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Customer Switching in Australian Electricity
Datamonitor, December 2008, Pages: 33
This brief investigates the trends in customer switching in the electricity market in Australia, and examines emerging trends such as the proliferation of price comparison sites, the growing presence of new entrants and also how the global financial crisis would be expected to impact the switching rate.
- Survey of 1,000 Australian households, examining reasons and triggers for switching, anticipated future behaviour, and reasons behind non-switching.
- Penetration of new entrants in competitive states and customer acceptance of offers from new entrants.
- Analysis of key sources of information for switchers, including proliferation of price comparison sites.
The accessibility of pricing information from price comparison websites is further improving the situation for customers looking to switch, with 21% of switchers citing price comparison sites as a key source for their switch.
The key challenge for utilities remains overcoming inertia and driving non-switchers to change. Some 42% of non-switchers are happy with their supplier and 24% are yet to look into switching. Furthermore, 32% of non-switchers would be unlikely to switch for a 10% saving.
83% of customers are willing to consider offers from new entrants, and 14% of those who have switched to a new entrant did so because they did not want to be supplied by a traditional utility.
Reasons to Purchase
- Track the progress of switching by state and changing consumer drivers.
- Evaluate key sources of information for consumers when switching supplier.
- Identify trends in customer inertia and to how overcome it.
CUSTOMER SWITCHING IN RESIDENTIAL ELECTRICITY 3
Australias customer switching rate continues grow 3
Despite high switching rates in Victoria and South Australia, less than half of Australians in competitive states have switched supplier 4
One-third of switchers will consider switching again in the next 12 months 7
Emergence of new entrants is providing customers with more choice 9
Driving the switching decision 13
Switching supplier remains a key method of reducing energy costs, behind energy efficiency 13
Door-to-door salespeople still have the greatest impact in driving the switching decision 15
Consumers are more reactive than proactive, with consumers rarely approaching more than two potential suppliers 17
Price comparison websites are becoming a much more useful source of information to switchers 20
Impact of inertia and customer satisfaction on switching 23
Non-switchers remain with their current supplier as generally happy and yet to look into switching 23
Switchers expectations are also being met by their new suppliers 27
Further reading 32
Ask the analyst 33
List of Tables
Table 1: How many times have you switched supplier? 6
Table 2: Nearly two-thirds of customers in South Australia have switched and over 50% in Victoria 7
Table 3: Customers are more willing to reconsider switching within a shorter time span 9
Table 4: Market share by type of supplier in Australian competitive electricity markets 10
Table 5: Australians are highly likely to consider offers from new entrants 12
Table 6: New entrants are making headway into the market through competitive offers and getting to customers first 13
Table 7: Some 16% of respondents had switched supplier in last 12 months as a means of reducing energy costs 15
Table 8: What triggered your most recent decision to switch your electricity supplier? 17
Table 9: Twice as many customers have been approached by suppliers than have themselves proactively approached a supplier 19
Table 10: Switchers have clearly been both better targeted and more active in seeking a new supplier 19
Table 11: Price comparison websites were useful to 21% of switchers 21
Table 12: Happiness with current supplier and lack of proactivity declining as reasons for not switching 24
Table 13: Less than half of Australians would be moderately or very likely to switch for a 10% saving 25
Table 14: Comparing reasons for not switching with likelihood of switching for a 10% saving 27
Table 15: Customers expectations are being met or exceeded by their new suppliers 28
Table 16: Lower prices and loyalty bonuses are the most attractive propositions to retain customers 30
List of Figures
Figure 1: Customer switching by state, January 2003 - October 2008 4
Figure 2: Over half of Australians in competitive states have not switched supplier 5
Figure 3: Nearly two-thirds of customers in South Australia have switched and over 50% in Victoria 6
Figure 4: More customers are expecting to consider switching again within a year 8
Figure 5: Market share by type of supplier in Australian competitive electricity markets 10
Figure 6: Australians are highly likely to consider offers from new entrants 11
Figure 7: New entrants are making headway into the market through competitive offers and getting to customers first 12
Figure 8: Some 16% of respondents had switched supplier in last 12 months as a means of reducing energy costs 14
Figure 9: Door to door sales continues to be the most successful tool in attracting switchers 16
Figure 10: Twice as many customers have been approached by suppliers than have themselves proactively approached a supplier 18
Figure 11: Price comparison websites were useful to 21% of switchers 20
Figure 12: Moneysupermarkets price comparison site for the UK illustrates the potential for price comparison and switching sites 22
Figure 13: Happiness with current supplier and lack of proactivity declining as reasons for not switching 24
Figure 14: Less than half of Australians would be moderately or very likely to switch for a 10% saving 26
Figure 15: Customers expectations are being met or exceeded by their new suppliers 28
Figure 16: Lower prices and loyalty bonuses are the most attractive propositions to retain customers 29