Predicting & Managing Customer Loyalty - Global Customer Behaviour Trends & Explanations

Transcription

1 Predicting & Managing Customer Loyalty - Global Customer Behaviour Trends & Explanations Dr Philip E. Lewis Group Director VaasaEMG (Nordic Centre for Expertise in Energy and Utilities Marketing), University of Vaasa CRM CRM CIS CIS Australia & & New New Zealand 2005, March 2005, Melbourne 2004 Philip E E Lewis

2 Global Customer Switching Research Definition of Switching (Churn) The number of switches between suppliers Includes multiple switches by same customers and switches back to an original (incumbent) supplier Does not include switches within the same supplier or switches for reason of (simply) moving home CRM CIS Australia & New Zealand 2005, 17 March 2005, Source: Melbourne Peace Software , Philip Paul E Lewis Grey

3 Note: Global Switching Trends will be Revealed at the conference

4 Overview of Switching Influencers Fixed (Non Time-Specific) Influencers Researched through considering overall switching levels within the context of an understanding of customer psychology, customer segments and the customer s overall environment Quantitative, qualitative and anecdotal data is all valid for analysis purposes This data is often very reliable and thus enables market predictions Temporal (Time-Specific) Influencers Researched by comparing switching trends with temporal influencer data at given intervals Requires excellent and extensive historical data, thus very limited if data does not exist or held by separate parties Much data is not statistically valid or reliable. Therefore qualitative and anecdotal data and analysis is also essential These are just extremes. Influencers can be both temporal and fixed to differing degrees.

5 Overview of Switching Influencers Structural Pre-Requisites Corporate (energy industry including marketing) Regulatory Environmental & Resource Customer Pre-Requisites Need Drivers Lifestyle, predictability, faireness Behavioural Facilitators Individual, Situation, Contact, Relationship Intervening Rules Corporate (energy industry including marketing) Regulatory Psychological Environmental & resource Socio-cultural Customer Switching Action

6 Dis-loyalty Process Structural Pre-Requisites Marketing Pre-Requisites Marketing Resources, Experience, Knowledge, Ability, Commitment (incl. competitive instinct rayher than common philosophy / also incl. commitment to organic growth as means to business growth); Risk Management Ability and Philosophy; Access to Affordable Electricity; Strategic Marketing Objectives gain, retain, abstain; Realistic Shareholder ROI Expectations Regulation Pre-Requisites Regulatory Commitment, Resources; Control of Incumbent Minimum Pricing; Control of Market Concentration; Fair-control of Marketing Communications (incl. fear creation); Separation, Wholesale Availability / Access / Stability; ; Facilitation of New Entrant Access (incl. switching process quality, access to & transparency of key data etc.); Objectives Switch or Swatch; Political Separation (from suppliers and regulators) Need Drivers Lifestyle, predictability, faireness Behavioural Facilitators Individual, Situation, Contact, Relationship Customer Switching Action Intervening Factors & Rules Nature of Utilities The Cost-Benefit (value) Balance Customer Apathy / Customers Don t Educate themselves Sufficient Satisfaction only Satisfiers & Non-Satisfiers Dissatisfied customers often accept their lot Lowest risk option is inactivity better the devil you know Bill Predictability increases loyalty For a Fair Deal (Switching out of principle) Excuse identification and defence Critical Awareness, Involvement/Interest Interest Simple Game Rules / Clarity of Benefits Kick-Start / De-Sensitization (and proof based experience) De-Individualization Re-Individualisation Stages of switching (for everything a right time) Price Elasticity to levels, changes, savings, peaks, predictions Consumption affects price significance Price Matching (temporary price reductions) long-term contracts, price mis-information information Loyalty signals to customers Timing State of Public Emotions and perceived relationship/emotion emotion Degree of Empowerment Socio-cultural cultural Awareness, Involvement and Shift Seasonal Variation etc.

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8 Stages of Deregulation

9 for everything a time and place Overlaps Late-Attacks Pre-Full Deregulation Early-Full Deregulation Mid-Full Deregulation Mature-Full Deregulation Re-Born Competition (Cyclical?) Source: Peace Software 2004, Paul Grey

10 Status Quo

11 Customers stay where they are in the absence of extensive / intensive marketing States retain substantial ownership interests or players exert influence over the state whilst having disintegrated regulation eg. Australia, Finland, Germany, Austria Sweden, France. Large (and even smaller) incumbent monopolies tend to retain their power (concentration & supplier barriers) eg: France, Belgium, Finland, Sweden, Australia, NZ, Austria, Germany, USA, even UK (to a lesser extent) Large Customers Benefit The Most, Others Are Rather Powerless (except UK?) Not all suppliers want to compete cultural non-competition convergence is more likely than a cartel Competition does not necessarily lead to lower prices nor better service Not All Can Compete: Liquidity & Transparency Problems & Other Entry Barriers eg: Norway, Australia, Italy

12 Incumbent Supplier Barriers - Information barriers (obstruction) - Psychological risk creation - Price matching (temporary price reductions) Long-term contracts- mis-information - Strategic alliances / mergers / buyouts - Common philosophy - Integrated utilities - Increased role of Risk Management & Margin Protection - Increased Role of Wholesale Market & it s Instability (can also be an opportunity) - etc.

13 The psychology of efficient customer loyalty

14 The psychology of customer loyalty is complex & determined by individuals in situations Customer Situation Company / Offering

15 Loyalty Influencers Lifestyle more time, more money, less stress, more fun (requires customization: flexibility, individual treatment, responsiveness) Predictability security, consistency of service, proof of capabilities The Individual pre-disposition, personality, energy, emotions, free will, & thought salience Situation opportunity, pressure, environment & time Loyalty Contact interaction, awareness & education Relationship meaning, involvement, perception, structure & strength VS alternatives Fairness equality, ethics (genuine), flexibility, empwerment, good intent, individualization Other eg. Meaning, Aesthetics, Self Reward, Enjoyment, Play, Ownership, Materialism, Getting Something New, Social Acceptance

16 Loyalty Typical Correlation: Satisfaction

17 Price Elasticity

18 Switching Elasticity to Price Different Prices: Similar Loyalty Lost Customers 10,00 9,00 8,00 7,00 6,00 5,00 4,00 3,00 2,00 1,00 0,00 tammi.98 maalis.98 touko.98 heinä.98 syys.98 marras.98 tammi.99 maalis.99 touko.99 heinä.99 syys.99 marras.99 tammi.00 maalis.00 touko.00 heinä.00 syys.00 marras.00 tammi.01 maalis.01 touko.01 heinä.01 syys.01 marras.01 tammi.02 maalis.02 touko.02 heinä.02 syys.02 marras.02 tammi.03 maalis.03 touko.03 heinä.03 syys.03 marras.03 tammi.04 cnt/kwh System Price Swedish Average Standard Variable kwh (excluding taxes and electricity certificate) Finnish Average Standard Variable kwh (excluding taxes) Norwegian Average Standard Variable kwh (excluding taxes) Measure & Maximize Price

19 8,00 10,00 7,00 9,00 6,00 8,00 7,00 5,00 6,00 4,00 5,00 3,00 2,00 1,00 0,00 tammi.98 maalis.98 touko.98 heinä.98 syys.98 marras.98 tammi.99 maalis.99 touko.99 heinä.99 syys.99 marras.99 tammi.00 maalis.00 touko.00 heinä.00 syys.00 marras.00 tammi.01 maalis.01 touko.01 heinä.01 syys.01 marras.01 tammi.02 maalis.02 touko.02 heinä.02 syys.02 marras.02 tammi.03 maalis.03 touko.03 heinä.03 syys.03 marras.03 tammi.04 cnt/kwh 4,00 3,00 2,00 1,00 0,00 tammi.98 maalis.98 touko.98 heinä.98 syys.98 marras.98 tammi.99 maalis.99 touko.99 heinä.99 syys.99 marras.99 tammi.00 maalis.00 touko.00 heinä.00 syys.00 marras.00 tammi.01 maalis.01 touko.01 heinä.01 syys.01 marras.01 tammi.02 maalis.02 touko.02 heinä.02 syys.02 marras.02 tammi.03 maalis.03 touko.03 heinä.03 syys.03 marras.03 tammi.04 Pricing Messages cnt/kwh System Price Finnish Average Standard Variable kwh (excluding taxes) System Price Norwegian Average Standard Variable kwh (excluding taxes) Requirement: Gradual Change in Pricing Convention - Up & Down - More & More Frequent Changes - A Consistent Pricing Argument - Greater Personalisation of Prices - First Mover Competition CRM CIS Australia & New Zealand 2005, 17 March 2005, Source: Melbourne Peace Software , Philip Paul E Lewis Grey

20 Customer Predictions Service Price Alternatives Risk etc Current Supplier Opportunity Supplier

21 Note: Global Switching Trends vs Prices will be Revealed at the conference

22 Seasonal Variation

23 Note: Global Switching Trends vs Season will be Revealed at the conference

24 Meaning & Relationship

25 There is a meaning attributed to the relationship

26 Perverse loyalty signals your loyalty first

27 = Perverse Meaning feelings of trustless fickle loyalty

28 = Perverse Behaviour

29 Customers desire empowerment (choice) and to be heard