Customer Retention Strategies for the European Electricity Mid Market

Transcription

1 A Datamonitor report Customer Retention Strategies for the European Electricity Mid Market Improving ROI while maximising retention rates Why buy this report? Published: Jul-03 Product Code: DMEN0257 Mid-market segmentation - Understand who the more important customer groups are Competitor activity and the most targeted customers - Draw a priority list to identify the most suitable retention targets Revenues per customer group - Evaluate the long-term value of a customer before targeting for retention Key Research Findings available in ready to present PowerPoint Pack Format Switching barriers - A step-by-step assignment of switching barriers for each customer group to ensure maximum return without compromising profitability Switching barrier mix and retention strategy - Develop the most suitable switching barrier mix for your customer base and national retention strategy

2 Customer Retention Strategies for the European Electricity Mid Market - Improving ROI while maximising retention rates DMEN0257 An introduction to the report This report addresses the issue of customer retention in the European and covers the five key markets of UK, Germany, Netherlands, Italy and Spain. Its main objectives are to analyse the value of each of the customer groups that populate the, ascertain what measures are necessary to retain the various types of customer, and the cost of these strategies, and advise on the most appropriate strategies to adopt in order to boost retention rates without compromising profitability. Scope and coverage of the report Datamonitor's executive panel survey on customer retention strategies and trends in the European In-depth analysis of the dynamics, annual spend and switching likelihood of the main customer groups that populate the in the UK, Germany, the Netherlands, Italy and Spain. Datamonitor's unique customer retention model, based on the combination of hard data analysis and future trend modelling Examples of current and future challenges for retention strategies in the UK, Germany, the Netherlands, Italy and Spain Report methodology In researching this subject, we conducted a series of in-depth interviews with twenty strategy executives among leading European utilities in order to gain an understanding of current trends in customer acquisition and develop a best practice model. We also conducted a series of interviews with regulators, end-user associations and new entrant lobbying groups so as to gain a full picture of the main market forces and build a forecasting model for our recommendations. The data used in this report is taken from Datamonitor's unique Mid-Market Model in order to identify the key customer groups that populate each sub-segment and advise on the most appropriate customer retention strategies. For more information... tel: fax: ensales@datamonitor.com

3 Report highlights Despite noticeable differences in the dynamics of the from one European country to another, the overall approach to customer retention is the same. Although most retention strategies are focusing on competitive pricing, suppliers are yet to meet customers' expectations on basic functions such as billing and customer services. Half of value in the Netherlands and Spain is dormant and poses little threat to incumbent suppliers. German electricity suppliers are in danger of losing up to 37% of their midmarket revenues by 2005 if they do not develop effective customer retention strategies. Key customer group clusters in the UK Likelihood to switch B H&SW 2 HEM LEM 2 MEM 2 E 2 H&R 2 E 1 MEM 1 B&O 3 LEM 1 C 3 W&R 1 H&R 1 C 2 H&SW 1 B&O 2 B&O 1 36% E D 4% C 40% W&R 2 10% A 10% HIGH LOW C 1 LOW HIGH Average revenue per customer/year Source: Datamonitor DATAMONITOR Recommended investment levels for customer retention per customer group Customer group Reduce/prevent Improve product dissatisfaction proposition Build loyalty HEMs MEMs LEMs W & R H & R B & O H & SW Education HIGH MEDIUM LOW NONE Source: Datamonitor DATAMONITOR Report structure chapter by chapter Market Context - Analyses the current state of competition in the across a number of key European countries. Segmentation and Valuation - Identifies the main customer groups that populate the in the UK, Germany, the Netherlands, Italy and Spain and their monetary value to suppliers. Building Cost-Effective Switching Barriers - Conducts an analysis of the three key stages of customer retention and identifies the activities and retention tools suppliers need to develop in order to retain their most valued customers. Recommendations - Uses the findings of our analysis of how utilities can build effective switching barriers to offer actionable recommendations to electricity suppliers on the most potent retention strategies in the. Our recommendations are presented by country and based on the dynamics of the key customer groups in each....we do not pay enough attention to retention due to the lack of resources. We are finding it hard to calculate retention rates, which we only do once a year... Marketing Director, Electricity Supplier, the Netherlands

4 Customer Retention Strategies for the European Electricity Mid Market - Improving ROI while maximising retention rates DMEN0257 Key findings presentation pack This report's key findings have been distilled into a powerful presentation tool to aid your business planning. A ready to prsent PowerPoint slide pack with detailed notes on each slide is delivered electronically along with the main report. Why is customer retention a hot issue? European electricity suppliers could lose up to 57% of the value of their s to competing companies; In January 2004, all across Europe will be open to competition; Most utilities surveyed by Datamonitor consider customer retention to be the most important component of their strategy; The complexity of the makes it very difficult for suppliers to identify the switchers and understand their drivers Mid-Market customer base s dynamics Suppliers need to identify customers groups that are most likely to switch, identify the main switching drivers and develop effective retention strategies before the mid-makret is fully open to competition. First -tier Small customer base Highest consumption per customer Likely switchers Datamonitor Version CUSTOMER SIZE Second-tier LIKELIHOOD TO SWITCH Medium customer base Average consumption per customer Potential switchers Third-tier Large customer base Lowest consumption per customer Mostly dormant Share of total revenues Datamonitor Version Analyst presentation Datamonitor's residential//major energy user analysts are available to present these key findings to you and your colleagues. They can visit you in your offices to present and discuss the research. For further information about this service contact your account manager, or ensales@datamonitor.com...the challenge for retention strategists is getting the right communication mix. Most of the time, customers don't need to speak to their supplier, they just want the bill... SME Marketing Manager, Incumbent UK Electricity Supplier

5 Table of contents MARKET CONTEXT An analysis of' the current state of competition in the across a number of key European countries. We look into the factors most likely to affect customer retention strategies, such as switching trends and competitor activity, and present our methodology and approach for developing winning formulas that can be used by electricity suppliers to keep their most valuable customers. Analysis of switching trends in key national s Competitor activity and implications for retention strategies Datamonitor's customer retention model SEGMENTATION AND VALUATION This chapter identifies the main customer groups that populate the in the UK, Germany, the Netherlands, Italy and Spain and their monetary value to suppliers. We illustrate where the focus for customer retention should be, by taking into account not only their relative value but also other important factors, such as likelihood to switch. Key customer groups in the UK, Dutch, German, Spanish and Italian s Estimated annual electricity spend and switching likelihood for each customer group Key strategic customer clusters for retention strategies BUILDING COST EFFECTIVE SWITCHING BARRIERS An assessment of the three key stages of customer retention. We identify the activities and retention tools suppliers need to develop in order to retain their most valued customers. This is achieved by assessing each strategy's relevance to the key customer groups that populate the European. Main findings of Datamonitor's end-user survey in the UK and the Netherlands How can suppliers reduce/prevent dissatisfaction? Improve product proposition? And build loyalty? Does the nature of business customers affect the mix of switching barriers? RECOMMENDATIONS Actionable recommendations for electricity suppliers on the most potent retention strategies in the. They are presented by country and based on the dynamics of the key customer groups in each : Developing a retention model Drawing a priority list - which customers to target first? Mid-market customer retention strategies for the UK, Germany, the Netherlands, Italy and Spain APPENDIX DATASETS Table 1: Deregulation and competition levels across European s, May 2003 Table 2: Key electricity customer groups in the UK Table 3: Revenues per key electricity customer group in the UK Table 4: Likelihood to switch of key customer groups in the UK Table 5: Key electricity customer groups in the German Table 6: Revenues per key electricity customer group in the German Table 7: Likelihood to switch of key customer groups in the German Table 8: Key electricity customer groups in the Dutch Table 9: Revenues per key electricity customer group in the Dutch Table 10: Likelihood to switch of key customer groups in the Dutch Table 11: Key electricity customer groups in the Italian Table 12: Revenues per key electricity customer group in the Italian Table 13: Likelihood to switch of key customer groups in the Italian Table 14: Key electricity customer groups in the Spanish Table 16: Likelihood to switch of key customer groups in the Spanish Table 17: Key customer groups and share of total revenues for key European s Table 18: Potential revenues loss and switching risk in the UK halfhourly Table 19: Importance ratings* for key attributes in the UK and Dutch, 2003 Table 14: Key electricity customer groups in the Spanish Table 15: Revenues per key electricity customer group in the Spanish Table 16: Likelihood to switch of key customer groups in the Spanish Table 17: Key customer groups and share of total revenues for key European s Table 18: Potential revenues loss and switching risk in the UK halfhourly Table 19: Importance ratings* for key attributes in the UK and Dutch, The biggest surprise for me has been how well the small Stadtwerke have done in terms of keeping their customers. I think it is because they know them well and used very clever marketing... Sales and Marketing Manager, German Electricity Supplier

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