First Utility: same day switching would boost churn rates

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24 September 2013, Gas, Electricity

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For many consumers, switching energy suppliers is seen as a laborious and perilous process, complete with fears of being cut off, having engineers in to change meters, and having to deal with reams of confusing paperwork. Although these fears are mostly unsubstantiated, they exist due to a lack of clarity into how the process works and what will happen once they sign on the dotted line. These perceived fears can cause consumers to become disengaged and see switching to a new supplier as not worth the time and effort, even if there are financial savings to be made. These individuals then become very hard to reach by the industry, and with the most effective measures (cold calling, doorstep selling) open to abuse and increasingly shunned by suppliers fearful of regulatory intervention, disengagement is on the rise and switching rates have decreased to under 15%.

However, if the switching process was made as time efficient as in the telecoms and banking sectors (where providers can be changed in a matter of hours or at most a couple of days), then it would erase much of the negative perception that disengaged consumers hold towards the process, thus positively affecting switching rates in the market. Healthy switching rates are key to a competitive market, and these will only be increased by engaging with customers and providing clarity into how suppliers interact with each other and their customers. By shortening the switching process and removing irrational fears and confusion, suppliers will take a strong step towards this goal.

It remains to be seen how the market responds to the campaign. Clearly anything good for customers will be difficult to deny publicly; however, much will depend on whether or not the IT costs involved in implementing the change will be sufficiently low as to allow a positive business case to be made for the overhaul.

Source: MarketLine

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