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Loyalty may depend more on age group than anything else.
Utilities may want to start asking their customers some personal questions.
Such as: "How old are you?"
Why? Because customer behavior may have more to do with age and other demographics than anything. For instance, younger customers compose the highest-switching segment. However, older customers tend to have more loyalty. But so too, these loyal customers are the hardest to woo from another supplier.
Four distinct consumer clusters have emerged in the utility markets to show switching behavior is linked in part to the age of the consumer. The first group, which comprises those under 35, appears very responsive to switching providers and almost seems to enjoy doing so. The second group, consumers in their 40s and 50s, is amenable to switching, primarily for price. The third group, of 55- to 60-year olds, is very loyal to their existing providers and unlikely to switch. The fourth cluster, over age 65, is amenable to switching providers, primarily for features. %n1%n
By definition, retail competition means more choice for customers. Customer switching behavior and willingness to consider and switch service providers must be carefully studied by any utility facing competition. Why customers switch, how they can be retained or attracted and what that will cost are critical considerations. The answers may lie in understanding and identifying specific customer profiles.
"10 Cents a Dance"
Members of the "10-Cents-a-Dance" group generally are under 35. In addition, these people usually are single with lower to middle incomes. This switching segment composes 31 percent of the population. Without exception, members of this segment will switch any provider for any reason. These are pro-competition consumers in all service areas. In fact, it is almost guaranteed that this group will switch local telephone companies.
This segment is more likely to be interested in surge protection, both whole-house and point-of-use. They make up the most security conscious segment and are most likely to be interested in outdoor security lighting, at 43.1 percent, and most likely to own a home security system, at 11.3 percent. They have a higher-than-average penetration rate for home entertainment and computer equipment and are overwhelmingly more interested in monitoring personal energy use.
Of all the switching market segments, this group is the most likely to use telephone features. More than half subscribe to at least one. They have the highest local- and long-distance phone bills (em $34.57 and $33.21, respectively. However, members of this segment typically have the lowest electric bills, averaging $72.40 per month. They boast a higher-than-average cable penetration rate and are 5 percent more likely to subscribe to a premium service than basic cable.
"Middle of the Road"
Members of the "Middle-of-the-Road" segment are in their 40s and 50s, with higher incomes and are most likely married. This switching segment composes 33 percent of the population. The switching behavior of this group is moderate. They are neutral on most types of services and, in general, appear satisfied with the service they receive. These people are willing to consider a switch if it appears to suit