NCI: Attitudes to Price Across Europe

Content

• Chapter 1 Executive Summary
  • This report identifies four key trends in consumers' attitude to price and develops recommendations for how utilities should respond
  • Cost is the key dynamic for consumers but attitudes to price are diverse and complex
  • Across Europe, price is crucial to energy supply, but utilities also need a strong brand and a diverse portfolio of products
  • Time is money and consumers are willing to pay for convenience, quality and specificity
  • 'Convenience consumers' is a large segment - do not take them for granted and do not confuse them with other types of high-value customers
  • Masstige is a phenomenon associated with brand and indulgence at low prices - affordable luxuries
  • Develop energy brands with masstige in mind: be cheap, but do not identify with cheap brands
  • 'Rich' does not always mean 'high-spender': there are many affluent people who will shop around for bargains
  • Utilities that only segment customers by age, income and region need to go a step further: not all affluent people are the same
  • 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 price in consumer behaviour and leverages the expertise of four Datamonitor business units
• Chapter 3 Market Context
  • The attitudes of European consumers to a variety of products and services can be analysed in terms of share of wallet, and attitudes to financial management and payment
  • Housing, food and transport take the biggest bite out of the budget; whilst 'one Europe' concepts need to be avoided
  • Utilities should be aware of the masstige phenomenon and recognise the potential in affinity partners
  • Share of wallet is not a simple predictor of attitude to price and payment
  • Payment methods and chase-up tactics must be rethought in order to alter the bad habit of consumers regarding bills
  • Whilst energy is a necessity, it only takes a small bite out of the household budget and is not a priority
  • Younger consumers are more likely than older consumers to delay the payment of utility bills
  • Direct Debit is just one method by which utilities can facilitate the bill paying process
• Chapter 4 Cost Is The Key Dynamic
  • Cost is the key dynamic for consumers but attitudes to price are diverse and complex
  • Money talks: price is the priority in four key industries
  • Datamonitor classifies respondents as high, low or moderately price conscious
  • The importance of market specific knowledge: Swedish and Dutch consumers are more price sensitive than Italians
  • Age indicates price sensitivity better than gender; male and female 24-35 year olds are the most price conscious
  • Whilst the choice of electricity or gas supplier depends on price, banks are chosen foremost on the basis of service
  • By understanding consumers who do not prioritise price, utilities can alter their image as mere commodity suppliers
  • Service oriented utility customers profile
  • Service oriented customers - attitudes
  • Utility consumers who prioritise choice are more likely to switch or pay extra to obtain tailored and varied products or services
  • Choice oriented utility customer profile
  • Brand sensitive customers are predominantly male, less likely to switch and more inclined to listen to recommendations
  • Brand oriented utility customers - profile
  • Brand oriented utility customers - attitudes
  • Price drives switching, but only when the utility has a recognised brand
• Chapter 5 Time Is Money
  • Time is money and consumers are willing to pay for convenience, quality and specificity
  • Values versus commitments: family time is a priority but as lifestyles get busier values are increasingly compromised
  • Time-saving products are often high quality and expensive yet serve as welcome antidotes to hectic lifestyles
  • There are high proportions of convenience consumers in Sweden and the UK, but not in France, Spain or Holland
  • Convenience consumers want less stress and more time but are willing to experiment to find the right tailored product
  • Convenience customers expect to be rewarded for their loyalty to utilities and prefer to avoid the hassle of switching
  • Although convenience consumers switch less, their loyalty depends on getting good service and competitive prices
  • So in an effort to keep life simple, convenience consumers may take more than one product from their utilities
  • Not all high value, low switching customers are convenience customers, so utilities should not group them together
• Chapter 6 Masstige
  • Masstige is a phenomenon associated with brand and indulgence at low prices - affordable luxuries
  • 'Masstige': a retail phenomenon where prestigious, luxury items are being made available for mass consumption
  • Low earners enjoy luxurious or prestigious indulgences yet stay within budget
  • Attitudes to brand provides further evidence of the masstige phenomenon
  • In percentage terms, masstige populations are largest in Holland, Sweden, France and the USA, and smallest in Spain and the UK
  • Despite being brand sensitive, masstigers seek customisation and welcome extensive product offerings
  • Masstige consumers choose to save in come areas to fund spending in others
  • Young masstige consumers are more likely to switch utilities than older consumers, particularly when savings are involved
  • Whilst younger consumers are prone to switching, older masstigers would like to be rewarded for their loyalty
  • Utilities should develop energy brands with masstige in mind: be cheap, but do not identify with cheap brands
• Chapter 7 Bargain-Hunting
  • 'Rich' does not always mean 'high-spender': there are many affluent people who will shop around for bargains
  • Target hits the bull's eye; its success is evidence that consumers cannot resist a bargain
  • Bargain bin or treasure hunt; low and high earners alike seek value for money across all industries
  • There are enough bargain-hunters to warrant attention from retailers, but not industries where marketing is less precise
  • Despite being high earners, these affluent consumers are hungry for bargains, not indulgences
  • Bargain-hunters are also less concerned with brand
  • Bargain-hunters are more likely to switch than the rest of the population
  • Bargain-hunters seek utilities with a competitive price rather than a strong brand
  • Whilst they do not expect loyalty rewards, they are more likely to consider taking other products from their utilities
• Chapter 8 Recommendations
  • Introduction
  • All four of the market trends examined are pertinent to utilities, either for retail or marketing strategy, or both
  • Across Europe, price is crucial to energy supply, but utilities also need a strong brand and a diverse portfolio of products
  • 'Convenience consumers' is a large segment - do not take them for granted and do not confuse them with other types of high-value customers (like multi-service customers) even though they often have much in common
  • Develop energy brands with masstige in mind: be cheap, but do not identify with cheap brands
  • Utilities that only segment customers by age, income and region need to go a step further: not all affluent people are the same
• Chapter 9 Appendix
  • Definitions
  • Research methodology
  • Future readings
  • SPP writing team
  • How to contact experts in your industry
• List Of Tables
  • Table 1: Average European household expenditure and estimated propensity to pay for different elements of the budget, 2001
  • Table 2: The number of adults in each price consciousness band in each of the eight countries surveyed, 2004
  • Table 3: The number of adult convenience consumers in each of the eight countries surveyed, 2004
  • Table 4: The number of adult masstige consumers in each of the eight countries surveyed, 2004
  • Table 5: The number of adult convenience consumers in each of the eight countries surveyed, 2004
• List Of Figures
  • Figure 1: European consumers spent the most on housing, food and transport in 2001
  • Figure 2: Whilst both nations are price conscious (see Market Trend 1), Swedish consumers are financially prudent whilst Dutch consumers are much less cautious
  • Figure 3: Whist the use of automated and on-line payment is growing in popularity, around half of US consumers in 2004 had not tried either
  • Figure 4: Utilities may be essential but the payment of electricity and gas bills are the most likely to be postponed
  • Figure 5: The older the consumer, the more sensible their approach to managing finances
  • Figure 6: Utilities need to offer customers incentives for automated payment
  • Figure 7: For Europeans and Americans price is predominantly the most important factor when choosing a service provider
  • Figure 8: 53% of respondents (2,654) were rated moderately price conscious
  • Figure 9: Dutch and Swedish consumers are the most price conscious in Europe and the USA
  • Figure 10: On average, 25-34 year olds are the most price conscious with sensitivity reducing with age
  • Figure 11: Banks are chosen on the basis of service, but price matters most when choosing a utility
  • Figure 12: Choice-driven American consumers and brand-sensitive Dutch consumers place the most importance on trying new products or experiences
  • Figure 13: Both price and brand influence switching behaviour, as does the nature of the national energy market
  • Figure 14: People see simpler lifestyles as the key to having more family time, but find this hard to achieve
  • Figure 15: If people pay extra for time-saving products, they are also more likely to indulge to escape daily pressures
  • Figure 16: Italian, Swedish and American consumers are more willing to pay extra for time-saving products
  • Figure 17: The convenience consumer is keen to experiment, de-stress and differentiate
  • Figure 18: As part of their strategy to obtain effective service and tailored products, convenience-driven consumers value the recommendations of family and friends
  • Figure 19: Convenience-driven consumers expect to be rewarded for loyalty to utilities and see switching as troublesome
  • Figure 20: Across Europe, convenience consumers are more likely to complain than switch, although their switching rates are still significant
  • Figure 21: Convenience consumers are more likely to take other products from their utilities, particularly those residing in Sweden, the UK and the Netherlands
  • Figure 22: Whilst American and Swedish markets are most ripe for premium offerings, the premium potential is seen across nations
  • Figure 23: German consumers grapple for a piece of haute couture whilst Habitat commissions Manolo Blahnik
  • Figure 24: Indulgence: there is very little variation between high and low income groups
  • Figure 25: With the exception of the 65+, income has little influence on brand sensitivity
  • Figure 26: Despite being highly brand sensitive, masstigers also value tailored products and service
  • Figure 27: Just the look - Jasper Conran range at Debenhams
  • Figure 28: Not the thrifty type: masstigers will spend excessively in some areas and modestly in others
  • Figure 29: Younger masstige consumers are more likely to switch than older and are incentivised further by saving money
  • Figure 30: A premium utilities offering may encourage the older masstige customer to stay
  • Figure 31: Target Corporation in the US achieves revenues well above the industry average this year
  • Figure 32: Across nations income does not dictate price sensitivity and in France, Italy, Sweden and Britain high earners are more price conscious than low earners
  • Figure 33: The well-heeled bargain hunter is less likely to indulge; one of the manifestations of the highly price conscious nature
  • Figure 34: Despite having the money to invest in brands, this segment is unconcerned with the cachet behind the name
  • Figure 35: Young, wealthy bargain hunters are most likely to switch whilst middle-aged masstigershave a switching rate similar to the overall average
  • Figure 36: Impervious to the influence of brands, the well-heeled bargain hunter is enticed by savings rather than reputation
  • Figure 37: Compared with low earning, low price conscious consumers, bargain-hunters expect to be rewarded less