Europe's largest and once publicly-owned utilities risk losing more ground to new and local competitors, finds new Bain & Company study



First Pan-European Study of Utilities And Customers Finds Key To Long-Term Profitability Is Creating Brand Advocates, Who Produce More Than Twice The Lifetime Customer Value

Amsterdam, November 6, 2012 – In the face of increasing customer and financial challenges, Europe’s largest utilities could lose as many as one-in-three customers to their competitors; this, according to findings of “European Utilities: New Rules for Keeping Customers Plugged In,” a new study of more than 40 utilities and 8,500 utility customers in Belgium, France, Germany, the Netherlands, Spain, Sweden, and the U.K., published today by global consulting firm Bain & Company.  The study also finds that the only consistently high levels of customer advocacy in utilities are typically among two categories of “new entrants and discounters” and “local brands.”  Finally, it finds that utilities in Europe have the lowest overall level of customer advocacy as compared to other industries, lagging even industries such as banking, mobile telecom, and insurance by as much as 35 percentage points on average.  The churn caused by this low engagement, has been chipping away at overall profits, via higher customer service and acquisition costs—brand “detractors” generate less than half the profits for providers on average than do brand “promoters.”

“Europe’s utilities are preoccupied with regulatory concerns and rising energy costs.  They have to turn their focus to the customer.  With demand expected to be flat or even declining in coming years, retaining your existing customers is one of the few ways to improve profits,” said Jochem Moerkerken, partner in Bain’s European utilities practice and lead author of the study. 

When measured via Net Promoter® Scores (NPS), utilities that can be described as “new entrants and discounters” and “local brands.” outpace the incumbent utilities (state- or former state- owned larger providers) in brand advocacy by as much as 40 percentage points in different countries researched.  Overall NPS remains low. Only “new entrants and discounters” and “local brands” realize positive NPS scores.

The Bain study uses those differences as a way to indicate three levels of action and customer strategy that define the path to increased lifetime customer value.

  1. Stop the bleeding: Although most switchers cite price as their reason for change, Bain’s analysis shows that poor service is actually the underlying trigger that makes customers receptive to new offers.  Price alone sways only one third of customers. Large utilities need to focus on structural service improvements first to reduce the number of detractors within their customer base, e.g. via identifying and addressing customer service pain points
  2. Win on price:  Price is the most important factor in attracting new customers who are receptive to making a change in provider. Most switchers compare rates, using services such as online comparison sites, before deciding on a new utility
  3. Cultivate the relationship:  For happy customers (those who become brand advocates), brand and image is the most important driver to recommend their supplier next to service.  Bain finds, proactive communication, such as company updates or proactive call before surprising bills, is a proven and simple way to boost a utility’s image in customer eyes.  It creates a halo effect that improves perceptions of the overall customer experience and reduces the likelihood of churn; introducing proactive communication to the customer can deliver a quick 10 to 15 point improvement in NPS  

“Utilities have to break the vicious cycle of cutting costs and underinvesting in customer service” concluded Barney Hamilton, a Bain partner in London and co-author of the study. “Getting it right pays off -in more customers, increased lifetime value per customer, and greater potential to attract them to new retail offerings.”

For a copy of “European Utilities: New Rules for Keeping Customers Plugged In” or to schedule an interview with Jochem Moerkerken, members of the international media should contact Dan Pinkney at or +1 646 562 8102

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