Customer behaviour is unknowable

If there's one thing we know about customers, it's that they are hard to read - and harder still to predict. Even hard facts can be misleading. Take switching, for instance. Recently energy switching has fallen, but does this really indicate rising satisfaction with energy suppliers? That's doubtful.

It is much easier to get it very wrong if you assume customers’ behaviour is always rational – or even that customers will be consistent with their stated wishes. Millions of customers say they are keen to support green energy, for example, but Ecotricity and Good Energy, the most high-­profile green specialists, can muster barely 100,000 customers between them. That’s been a consistent problem. It’s often said that individuals need to force government’s hand on renewables, but long experience reveals it’s the other way around: the Renewables Obligation was placed on energy suppliers precisely because the take-up of green tariffs was so miserable. Demand was too low to drive investment.

Likewise, customers may say they would like simpler energy bills, but how many people actually scrutinise their energy (and water) bills? Many go unread, and they will continue to go unread if they are simplified.

As for trying to get a handle on some very uncertain futures – that’s even worse. Often we end up making plans based only on customers’ ­wishful thinking about their own behaviour. For example, people often declare that they would cut energy usage at peak times if given financial incentives to do so – and that assumption underlies a lot of projected smart meter benefits. In practice, behavioural change in smart meter trial households has never touched a 10 per cent average cut, no matter how much education has been built around the installation.

Here lies a big trap for the unwary, because at some point we all have to make predictions. At the time of doing so, we understand that our best guess may be just a stab in the dark. But numbers, once published, start to gain a weight they don’t deserve. They get repeated elsewhere and become self-reinforcing, their insubstantial origins forgotten. The number becomes one that “everyone knows”, and becomes a building block of policy, but it’s still only the guess that it ever was.

We are often required to make guesses, or conjure up a set of scenarios, for essentially unknowable customer behaviour. But forgetting that these are merely guesses is a recipe for disaster.

Janet Wood

This article first appeared in Utility Week’s print edition of 6 July 2012.

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