household customers. this figure was of 7100 in July. and what is the rhythm of this defection. 4200 changes were recorded.42 4. Propensity to switch We know the opening of electricity market creates a leakage in companies' reservoir of customers.73 3. However. 1998) 3. Companies offer simplified switching formulas on which the 1998-330-0018 17 12/98 – MS&CP WG .Part II: Customer Loyalty in the Electricity Supply Industry for making difficult the building of marketing strategies. of which 81 % had changed in the last two quarters. In April 1997.41 4.99 4.12 3.27 6 5.12 4.86 6. The second factor of influence is undoubtedly the recent free of charge switching policy. these numbers still look rather meagre since they represent 1.73 3.88 4. We will now examine how big this hole is.06 5. the 2 million household customers have the right to choose their supplier since 1995. A great deal of efforts should be directed toward creating databases that could be used to add value for customers.54 Un int err up tibl e po we r Pr ot ect ion ag ain st spi ke s Cu sto mi ze d co ntr act s Fix ed pri ce co ntr act s Be nc h m ar k inf or m ati Ri sk m an ag e m en t to On e re gio nal su ppl ier Bill co ns oli da tio n E DT for pa yin g bill s On e na tio nal su ppl ier Source: Survey (Diamond.
3 % are not sure or did not know this opportunity was offered.Part II: Customer Loyalty in the Electricity Supply Industry customer only has to write down the date. The figures show that 20 % of customers live in areas where the market share for the dominant electricity supplier is below 99 % and 10 % live in an area in which no one has changed supplier. living in Scotland or the North. We see that 16. we verify that little variance has been observed on the basis of sex segmentation. the numbers indicated on his meter. and working part time. or more precisely the difference between the expectations of the market and reality will influence switching rates. 59 % claim they will not switch. But these numbers are not static. The 65 and more age group is very reluctant to switch with a rate of 74. Age has a greater impact: Customers in the 25-34 age group are more inclined to switch. Part time and full time workers are more receptive to switching then any other group (retired or others) and make us believe they will behave in very similar manners. 1998) gives us more details. For example. living in Wales or The Midlands. belonging to less favored social class. In the UK. choose a new contract and sign. A significant difference has been reported according to the region. These figures prove that the traditional supplier still holds a dominant position and that customers' switching has not really started yet. MarketLine International has tempted to draw a profile of the most likely and the least likely to switch: ü The most likely person to switch is… A male. Finally. important disparity in prices could encourage people who said they wouldn't switch to change their mind. Again. probably around 25 %. ü The least likely to switch is… A female. Other groups such as retired are far less enthusiastic. Going deeper in the analysis. However. Answering the survey. They are typically considered to be early adopters and embrace new ideas and technological changes first. The older the customer is and the more reticent to switching he is. A slight difference of 3 % (higher will to switch for male) seems to predict there will be no major behavior contrast for these segments. 24. Working status also plays its role.6 % of household customers declare they will switch before the end of the first year of liberalization. The Norwegian market is quite complex as it is divided into approximately 200 sub-markets. figures (Electricity Association) for industrial market (100kW) show that over a third of customers has changed supplier since April 1994. These figures are expressed in the table below. The company will then take care of the rest. 1998-330-0018 18 12/98 – MS&CP WG . the market. just as a small gap could dissuade others. the experience lived in the gas industry seem to suggest a far lower potential. 7 % of households have said they were "very likely" to "likely" to switch supplier and 31 % remained undecided. Another research conducted in 1998 on "Customer attitudes in the UK domestic electricity market" (MarketLine International. the overall maximum switching prognoses is estimated around 25-30 %.4 % saying they will not exchange their actual provider. 45-54 years old. 25-34 years old. belonging to a well-to-do social class. This would give us a maximum of 40 % potential switchers. and being neither employed part nor full time.
1998 5 Source: Das Deutsche Kundenbarometer – Qualität und Zufriedenheit.E.4 %. 1995 1998-330-0018 19 12/98 – MS&CP WG . It showed value is undoubtedly a more reliable indicator of switching propensity. Finally.9 15 11.5 Yes. people were asked the question: "if you could freely choose. Satifying and saving". Lisbon: Conference on Customers & Markets. immediately 3.1 5 0. already switched 1.2 % additional would definitely switch with "significant" cost savings. This confirms that a complex link exists between satisfaction rate and loyalty. would you choose your existing electricity supplier again?" 5. but it is worth repeating it cannot be the only explanation. Jahrbuch der Kundenzufriedenheit in Deutschland. (ANDERSEN CONSULTING). 33. session 1.9 No -5 Yes. "Convinced" customers said "definitely" at 35. This is even better demonstrated in a survey (British Gas.2 % of residential customers declared in a recent survey 4. 4 McINTOSH H. "Customer service. and 24.5 Yes. "Satisfied" customers answered "definitely" at 24 % and "probably" at 18.2 3.Part II: Customer Loyalty in the Electricity Supply Industry 65 59 55 45 35 % 25 20. after year Unaware I would be able to switch Don't know / Not stated Source: MarketLine International In the US. after a few month Yes.9 % and probably at 6. 1997) realized on the UK gas market: The relation between customer satisfaction and likelihood of switching supplier and the relation between value for money and likelihood of switching were opposed.5 % and "probably" at 18.9 %. In Germany. "disappointed" customers responded "definitely" at 11. they would consider switching with no price difference.1 %.
Let's note the high degree of uncertainty. The importance of service declines with the age. Still. Disparities between working status are greater than in any other segmentation. over one third of respondents did not mention price as a dominant factor. 20 % more than full time workers). All the others. profits.Part II: Customer Loyalty in the Electricity Supply Industry 4..6 %. Knowing what is going wrong also enables the company to take corrective actions.Dissatisfaction with British Gas .7 %. Boston 1996 1998-330-0018 20 12/98 – MS&CP WG . 1998). gathered only 23 %. The second most popular choice. This information enables us to make a new customer profiling for each of the reasons that can lead to switch: 6 REICHHELD FREDERICK F.9 %. The hidden force behind growth. Price is particularly decisive for part time group (82. the identified reasons for switching were listed as follow (Lias. Broken down by sex. and lasting value". this survey indicates that female respondents were far more sensible to price and service (around 6 % higher than male). were under 10 %. It can also be a good indicator of the company's global performance or its performance in a special domain in comparison with competitors. switching bonus.Innovators . The younger age groups show a high degree of uncertainty that can be explained by the fact they are not often decision-makers and thus do not feel too concerned. "any defection is the result of a lack of value". 1997): . probably coming from those who did not know at the time if they would switch or not. Once more. price was the dominant answer with 61. On UK's gas market. other discounts. "The loyalty effect. Harvard Business School Press.Early adopters 15 % 5% 1% 9% On the electricity market (MarketLine International. customer service. such as combined gas and electricity. combined utilities.Price only . Clear information allowing comparison of suppliers ranked third with 10. Reasons for switching Studying the reasons that push customers to switch from one supplier to another gives your company the tools to comprehend and measure its performance. As Reichheld claims in his book6. the other options were far behind.
So we should not forget to consider all the elements when we "simply" speak of price. mostly due to the risk perceived and to the low involvement of customers who have adopted a wait and see attitude. 5. Let's look at these barriers through practical examples. "are there a lot of documents and paper work". Price is a more complex notion than what we usually imagine. Price is an interaction of many different elements and is the result of a long personal process. Is the contract clear and do I really see a difference with my old supplier? Am I going to save a significant amount of money? Will I see an improvement in the relations and a better understanding? 1998-330-0018 21 12/98 – MS&CP WG .Part II: Customer Loyalty in the Electricity Supply Industry Price Service Information Combined gas and electricity Combined utilities Switching bonus Recommended offer through a non-utility Discounts on other products and services Sex F F M M F F M F Age 35-44 25-34 55-64 25-34 45-54 15-17 35-44 18-24 Working status Part Time Part Time Retired Retired Part Time Retired Full Time Part Time Source: MarketLine International After having considered these results. Prices influence products as products influence prices. It involves psychology as much as economy. This concern is also relevant in the case of service because it is not necessarily clear what service means in customer's mind. ü The first obstacle that slows customers down is ease. But we now know some dysfunction may occur in a liberalized market and may be the sign competition does not work exactly as it should. Barriers create inertia. four barriers have been identified (Lias. It seems to us it is quite dangerous to say that price and only price is the determinant factor that explains most of switching behaviors.1. "do I have to pay an exit or entry tax"? ü The second difficulty is the level of simplicity. Barriers The main purpose of deregulation and opening of electricity market is to introduce competition in a domain that was until now in a monopolistic situation. On the UK gas market. Customers ask themselves questions like "do I have to sign a contract". Barriers / Incentives 5. it is tempting to raise the problem of oversimplification often observed in such studies. These barriers force the suppliers to go out and win customers via direct channels. 1997). Some of these barriers can also be due to other factors inherent to customers rather than to the market.
Suppliers touch a larger population and at a much better price than what they could do on their own. 12. they create a better retention rate and have found an ideal ally. 1998-330-0018 22 12/98 – MS&CP WG . hassle should not be an obstacle since it is easily remedied as door-to-door or telephone sales people make most of the efforts on behalf of the customers. the background and the experience other companies have built over the years in a rather complicated and technical domain. These incentives can vary from one company to another. In fact. In the UK.7 %). The second most popular answer. They are also less happy by 10 %.5 % vs. These alliances concern airline companies (miles). could cause prejudice to others. In addition. Again. is the hassle caused by switching. Still in UK.9 % of non-switchers invoked is just that they are happy with their current supplier.9 % of non-switchers do not want to be bothered by what they feel is a long and complex process. credit card and financial service companies. brand will be a handicap for newcomers and companies working outside of their usual perimeter. 5. but in order to attract new customers or just retain the existing ones. 74. 1998) also approached the subject of barriers. First they have stores nationwide and are visited by most of the population on a regular basis. The answer is quite surprising.Part II: Customer Loyalty in the Electricity Supply Industry ü Third. and so on. These newcomers could carry a more "neutral" image and reputation in buyers' eyes and therefore speed up the switching process. ü Finally. People were asked to give the main reason responsible for not willing to switch electricity supplier. It looks like it is a win-win strategy since both side are taking some advantage out of this offer. in customers eyes. they must be decisive in customers' mind.2. but far behind happiness. some suppliers propose to join a loyalty club that gives points and can later be used to reduce shopping bills. media industry. On the UK gas and electricity market. This solution seems to be liked by customers because of its convenience. it seems that energy companies try almost frantically to make alliances with non-utilities. Supermarkets are great candidates for alliances for a number of reasons. the 65+ age group being the most satisfied and the 35-44 group most concerned about hassle (probably a time issue since it is at this age that family and work ask for a lot of time and energy). Incentives Customers are waiting for the companies to give them good reasons to switch. about twice as much as part time or retired. building societies. 14. The loyalty schemes provide a database and a mean for joining marketing initiatives. People working full time showed more concern about hassle (20. These people feel they don't have that much time available and don't want to waste time on choosing a new supplier. we observe small distinctions by age. created by the numerous errors some of the new entrants made. the problem is having the latter know of this service! The difference between male and female behavior is rather small. The reason 76. Male customers seem to be more preoccupied by the hassle caused (17. Finally. Customers will more easily trust brand they know. the reputation. but this time on the electricity market. Energy providers have concluded alliances with all kinds of non-utility companies. The resulting side effect could lead customers to be more receptive to switching opportunities.7 %) while female seem a little happier (78. energy suppliers benefit from the stores "one-stop" principle.2 %). New entrants will lack. another research (MarketLine International.3 % vs. We believe the arrival on the electricity market of new entrants such as non-utility companies will have an indirect impact on customer loyalty.
But in a rather short-term perspective this advantage could be substantially annihilated since most of competitors are on their way to offer dual-fuel. This solution is risky in a world in which people are used to take advantage of this kind of deals and run away at the first occasion. Customers see their transaction simplified and do not have to bother about their monthly bill any more. service undertakings and dual or combined fuel discounts. but in any case. Product based tariffs will focus more on people having strong believes about environment (green tariff) or wanting to save the British coal industry (Eastern's Lionheart) for example. prices vary according to the load profile of customer. This tactic may be quite dangerous since nothing guarantees that the new customer will stay loyal long enough to pay off the investment. Both sides particularly appreciate direct debit. Suppliers incur a far lower credit risk and billing costs are lower. suppliers can offer incentives linked to non-utility companies.7 % stated they would be happy to switch to direct debit to save money while 26. Since the costs are lower. insurance. Some have even linked gas and electricity so tight that they offer a price reduction only if customers take both products. and unique interlocutor in order to do most of the job for the customer. and media. Reduction is expected through the offering of a tariff closely related to consumption pattern. Three main methods have been used: ü Offering a preferential price or tariff to an affinity group. the goal the suppliers are aiming at is to acquire and keep customers by offering them an easier solution to their energy problem. The main package has been thought over again too.Part II: Customer Loyalty in the Electricity Supply Industry Others have given welcome cash back incentives. In this system. effort reduction. ü Sign-up vouchers. The margins being already so tight. They will also respond to your competitors' incentives! A research led by MarketLine International in UK focused on the additional components a company can offer as an incentive. Many companies have chosen the option to offer gas and electricity. This method is most suitable for financial services. Another trend has emerged some time ago with the offer of dual or combined fuel packages. unions. but especially charities. They bet on time saving. ease. banks. Usually used when transactions are less frequent. The main reason for this refusal is the fear that electricity companies have access to their bank account.2 % stated they would not switch. Suppliers offer price reductions and time-of-day tariff options since most of the competition is based on this matter. The range of offers is very wide. Other tariff options such as tariffs on payment method (see below) and on overall consumption will also aim to reduce customer electricity bill. 1998-330-0018 23 12/98 – MS&CP WG . Payment options are also being considered as a key for customer acquisition and retention. direct debit users are often offered a lower price. energy goods. Suits to any company. But what are the figures for direct debit? 26. The problem is that the more complicated the tariff and the more complex and expensive is the meter. retailers. high street stores. This explains why companies try to offer lower bill by playing with tariff options. These methods are most suitable for supermarkets and high street stores with reward schemes. Beside the traditional supply package containing price. charities. ü Continuous reward schemes and sign-up cash bonus. tariff structure.8 % already use this method and 32. unions. and building societies. no real significant drop is expected (some say it will be below 10 % and probably even below 5 % for domestic electricity).
and as a residue of the monopolistic situation that characterized the electricity industry for years. These results are confirmed in a number of studies but are not satisfactory enough. but even who he is. everything goes very fast. The options are numerous and they range from cash back incentives. But what is important is that companies have the tools to guide. It is true a wait and see attitude can be observed in the first months. But let's forget that these actions should always result in long-term benefits. how he reasons when he has to make a complex decision. tariff offers. We miss the essential. but always in comparison with what is offered. Not only what his needs are. for customers as much as for electrical companies. What incentives will he/she react to? The figure below confirms what we had already guessed. With the fall of the psychological as much as the real barriers starts a real struggle for survival.Part II: Customer Loyalty in the Electricity Supply Industry We until now have listed what kinds of incentives were available on the market. and do most of the work in order to facilitate customer's life. and consequently for ourselves. Cash back is the preferred customer solution but it does not mean a company should do it at any cost. Customers have a lot of presumption (that are sometimes not only presumptions!) due to the fact electricity has a long history. Let's look at the customer point of view. both sides should be winning on the long term when such a deal is concluded. So let's not resume everything to price just because it is convenient to do so. and this is not an easy task when margins on electricity sales shrink as they do in fully open markets. 1998-330-0018 24 12/98 – MS&CP WG . A service can be cheap or expensive. companies can always fight customers' inertia by sending incentives. They suffer from a simplification effect and too often forget to correlate these factors with other elements. As discussed earlier. Barriers exist. Conclusion The reading of those researches made on liberalized utility markets leads us to make a series of final comments. combined fuel packages. with what guarantees you get. First. to alliance to non-utility companies. The more persistent are in customers' mind. help. And if suppressing the barriers is not enough. 6. It is therefore urgent to build databases gathering the most relevant information on customers. These information can then be treated and used to refine our positioning and really work toward the creation of value for our customers. Once the market is liberalized. but as the trend takes off. The reasons invoked for switching were first price (two third) and then service (one third). it becomes harder to inverse the tendency. we discover we know very little about our customers. Measures have to be taken as soon as possible since the years preceding the opening are essential to consolidate the position and the image of the company.
4 No ne of th es e 1.5 In su ra nc e co m pa 0 Ca sh ba ck on sw itc hi ng Du alfu el dis co un t Sh op vo uc he rs Ba nk su pp ly Su pe rm ar ke t loy alt Hi gh str loy ee alt t y st or Source: MarketLine International 1998-330-0018 25 12/98 – MS&CP WG .Part II: Customer Loyalty in the Electricity Supply Industry 30 29.4 2.1 Fi na ncisu al pp se ly rvi ce s 0.3 27.7 4.2 25 20 % 15 10 5.8 Do na tio n to sc ho ols 1.4 Ch ari ta bl e do na tio 1.2 2.9 5 5.
20/page 14-16. OFFER Annual Report. 16/page 20-21. "Split affinities". 102/page 12-13.Part II: Customer Loyalty in the Electricity Supply Industry BIBLIOGRAPHY BRITISH GAS. profits. January 1998 LIAS ALAN (Managing director Beacon Gas Limited. "Conference on Customers & Markets". Relation between customer satisfaction and likelihood of switching gas supplier". and lasting value". December 1997 ELECTRICITY ASSOCIATION. Presentation by). 1996 REICHHELD FREDERICK F. Lisbon 1998 1998-330-0018 26 12/98 – MS&CP WG . "Domestic electricity competition. The hidden force behind growth. February 1998 UNIPEDE. European Utilities Conference. "European & overseas relations. November 1997 MARKETLINE INTERNATIONAL. "Competition in supply". "Supplier change January 1998". "Marketing: Tesco teams up with ENERGI to offer gas customer loyalty points". Utility Week. Speeches & Slides. "Residential gas. Utility Week. March 1998 OFFER. "What has made domestic customers switch? Analyzing the critical success factors for profitably attracting new customers".. Switching supplier and customer loyalty in the UK electricity market" KOBER MAGNUS & HJELLE ANN-KRISTIN. Customer attitudes in the UK domestic electricity market". August 1997 KOBER MAGNUS & HJELLE ANN-KRISTIN. NVE. January 1998 MOORE KATHERINE. 1998 MOORE KATHERINE. "Electricity market survey 1997". "The loyalty effect. Harvard Business School Press. "Talking tactics". Boston 1996 UK GAS REPORT. NVE.
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