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Customer Switching in Australian Electricity

Datamonitor
December 17, 2008
27 Pages - SKU: DFMN2069269

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Countries covered: Australia

Introduction

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.

Scope

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.

Highlights

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.

DATAMONITOR VIEW: CATALYST; SUMMARY; METHODOLOGY
CUSTOMER SWITCHING IN RESIDENTIAL ELECTRICITY: Australia's customer switching rate continues grow; Despite high switching rates in Victoria and South Australia, less than half of Australians in competitive states have switched supplier; One-third of switchers will consider switching again in the next 12 months; Emergence of new entrants is providing customers with more choice; Driving the switching decision; Switching supplier remains a key method of reducing energy costs, behind energy efficiency; Door-to-door salespeople still have the greatest impact in driving the switching decision; Consumers are more reactive than proactive, with consumers rarely approaching more than two potential suppliers; Price comparison websites are becoming a much more useful source of information to switchers; Impact of inertia and customer satisfaction on switching; Non-switchers remain with their current supplier as generally happy and yet to look into switching; Switchers' expectations are also being met by their new suppliers; Summary
APPENDIX: Definitions; Sources; Further reading; Ask the analyst
List of Tables: Table 1: How many times have you switched supplier?; Table 2: Nearly two-thirds of customers in South Australia have switched and over 50% in Victoria; Table 3: Customers are more willing to reconsider switching within a shorter time span; Table 4: Market share by type of supplier in Australian competitive electricity markets; Table 5: Australians are highly likely to consider offers from new entrants; Table 6: New entrants are making headway into the market through competitive offers and getting to customers first; Table 7: Some 16% of respondents had switched supplier in last 12 months as a means of reducing energy costs; Table 8: What triggered your most recent decision to switch your electricity supplier?; Table 9: Twice as many customers have been approached by suppliers than have themselves proactively approached a supplier; Table 10: Switchers have clearly been both better targeted and more active in seeking a new supplier; Table 11: Price comparison websites were useful to 21% of switchers; Table 12: Happiness with current supplier and lack of proactivity declining as reasons for not switching; Table 13: Less than half of Australians would be moderately or very likely to switch for a 10% saving; Table 14: Comparing reasons for not switching with likelihood of switching for a 10% saving; Table 15: Customers expectations are being met or exceeded by their new suppliers; Table 16: Lower prices and loyalty bonuses are the most attractive propositions to retain customers
List of Figures: Figure 1: Customer switching by state, January 2003 - October 2008; Figure 2: Over half of Australians in competitive states have not switched supplier; Figure 3: Nearly two-thirds of customers in South Australia have switched and over 50% in Victoria; Figure 4: More customers are expecting to consider switching again within a year; Figure 5: Market share by type of supplier in Australian competitive electricity markets; Figure 6: Australians are highly likely to consider offers from new entrants; Figure 7: New entrants are making headway into the market through competitive offers and getting to customers first; Figure 8: Some 16% of respondents had switched supplier in last 12 months as a means of reducing energy costs; Figure 9: Door to door sales continues to be the most successful tool in attracting switchers; Figure 10: Twice as many customers have been approached by suppliers than have themselves proactively approached a supplier; Figure 11: Price comparison websites were useful to 21% of switchers; Figure 12: Moneysupermarket's price comparison site for the UK illustrates the potential for price comparison and switching sites; Figure 13: Happiness with current supplier and lack of proactivity declining as reasons for not switching; Figure 14: Less than half of Australians would be moderately or very likely to switch for a 10% saving; Figure 15: Customers expectations are being met or exceeded by their new suppliers; Figure 16: Lower prices and loyalty bonuses are the most attractive propositions to retain customers

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