Scope
A quantitative assessment of the key global price-related consumer trends and the impact they have for utilities
Detailed value-added analysis of extensive primary research across eight countries in Europe and the USAA market-specific assessment of three major customer types in terms of switching, product uptake and price sensitivity
Highlights
Price drives switching but only when the utility has a recognized brand. However, even when a 10% savings incentive is offered, consumers tend to be ambivalent about switching.
In an effort to keep things simple, convenience consumers are less likely to switch if they are unsatisfied with the service. Whilst, on average, 46% of the general population would switch if they were unhappy with their supplier, a smaller proportion of convenience consumers would do so with the majority, 47%, opting to complain instead.
The report segments consumers across the eight countries using a unique price consciousness index. Consumers are classified into low, moderate and high price sensitive bands enabling the marketing, customer service and brand departments of energy suppliers to better understand consumers' behavior.

Reasons to Purchase
Understand the motives driving customer attitudes to price and be in a position to better meet needs and so increase retention and acquisition levels
Fine-tune marketing and advertising campaigns in light of growing price-related, global consumer trends
See how perceptions of service, choice and brand affect customers' relationships to price and develop products that will appeal to them directly


Table of contents:
CHAPTER 1 EXECUTIVE SUMMARY
This report identifies four key trends in consumers’ attitude to price and develops recommendations for how utilities should respond
Cost is the key dynamic for consumers but attitudes to price are diverse and complex
Across Europe, price is crucial to energy supply, but utilities also need a strong brand and a diverse portfolio of products
Time is money and consumers are willing to pay for convenience, quality and specificity
’Convenience consumers’ is a large segment - do not take them for granted and do not confuse them with other types of high-value customers
Masstige is a phenomenon associated with brand and indulgence at low prices - affordable luxuries
Develop energy brands with masstige in mind: be cheap, but do not identify with cheap brands
‘Rich’ does not always mean ‘high-spender’: there are many affluent people who will shop around for bargains
Utilities that only segment customers by age, income and region need to go a step further: not all affluent people are the same
Recommendations
CHAPTER 2 INTRODUCTION
The report is aimed both at marketing and operational executives, and is based on research conducted in eight European countries
What is this report about?
Who is the target reader?
This report examines the role of price in consumer behaviour and leverages the expertise of four Datamonitor business units
CHAPTER 3 MARKET CONTEXT
The attitudes of European consumers to a variety of products and services can be analysed in terms of share of wallet, and attitudes to financial management and payment
Housing, food and transport take the biggest bite out of the budget; whilst ‘one Europe’ concepts need to be avoided
Utilities should be aware of the masstige phenomenon and recognise the potential in affinity partners
Share of wallet is not a simple predictor of attitude to price and payment
Payment methods and chase-up tactics must be rethought in order to alter the bad habit of consumers regarding bills
Whilst energy is a necessity, it only takes a small bite out of the household budget and is not a priority
Younger consumers are more likely than older consumers to delay the payment of utility bills
Direct Debit is just one method by which utilities can facilitate the bill paying process
CHAPTER 4 COST IS THE KEY DYNAMIC
Cost is the key dynamic for consumers but attitudes to price are diverse and complex
Money talks: price is the priority in four key industries
Datamonitor classifies respondents as high, low or moderately price conscious
The importance of market specific knowledge: Swedish and Dutch consumers are more price sensitive than Italians
Age indicates price sensitivity better than gender; male and female 24-35 year olds are the most price conscious
Whilst the choice of electricity or gas supplier depends on price, banks are chosen foremost on the basis of service
By understanding consumers who do not prioritise price, utilities can alter their image as mere commodity suppliers
Service oriented utility customers profile
Service oriented customers - attitudes
Utility consumers who prioritise choice are more likely to switch or pay extra to obtain tailored and varied products or services
Choice oriented utility customer profile
Brand sensitive customers are predominantly male, less likely to switch and more inclined to listen to recommendations
Brand oriented utility customers - profile
Brand oriented utility customers - attitudes
Price drives switching, but only when the utility has a recognised brand
CHAPTER 5 TIME IS MONEY
Time is money and consumers are willing to pay for convenience, quality and specificity
Values versus commitments: family time is a priority but as lifestyles get busier values are increasingly compromised
Time-saving products are often high quality and expensive yet serve as welcome antidotes to hectic lifestyles
There are high proportions of convenience consumers in Sweden and the UK, but not in France, Spain or Holland
Convenience consumers want less stress and more time but are willing to experiment to find the right tailored product
Convenience customers expect to be rewarded for their loyalty to utilities and prefer to avoid the hassle of switching
Although convenience consumers switch less, their loyalty depends on getting good service and competitive prices
So in an effort to keep life simple, convenience consumers may take more than one product from their utilities
Not all high value, low switching customers are convenience customers, so utilities should not group them together
CHAPTER 6 MASSTIGE
Masstige is a phenomenon associated with brand and indulgence at low prices - affordable luxuries
‘Masstige’: a retail phenomenon where prestigious, luxury items are being made available for mass consumption
Low earners enjoy luxurious or prestigious indulgences yet stay within budget
Attitudes to brand provides further evidence of the masstige phenomenon
In percentage terms, masstige populations are largest in Holland, Sweden, France and the USA, and smallest in Spain and the UK
Despite being brand sensitive, masstigers seek customisation and welcome extensive product offerings
Masstige consumers choose to save in come areas to fund spending in others
Young masstige consumers are more likely to switch utilities than older consumers, particularly when savings are involved
Whilst younger consumers are prone to switching, older masstigers would like to be rewarded for their loyalty
Utilities should develop energy brands with masstige in mind: be cheap, but do not identify with cheap brands
CHAPTER 7 BARGAIN-HUNTING
‘Rich’ does not always mean ‘high-spender’: there are many affluent people who will shop around for bargains
Target hits the bull’s eye; its success is evidence that consumers cannot resist a bargain
Bargain bin or treasure hunt; low and high earners alike seek value for money across all industries
There are enough bargain-hunters to warrant attention from retailers, but not industries where marketing is less precise
Despite being high earners, these affluent consumers are hungry for bargains, not indulgences
Bargain-hunters are also less concerned with brand
Bargain-hunters are more likely to switch than the rest of the population
Bargain-hunters seek utilities with a competitive price rather than a strong brand
Whilst they do not expect loyalty rewards, they are more likely to consider taking other products from their utilities
CHAPTER 8 RECOMMENDATIONS
Introduction
All four of the market trends examined are pertinent to utilities, either for retail or marketing strategy, or both
Across Europe, price is crucial to energy supply, but utilities also need a strong brand and a diverse portfolio of products
‘Convenience consumers’ is a large segment - do not take them for granted and do not confuse them with other types of high-value customers (like multi-service customers) even though they often have much in common
Develop energy brands with masstige in mind: be cheap, but do not identify with cheap brands
Utilities that only segment customers by age, income and region need to go a step further: not all affluent people are the same
CHAPTER 9 APPENDIX
Definitions
Research methodology
Future readings
SPP writing team
How to contact experts in your industry

LIST OF TABLES
Table 1: Average European household expenditure and estimated propensity to pay for different elements of the budget, 2001
Table 2: The number of adults in each price consciousness band in each of the eight countries surveyed, 2004
Table 3: The number of adult convenience consumers in each of the eight countries surveyed, 2004
Table 4: The number of adult masstige consumers in each of the eight countries surveyed, 2004
Table 5: The number of adult convenience consumers in each of the eight countries surveyed, 2004

LIST OF FIGURES
Figure 1: European consumers spent the most on housing, food and transport in 2001
Figure 2: Whilst both nations are price conscious (see Market Trend 1), Swedish consumers are financially prudent whilst Dutch consumers are much less cautious
Figure 3: Whist the use of automated and on-line payment is growing in popularity, around half of US consumers in 2004 had not tried either
Figure 4: Utilities may be essential but the payment of electricity and gas bills are the most likely to be postponed
Figure 5: The older the consumer, the more sensible their approach to managing finances
Figure 6: Utilities need to offer customers incentives for automated payment
Figure 7: For Europeans and Americans price is predominantly the most important factor when choosing a service provider
Figure 8: 53% of respondents (2,654) were rated moderately price conscious
Figure 9: Dutch and Swedish consumers are the most price conscious in Europe and the USA
Figure 10: On average, 25-34 year olds are the most price conscious with sensitivity reducing with age
Figure 11: Banks are chosen on the basis of service, but price matters most when choosing a utility
Figure 12: Choice-driven American consumers and brand-sensitive Dutch consumers place the most importance on trying new products or experiences
Figure 13: Both price and brand influence switching behaviour, as does the nature of the national energy market
Figure 14: People see simpler lifestyles as the key to having more family time, but find this hard to achieve
Figure 15: If people pay extra for time-saving products, they are also more likely to indulge to escape daily pressures
Figure 16: Italian, Swedish and American consumers are more willing to pay extra for time-saving products
Figure 17: The convenience consumer is keen to experiment, de-stress and differentiate
Figure 18: As part of their strategy to obtain effective service and tailored products, convenience-driven consumers value the recommendations of family and friends
Figure 19: Convenience-driven consumers expect to be rewarded for loyalty to utilities and see switching as troublesome
Figure 20: Across Europe, convenience consumers are more likely to complain than switch, although their switching rates are still significant
Figure 21: Convenience consumers are more likely to take other products from their utilities, particularly those residing in Sweden, the UK and the Netherlands
Figure 22: Whilst American and Swedish markets are most ripe for premium offerings, the premium potential is seen across nations
Figure 23: German consumers grapple for a piece of haute couture whilst Habitat commissions Manolo Blahnik
Figure 24: Indulgence: there is very little variation between high and low income groups
Figure 25: With the exception of the 65+, income has little influence on brand sensitivity
Figure 26: Despite being highly brand sensitive, masstigers also value tailored products and service
Figure 27: Just the look - Jasper Conran range at Debenhams
Figure 28: Not the thrifty type: masstigers will spend excessively in some areas and modestly in others
Figure 29: Younger masstige consumers are more likely to switch than older and are incentivised further by saving money
Figure 30: A premium utilities offering may encourage the older masstige customer to stay
Figure 31: Target Corporation in the US achieves revenues well above the industry average this year
Figure 32: Across nations income does not dictate price sensitivity and in France, Italy, Sweden and Britain high earners are more price conscious than low earners
Figure 33: The well-heeled bargain hunter is less likely to indulge; one of the manifestations of the highly price conscious nature
Figure 34: Despite having the money to invest in brands, this segment is unconcerned with the cachet behind the name
Figure 35: Young, wealthy bargain hunters are most likely to switch whilst middle-aged masstigershave a switching rate similar to the overall average
Figure 36: Impervious to the influence of brands, the well-heeled bargain hunter is enticed by savings rather than reputation
Figure 37: Compared with low earning, low price conscious consumers, bargain-hunters expect to be rewarded less