Utility Week

24 | JANUARY 2021 | UTILITY WEEK Customers Analysis What are they really like? Professor Stephen Littlechild explains why an Overall Customer Satisfaction Score could help energy suppliers establish a reputation more rapidly and allow customers to make better informed decisions. E nergy is sometimes said to be a "homogeneous" product, the same whichever company supplies it. So, if customers don't switch to suppliers with lower prices, this must indicate "weak cus- tomer response". An alternative view is that there are in fact different products and different kinds of tariff, and different qualities of customer service. With over 50 retailers active in the domestic market – and a constant flux of new entrants and exits – most customers have little or no firsthand knowledge of most of the suppliers. If customers don't leave their present supplier, it's because they are satisfied with its price and service or because they are unsure whether another supplier promising a lower price will offer better or worse service. In a competitive market, companies establish reputations for better or worse ser- vice and value for money, for "never know- ingly being undersold" or for "pile 'em high and sell 'em cheap". But this takes time: supermarkets have been in business for over 100 years, whereas the domestic energy mar- ket has been open for only 20. Can anything be done to speed up the establishing of reputations of energy sup- pliers? So that customers are not panicked into switching to the cheapest supplier, or petrified into staying with their existing sup- plier? So that all customers can make better informed decisions as to whether to switch supplier or stay loyal to their present one? An Overall Customer Satisfaction score I have proposed an Overall Customer Sat- isfaction (OCS) score to do precisely this. Rather than try to develop an entirely new measure, the idea is to average four existing ratings, each of which measures an impor- tant aspect of a supplier's performance that deserves to be taken into account in assess- ing customer satisfaction. These four compo- nent ratings are as follows. First, a measure of customer complaints and complaint handling based on the sta- tistics that Ofgem collects and reports each quarter, presently for about 44 companies. Three statistics on number of complaints and speed of handling are combined into a single number out of 100. Second, the annual ratings of the Con- sumer Association in its Which? magazine, based on its interviews with around 8,000 customers, which combines customers' over- all satisfaction with their likelihood to rec- ommend that supplier. Typical coverage is about 30 suppliers. Third, the quarterly ratings of Citizens Advice, which has a statutory remit to pub- lish energy supplier performance data, and rates energy suppliers across five different metrics, as far as possible using objective data. The total number of suppliers rated has increased from 28 suppliers in March 2018 to 40 suppliers in March 2020. Fourth, the views of customers them- selves as expressed on Trustpilot, a con- sumer review website where customers rate the companies from one to five stars and give their views about whatever impresses or concerns them. Trustpilot calculates a time- weighted average of these customer stars to give a single TrustScore for each company, presently from one to five (in this article expressed as a percentage). TrustScores are recalculated (and publicly available online) every time a new review is filed, so are con- stantly evolving. Trustpilot presently covers about 100 domestic energy suppliers, with in total over 500,000 customer reviews as of August 2020. All four ratings relate to features that cus- tomers or their advisers feel are relevant and important. But they are quite different and mostly have little or no statistical correlation with each other. The OCS score can only be calculated for suppliers that are well enough known to have featured in all four ratings. So even just having an OCS score is an indi- cation that the supplier has attracted a suf- ficient number of customers to be widely assessed. At any time, between 21 and 30 companies qualified for inclusion. But this is not to say that all these companies got a high OCS score or offer sufficient customer satisfaction. Does size matter? Understandably, many customers prefer a supplier they have heard of, which will typi- cally be an existing large supplier but might include a few medium-sized retailers. Is this consistent with the customer satisfac- tion scores calculated here? Yes and no, as the table Median OCS scores by supplier size shows. The answer is "yes" insofar as the median medium supplier in the league consistently scores more highly than the median large or small supplier. It is "no" insofar as the median large supplier consistently used to score much lower than the median small and medium supplier. But most large suppliers have significantly improved their scores over the past year, to the extent that the median large supplier now scores more highly than the median small supplier and is not far below the median medium supplier. Median OCS score by supplier size Large Medium Small 80 70 60 50 40 18 April 2018 15 May 2019 18 June 2020

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