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MORRISTOWN, NJ., January 14, 2002 - Energy companies in Australia’s State of Victoria face significant new challenges in meeting customer expectations as full retail contestability (FRC) comes into effect on 1st January 2002. That’s the finding of new research by Transformance Group, who found that over 80% of Victorian consumers are aware of FRC and hope for significant reductions in electricity prices as a result of increased competition.

TransFormance Group, the consulting division of SPL WorldGroup, a leading provider of best-of-breed customer management solutions to the energy and service related industries, was recently established to help organisations become more innovative as they face the challenges of new business dynamics. The division is conducting a series of market studies to track the impact of full retail contestability on the energy industry in Victoria, Australia.

Transformance Group principal, Trevor Aronson, said one of the key findings of the initial research was that consumers are expecting the deregulation process to deliver substantially cheaper prices. “We found that consumers across the board generally believe that energy companies enjoy large profit margins and expect increased competition to provide opportunities for them to save money on their electricity bill,” he said. “Ninety percent of those surveyed said they would switch suppliers for a saving on their energy bill, with most expecting reductions of at least 10 percent. However, the reality is that electricity companies operate on margins as low as two or three percent and prices are more likely to stay the same, or even increase, as a result of deregulation. The challenge for electricity suppliers will be to effectively communicate the benefits they offer to customers while taking full advantage of opportunities to reduce overheads,” he said.

According to the survey, January 1st will not see massive customer churn with most customers (82 percent SMEs and 75 percent residential) expressing varying degrees of satisfaction with their current energy supplier. Fifteen percent of SMEs and 17 percent of residential customers said they would remain loyal while 47 percent of SMEs and 56 percent of residential customers plan to wait and see what options are introduced.

However, Mr Aronson said there would be significant opportunities for proactive energy companies, with a substantial proportion of customers (37 percent SMEs and 27 percent residential) planning to investigate their options in a deregulated environment.

“It’s too early to say if there will be customer churn in the energy sector, but we will track their behavior over time. Certainly, the fact that 25 percent of SMEs and 16 percent of residential customers said they would consider using an interstate supplier indicates that the interstate players entering the Victorian market have much to gain,” he said. “High value customers were not distributed equally between suppliers. This means that suppliers with a large proportion of high value customers will find their customer base under significant threat, while suppliers with more low value customers are less likely to be targeted,” explained Mr Aronson. “In a low margin environment where customers are very price conscious, perceived value will become key to attracting and retaining customers.”

Other important findings of the research were the existence of a significant degree of brand confusion with 10 percent of consumers unable to name their electricity supplier. “TransFormance Group will use the results of this and future studies to identify ways to assist our energy clients to tailor their products and services for a deregulated market, helping them to become best-of-breed in their operation and customer service delivery,” he said.

The research, conducted for TransFormance Group by market research company DBM Consultants, surveyed 150 SMEs and 200 residential customers in the State of Victoria, Australia.

About TransFormance Group
TransFormance Group, the consulting division of SPL WorldGroup, helps companies develop people, processes and technology to enable and foster innovation and transformation in response to rapidly evolving industry business models.

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