NCI: Attitudes to Customer Service Across Europe

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 a way to positively differentiate themselves from their competitors. Datamonitor identifies five emergent consumer trends and segments and advises utilities on how they can respond to these effectively.

Scope

• A quantitative assessment of five key global service-related trends and the impact they have for utilities
• 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 in relation to utilities

Highlights

25% of consumers are highly service conscious and their needs should be identified and met by utilities wherever possible. However, investing in internal service processes and complaints procedures 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 a minority segment with the power to influence many. Garage influentials may be potent sources of viral marketing but their expectations of service are higher than the average consumer and utilities will 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 services and products which emphasise connectivity, comfort and well-being or forge partnerships with brands promoting experiences of travel, culture or home.

Reasons to Purchase

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

• Chapter 1 Executive Summary
  • This report identifies five key trends in consumers' attitudes to service and develops recommendations 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
  • People's online experiences are raising their expectations of offline customer service
  • 'Garage influentials' seek responsive, reliable service; targeting them is vital since their influence is widespread
  • 'Experiential' consumers value doing things rather than having things and seek a reliable and tailored service
  • Recommendations
• Chapter 2 Introduction
  • The report is aimed both at marketing and operational executives, and is based on research conducted 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 of four 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 on experiences to others
  • Some customers want both good service and low prices, others do not worry about either - it is important to identify them
  • Within the altruist and egoist segments, consumer attitudes vary significantly, although predictably
  • A competitive price is vital, but companies should see apathy as opportunity and focus on branding 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, price remains the key driver
  • Confronted with high expectations, utilities must invest in branding and diversifying product ranges
  • Offering all-in-one packages will help retain egoists as savings incentives will persuade them to commit to a contract
• Chapter 4 More Choice, Less Trust And Less 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 and high 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 retail banking
  • Increased competition does not change the relative importance of service: everything is more important, including service
  • Whilst Dutch and Swedish consumers take multiple products from utilities, in other markets supplier's brands will only stretch to dual-fuel
  • Switching levels are higher in the UK and Sweden yet customers still expect rewards to the same degree as elsewhere
  • To win customer's trust suppliers must compete on brand, service and price
  • As switching becomes more commonplace, the importance of delivering a consistently good level of service increases
• Chapter 5 The Rise Of The Internet
  • People's online experiences are raising their expectations of offline customer service
  • The Internet is a fast-growing means of communication which enables consumers to gather information and form opinions quickly
  • The Internet is often preferred over the mail and the 'middle-man' as a method of switching service providers
  • The Internet has raised customer expectations of service by increasing personalisation and responsiveness
  • Offline retailers are having to evolve their service in order to parry the challenge of online competitors
  • 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 is unhappy with service
  • A responsive and reliable complaints procedure as well as all-in-one packages can prevent customers switching
  • Although expectations of service are high, in reality, switching numbers are low across four out of five liberalised markets
  • In the event of service failure, customers expect utilities to resolve the issue promptly and provide compensation
  • Complaint management and customer communications: the building blocks of satisfaction, loyalty and so retention
• Chapter 6 Garage Influentials
  • Garage influentials seek efficient, reliable service: there are not many of them but their influence is potent and growing
  • Garage influentials; a minority of Internet users with the power to persuade a sizeable portion of 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 product and service providers
  • Garage influentials want to simplify, de-stress and experiment
  • Garage influentials expect high levels of service as they translate on-line experiences into off-line expectations
  • The Internet is the platform for targeting garage influentials; do this effectively and be rewarded 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 and exploit the potential of web-links
  • A consistent and reliable off-line service is vital as positive on-line experiences will not compensate for off-line blunders
• Chapter 7 The Experiential Consumer
  • Experiential consumers are looking for rewards from new and exciting experiences rather than material possessions
  • In the eight markets, one in three consumers is an experiential with the largest proportion living 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: Mastercard's adverts capitalise on the experiential's belief that some things cannot be bought
  • Utilities are to a degree insulated from the experiential trend since price rather than service is still the key switching
  • In the event of unsatisfactory service, experiential consumers will opt to complain rather than move 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 sense of comfort or well-being
  • Utilities should offer services or forge partnerships with brands promoting experiences of travel, culture or home
• Chapter 8 Recommendations
  • Introduction
  • All five of the market trends examined are pertinent to utilities, either for retail or marketing 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 energy retail liberalisation and pre and post market opening commodity bundles
  • Table 3: On-line applications and switches, having already surpassed those made by post, are fast becoming as popular as those conducted over the telephone
  • Table 4: Garage influentials (GIs) per country, also expressed as a percentage of the total adult 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 of friends and family
  • Figure 4: 28% of consumers are altruists, 28% egoists
  • Figure 5: Extreme egoist consumers are the most proactive and opinionated whilst extreme altruists are less demanding than their more moderate affiliates.
  • Figure 6: Utilities must avoid one-size-fits-all strategies and offer a product range as diverse as 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 unlikely to switch utilities particularly if the brand is unknown
  • Figure 10: This festive period in the UK, online shopping more than doubled, overtaking other purchasing methods in popularity
  • Figure 11: Location is no longer a priority for consumers; expectations of service are relatively higher than they have been in the past
  • Figure 12: Across industries, levels of trust are not high and businesses looking to build up a loyal customer base should look to improve these.
  • Figure 13: Customers do not unanimously agree they should be rewarded for their loyalty and do not view switching as troublesome
  • Figure 14: In the UK, 56% of consumers have switched mobile telephones and, whilst the number of switchers 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 Dutch Nuon to continue offering more products whilst the likesof BG are limited
  • Figure 17: More than a third of consumers in the Netherlands and the UK have switched yet expectations of loyalty rewards are no less than in Spain and Germany
  • Figure 18: Trust levels are currently low, but utilities can improve customer perceptions by investing in a strong brand
  • Figure 19: There is a marked discrepancy between consumers' service expectations and rating given to the service they have received from utilities
  • Figure 20: Whilst Internet user growth is greatest in France and the Netherlands, penetration rates 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 be unwilling 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 a week or more
  • Figure 24: Despite 64% of consumers prioritising price when choosing their utilities, one in eight - 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 to stay 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, in reality, those who have switched is much lower
  • Figure 27: 46% of utilities customers expect power to be restored within 3 hours after a major storm, whilst 42% expect compensation for power cuts lasting less than 4 hours
  • Figure 28: Improvement and investment in complaint management and customer communications are necessary 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 as much as possible
  • Figure 32: Access to a wide range of information has resulted in garage influentials being harder 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 cause considerable damage
  • Figure 35: 27% of consumers who consult Internet forums twice weekly or more have switched suppliers, 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 on customers due to short-comings in its offline service
  • Figure 38: Red Letter Days: A response to the demand for cultural and outdoor experiences rather than material possessions
  • Figure 39: Experiential consumers are keen to experiment and de-stress and are enjoying more indulgences to ease the pressures of everyday living
  • Figure 40: Experiential consumers value good service and willconsider paying more in order to meet their needs Error! Bookmark not defined.
  • Figure 41: MasterCard's campaign exploits the growing consumer trend favouring experiences over material possessions
  • Figure 42: Experiential consumers are likely to switch for a better price but are less likely if they are unfamiliar with the company's brand
  • Figure 43: Experiential consumers are reactive rather than passive but would complain first rather than switch
  • Figure 44: Face-to-face and over the telephone are the most popular methods of switching for experientials
  • Figure 45: Whilst product uptake is generally low, experiential consumers are most likely to consider taking a green energy tariff
  • Figure 46: The environment, the home and affiliations with experiential companies appeal most to this segment