The Importance of Various Attributes of an Electricity Supplier as per the Customer - Research Paper Example

Electricity Supply to Consumer Households Executive Summary This study is aimed at finding the importance of different attributes of an Electricity supplier as per the customer. We have found that the top three most desired attributes of a new supplier are infrequent power interruptions, lower response times and lower charges. We also found that the top three attributes of the existing service provider and these most certain would be expected by customers from the new suppliers in addition to what they have expressly indicated. These are : friendliness of staff, lower response time and financial incentives to retain business. The study also found that majority of customers prefer to receive information about the new supplier via post and then by salesperson visit. Presence on the web have has also been selected. It is recommended that information be sent via post and published via web. These customers can then be followed up by salespersons for generating business. We found that 74% of customer have been approached by 0-2 suppliers for their business and 42% of customers have never switch suppliers in the last five years. This means that if the new supplier is able to market the service in accordance to the top 3 desired and top 3 existing attributes, these customer can move over to the new suppliers. 64% of the customer who have switched suppliers over the last five years indicated that they have been approached by a supplier for their business. This indicates that the general trend of the market is to be approached by the new suppliers rather than approaching the supplier with their business. Data Analysis 1. Sample Profile For the analysis, the age of the sample has been broken down into three groups – below 30, 30 to 60 and over 60 years of age. In this sample, we found the majority of respondents between the age of 30 and 60 ( at 42%), closely followed by respondents below the age of 30 ( at 30%) and then respondents over the age of 60 (at 28%). Gender represented by this sample has been dominated by males (at 60%). We believe that since men are easier to approach cumulatively across various classes, they have been over represented. Major of the respondents fall within the income bracket of $50,000 and above (at 64%) compared to respondents with income below $50,000 (at 36%). Considering the income bracket, the sample is unevenly distributed across various respondent profiles. During this analysis, the masses with income lesser than $50,000 are under-represented, so are females. In terms of age, the 30 to 60 age group is dominant, however this is required since this is the age group which would normally be found as a family's decision maker age group. The positive implication of these limitations is that the actual decision making age group is largely represented but the negative implication is that females are not equally represented and the results of this study might be preferential towards male decision makers. Below are the percentage breakdowns from survey questions 1 to 3: 3. Survey question 4 asks the respondents to rate a factor in accordance to its importance. The seven point scale provides a quantitative method is attaching importance of a certain factor. This information is very useful in not only providing services to customers but also marketing insight. Since they various factors deal with different objectives and priorities of customers, the sever point scale will help narrow down the most influential one's in marketing the service. While this scale provides with the most desired attributes and features (by calculating mean) it can also tell us the difference in view points of various customers (by calculating standard deviation ). The negative aspect of creating marketing strategies by using mean and standard deviations is that smaller segments are ignored. However, certain promotional offers and strategies can be used to capture the market represented by these smaller segments. Below is the data for individual factors sorted by mean in descending order. This chart will provide the most desired attributes vis-a-vis others and help in formulating strategies towards capturing maximum market share. Attributes N Minimum Maximum Mean Std Deviation J 50 2 7 6.44 1.01 K 50 3 7 6.3 1.09 A 50 3 7 6 1.25 E 50 1 7 5.38 2 H 50 1 7 5.34 1.73 Y 50 1 7 5.3 1.92 I 50 2 7 5.24 1.55 F 50 1 7 5.18 1.8 L 50 1 7 5.16 1.67 O 50 1 7 5.1 1.99 B 50 1 7 5.1 1.9 M 50 1 7 4.86 1.83 N 50 1 7 4.68 1.96 G 50 1 7 4.68 2.09 V 50 1 7 4.64 1.98 Q 50 1 7 4.54 2.08 W 50 1 7 4.54 1.83 X 50 1 7 4.52 1.84 R 50 1 7 4.44 1.83 P 50 1 7 4.42 2.2 C 50 1 7 4.38 2 D 50 1 7 3.98 2.11 T 50 1 7 3.68 1.93 U 50 1 7 3.62 1.86 S 50 1 7 3.6 1.91 Below is a list of attributes used in the above calculation using a seven point scale. A The supplier charges a lower price than other suppliers B They do not charge ‘early exit fees’ for switching to another supplier C They offer a variety of payment options (e.g. direct debit, Internet etc) D You can spread your annual bill across 12 equal monthly payments E They offer fixed electricity prices for up to 48 months F They offer loyalty rebates for retaining them as your electricity supplier G They offer financial incentives for switching over to them H They offer discounts for paying your electricity bill on time I The staff you encounter are friendly and polite J Interruptions to your power supply are rare K The firm responds quickly to fix any problems with your power supply L They offer advice on how to reduce the cost of your firm’s electricity bills M They offer advice on how to increase the energy efficiency of your firm N They offer electrical safety advice and safety assessments O They are Australian owned P They are Victorian owned Q They are located within your region R They are highly regarded by environmental groups S They offer your firm the option of wind-generated electricity T They offer your firm the option of solar-generated electricity U They offer your firm the option of hydro-generated (e.g. water) electricity V They offer the option of renewable electricity at no extra cost W They are one of the major providers of electricity to homes and business X They have been established as an electricity supplier for many years Y They do not tie their customers in to fixed term contracts “Interruption to your power supply are rare” is the most popular not only in mean but it also has the lowest standard deviations. This in layman's language means respondents have rated this attribute at 6.44 on a 7 point scale based on importance with a standard deviation of 1.01 which still keeps it quite important for those who have rated below the mean. “They do not tie their customers in to fixed contracts” has a moderate importance levels at 5.3 however it has standard deviation of 1.92 which means that for a segment of customers flexible contract terms are very important. The above is a classic example of importance of standard deviation in statistical analysis. For marketing purpose, this segment of prospects have high chances of not being converted in customers if there are minimum contract terms but can be tapped into by providing special promotional offers of waived contract terms. From strategic point of view, attributes with large standard variations are likely to cause loss of customers since that particular attribute may or may not be important to a prospect. To make the decision making process easier, let us categorize standard deviations and mean into four. Low Mean and Low Standard Deviation - Attribute having a low mean and a low standard deviation are not likely to have any impact on the decision of a customer. Low Mean and High Standard Deviation – These attributes are desired by very few customers hence low mean but since are desired they will have high standard deviation as few customers would prefer such attributes before any other. High Mean and High Standard Deviation – This is very unlikely since it is not possible to achieve a high mean with a high deviation. High Mean and Low Standard Deviation – These attributes are quite common as there will always be attributes desired by all like low cost or high reliability etc. 4. Survey question 5 serves two purposes. From marketing perspective it find the most desirable attributes of the service provided by the existing electrical company. It also finds the least desired attributes. In certain cases, eliminating the least desirable attribute can the new service most desirable. An often overlooked but very successful marketing strategy. Below are the mean and standard deviations of the attributes rated in the questionnaire. The attributes rated are as under: From the above data we see that the existing electric company have a friendly and polite staff. Staff friendliness has the highest mean which also tells us that customers are very satisfied with this attribute and would obviously want such service from the new provider as well. The standard deviation of this attribute is also quite high which means that few of the existing customers may have had bad experiences with the staff and this might well be a motivational factor for marketing the new service. Not having a friendly staff might cause the new company loose customers to the existing electric company. The lowest on the scale is Interruption of power supply. Please note that in the earlier part of the questionnaire, the same set of respondents indicated that minimum interruption of power supply is extremely desirable. Here we a direct correlation between the existing service providers performance and what is desired of the a new service provider. It is clear from the data that the existing service provider has not been able to provide consistent power supply. This is a very important attribute for marketing perspective. If the new service provider is able to provide minimal power interruptions, customers of the existing power company will readily switch over to the new one. Note that this attribute also has the lowest standard deviation. Failure to provide better power supply is certainly going to loose customers since most of the customer have made it clear that dependable power supply is their main concern. 5. Data for relative importance of promotional tools in survey question 6 is as under: The attributed rated and represented are: The customer have made it clear that they prefer to be contacted via post. However using mail as a promotional tool is inadequate for a number of reasons. First, the mail might not reach on time. Second, the promotional material might be destroyed by other household staff or family members before the decision maker can see it. Third, it might reach the right person but is overlooked. The best method and a great marketing strategy would be send information packets via post but have it followed up individually by a group of sales persons. Since this attribute is rated second, it will be fairly accepted. Below is the data for the one-sample T-test: 7. Below is the data for the three attributes in accordance to age: Where A is “The supplier charges a lower price than other suppliers” B is “Interruptions to your power supply are rare” C is “The firm responds quickly to fix any problems with your power supply” As we see there is a negligible difference in the response to the three most important attributes from question 4. 8. Below is the data for the analysis: As we see, for the segment of customers below the amount of $50,000 have a high standard deviation. This means that most (in both age groups) are neutral towards that attribute, however a few may be interested (as shown by the high standard deviation) from the Under $50,000 group in financial incentives. 9. As we see, the male count is much higher than the female count. The Chi test has a value of 0.88. It is clear that if the count of males and females were different, then the switching behavior pattern would also be different. Conclusions and Recommendations This study had answered a number of marketing related questions for sale and promotion of the service. Also, it has offered an insight into the the customer's expectations from a new electric service provider. In this study a total of 50 respondents were asked to rate individual aspects of their existing service provider along with their expectations from a new service provider. It also asked a few profiling questions enabling the analysis to categorize their responses on the basis of Gender, Age, Income group etc. We discovered from this study that minimal power interruptions, lower response time and low tariff are the top three shortcomings of the existing service provider. This enables marketing to capitalize of these three major shortfalls to promote the new service. The study also found that Friendliness of staff, lower response time and financial incentive to retain business are the most appreciated attributes of the existing service provider and combining these with the three most desired attributes will help win and retain customers. We also discovered that information regarding the new suppliers is most desired by customers in the form of mail, followed by salesperson visit and finally suppliers website. It is recommended that relying only on the first mode of sending information will be highly risky (late delivery, loss of information packets etc). We recommend that information is send via post followed up with salesperson visits. Web presence is highly recommended as it will help in forming a positive opinion in the customers mind. Also, customers who don't have time to browse through mail or to spend time consulting with salesperson can easily find information about the company and its services via the website. The website can not only serve as an information carrier but also as generate sales leads. From the survey questions 1 to 3 we find some valuable insight toward the customers behavior in switching electric supply vendors. A cumulative 74% of customers have approached by 0-2 electricity suppliers seeking their business. This is a low amount considering the number of suppliers in the market and it is suggested that the marketing department targets these customers before any other as there are high chances of gaining business from this segment. Also, a total of 42% from the entire sample have not switched suppliers within the last five years. If the marketing strategy is able to answer the top 3 desired and the top 3 existing attributes, these 42% can be convinced to move over to the new company. 64% of the customers responded that it was the supplier who had initiated the switch over to the new company. This indicated that the customers are open to new service providers given that the new supplier is able to meet their needs. This study has tried to provide insight to the various attributes of existing service provider and what a customer might expect from a new service provider. However, the sample question has uneven distribution of the profile or the respondents and might not be able to provide a holistic picture. The unequal attributes of the respondents are: Majority of male respondents at 60%. Income group of under $50,000 under represented at 36% Reference List An Investigation into the New Product Process: Steps, Deficiencies, and Impact RG Cooper, EJ Kleinschmidt - Journal of Product Innovation Management, 1986 – uni-hamburg.de Using focus groups to discover health professionals' information needs: a regional marketing study. 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