UK utilities should move towards lifestyle tariffs

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By: Wise Marketer Staff |

Posted on March 2, 2002

In recent years, the number of companies moving towards lifestyle solutions has grown rapidly, but UK utilities have lagged behind.

Continental utilities and suppliers from other vertical markets are well on the way to providing their customers with lifestyle products and services, but UK utilities continue to offer the traditional standard or Economy 7 tariffs. The authors of a new Datamonitor report  believe that, if UK utilities are serious about becoming multi-product retailers, their tariffs will have to evolve. Datamonitor expects this evolution to begin in the next year or two.

In the past, approximately a third of UK gas and electricity customers who switched suppliers achieved both lower prices and other benefits. And while all the UK utilities now offer a range of standard and prepayment tariffs (and many offer a selection based on customers' environmental preferences, or in conjunction with charities, or with other loyalty incentives), they are not targeted at any particular lifestyle groups.

In contrast, banks target students with loans, accounts and other products specially geared to a student's lifestyle. The better loyalty programme operators target customer segments with offers suited to their lifestyle; say, vegetarian products for vegetarians.

This lifestyle segmentation not only aids in offering the right customer the right incentives, it is also simpler for the customer. The "one size fits all" offers are often confusing: the customer can't easily and clearly identify with any of them. They all have advantages and disadvantages and ambivalence creeps in. Research by Ofgem reveals that 35% of consumers find price comparisons "difficult" and, even when they have the pricing information, 40% still feel "not informed".

UK utilities recognise the potential value of their customer databases but at present have little information that will help them segment them in any beneficial way. What would be a real benefit is a thorough knowledge of their customers' lifestyles and preferences.

On the Continent
Utilities in Germany and Scandinavia are already doing this � Germany's DEW has a "Single and Happy" tariff and a "Family" tariff. Recognising the separate and different needs of these groups, and designing tariffs to suit them, makes the choice much easier for the customer � who consequently feels much more confident that he or she has chosen correctly and is getting the best deal possible.

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