Power Engineering - European mid-market power customers vunerable says report

29 July 2003 - New research from independent market analyst, Datamonitor has found that incumbent European electricity suppliers are at risk of losing up to 57 per cent of their mid-market revenues' total value. Despite this imminent threat, only a handful of suppliers are likely to have the required strategies in place by January 2004, when the European electricity mid-market opens to competition.

Datamonitor's research in the UK, the Netherlands, Germany, Italy and Spain reveals that the majority of mid-market customers are dormant, posing little threat, and that mass-marketing efforts aimed at the entire the mid-market are a waste of resources. Datamonitor's research identified those customers suppliers must focus on in each country, who tend to fall into either manufacturing, retail or hospitality sectors.

In order to keep these customers, incumbent suppliers must ensure they deliver on basic requirements, such as accurate billing and timely customer services, whilst developing tailor-made products to enhance satisfaction and build dependence.

Switching levels experienced at the higher end of the Dutch electricity market showed suppliers must not rest on their laurels and hope for the best. A Datamonitor survey revealed none of the incumbents in the Netherlands had anticipated that as many as 20% of customers would switch supplier within the first 12 months of the second phase opening.

The news has sent a clear signal to the industry that switching is a real risk and in some cases, imminent. An analysis of the customer dynamics and market conditions in the UK, Germany, the Netherlands, Italy and Spain identified the nature and value of the customer groups most at risk. The findings show that incumbent suppliers are running the risk of losing between 10 per cent and 57 per cent of their mid-market electricity revenues if they fail to initiate effective customer retention strategies.

The issue is even more pressing due to suppliers' lack of preparation.
Datamonitor's research shows that out of the five countries analysed, only
in the UK are suppliers adequately equipped to deal with retention, at least in terms of manpower. In other countries, such as the Netherlands, the majority of incumbent suppliers have yet to appoint dedicated personnel to deal with the tracking, planning and implementation of customer retention programmes.

In most cases, suppliers are still trying to get to grips with the complex
nature of the electricity mid-market and complain about the amount of data
required to conduct accurate customer segmentation and valuation. However,
Datamonitor's analysis has shown that suppliers can still implement efficient retention strategies with limited information, provided they know the customer's industry sector and consumption level.

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