Nearly a third of the UK population will switch gas supplier when deregulation of the market is introduced across the country, according to exclusive research for Marketing Week conducted by Mintel and BMRB.
This means 7.3 million households could ditch British Gas and change to one of the new independent suppliers, taking almost 2bn of expenditure with them.
On the evidence of the Mintel sample, it seems probable that a higher number of electricity customers than those for gas will replace their supplier. With 37 per cent of the sample being either very or quite likely to change, this grosses to about 17.5 million adults – or approximately 8.8 million households.
But these differentials against gas can probably be attributed to the higher penetration of electricity, which provides a bigger pool of respondents to questions about electricity supply.
Indeed, the most recent Family Spending Survey from the governmental Office of National Statistics indicates that about 77 per cent of households sampled have gas, compared with the almost 100 per cent for electricity.
As the chart shows, slightly under a third (31 per cent) of all adult respondents in the sample expressed a likely interest in switching their gas supplier; one in ten consider themselves very likely, while a further 20 per cent are quite likely to switch. Even applying a margin of error of plus three per cent to the sample of 1,000, there are likely to be between 6.6 million and 8 million households switching suppliers.
Men in the sample tend to be more enthusiastic about switching gas supply than women, by a margin of 13 per cent. Simultaneously, the more resistant attitudes expressed by the “not particularly likely” and “not at all likely” responses, were much more evident among women than men.
This presents an interesting challenge for the new utility players wishing to find the most receptive target for their marketing campaigns. For while women are often considered to be the gate keepers of the domestic budget, this data suggests they may be less receptive to the idea of new gas supply arrangements than their male partners.
Elsewhere, the most enthusiastic proponents in the sample for switching supplier are younger adults, particularly 25- to 44-year-olds. To some extent it is these adults who, having grown up through an era of reduced state control and greater deregulation, may be more willing to flex their freedom of choice.
In contrast, older respondents show a more overt conservatism, preferring to maintain the status quo. Nevertheless, the figures also suggest that where there is uncertainty (as indicated by the “don’t know” responses) it is most evident among the over 55s, which highlights the need to vary the content of the selling messages being conveyed to different groups of prospective customers.
These tendencies in favour of switching or not, are also transmitted through the lifestage analysis. The family lifestage group, comprising many adults between 25 and 44, is the most enthusiastic of any group (43 per cent are likely to switch).
Clearly with the highest expenditure on gas and electricity, this group represents an attractive target. For families, the financial incentives for switching will also be relatively more valuable than for groups with lower fuel expenditure. The special groups analysis shows that both families on tight budgets and those which are better off are likely to be equally enthusiastic about changing supplier.
But analysing the data by socio-economic group shows some significant differentials between groups. ABs are the most receptive to the idea of switching, while those at the opposite end of the income spectrum, the Ds and Es, are considerably more reluctant.
This reflects the relatively large elderly contingent in both these groups. It may also be transmitting the uncertainty of switching from a current supplier which offers convenient payment terms, to one where such terms may be unavailable. Clearly for those on lower incomes or state benefits, this could be a major reservation to overcome.
Regionally, it is interesting to note – given the publicity over SWEB’s pilot in the area – that nine per cent of the South-west sample claim to already have switched supplier. A further 24 per cent are likely to switch and 19 per cent of the sample are “don’t knows”.
These findings are in line with other regions; so while SWEB has clearly flushed out the impulse switchers (perhaps motivated by a “change for change’s sake” senti-ment) the company’s campaign has not persuaded the 48 per cent of “not likelies”.
For energy suppliers, this data has some important lessons. There is a strong degree of entrenchment in favour of existing suppliers – overall, there is a higher probability of both gas and electricity customers sticking with their current supplier. Over half of those surveyed would appear to be of this persuasion.
More telling is that even though respondents were presented with a proposition which offered discounts and loyalty schemes, the majority still feel unmoved. Clearly there is a high degree of inertia to overcome, but it may be that marginal financial benefits are insufficient to get consumers’ allegiance. The loyalty building tactics of the grocery trade could be inappropriate for this kind of market.
For most domestic consumers, the notion of being able to shop around for gas and electricity will be a novelty – having become accustomed to the conventions of mono-poly supply, the concept of being able to buy electricity, for instance, from a supply company 400 miles removed, will challenge many consumers.
Nevertheless, the wider climate of deregulation (telecoms, railways and the like) will undoubtedly present a backdrop which will help the new breed of utility companies to spread their message of customer choice.