Customers say good service is the reason they are prepared to pay over-the-odds

The results of a survey published last week has found that 10% of customers have stayed with the same energy supplier for more than 15 years, costing them an average of £3,000 more than if they had switched to a cheaper deal.

The figures were compiled by the price comparison website Energy Helpline, which also found that 7% had not switched energy supplier for between 10 to 15 years, and 15% had not switched energy supplier for between 5 to 10 years.

The figures suggest that energy suppliers are therefore receiving an over-payment of £5.4 billion ever year, simply because of the loyalty of their customers.

In June the Competition and Markets Authority (CMA) proposed an Ofgem database of customers who had not switched supplier recently, to allow them to be contacted by other suppliers offering better deals.

In its Report on a two-year investigation into the energy sector, the CMA warned that 70% of people were on expensive standard variable tariffs, costing customers £1.4 billion more than in a competitive market.

Why are energy customers so loyal, despite the higher cost?

In their survey, Energy Helpline found that 53% of loyal customers cited ‘quality of service’ as their main reason for not switching, and 41% said they benefited from their supplier's reward scheme. ‘Consistency’ and ‘familiarity’ ranked as the third and fourth reasons that loyal customers gave for not switching, despite the extra cost.

Mark Todd from Energy Helpline said: "The media talks a lot about broken trust between energy suppliers and customers, but in reality there appears to be too much trust. Many customers are staying loyal even while they are getting fleeced - overpaying by around £300 a year.”

"If households continue to stay loyal, providers have no incentive to offer cheaper deals. The price of loyalty is truly vast."

What can we learn from this?

The clear lesson that we can learn from this is that a large number of people (in the case of energy, about a third of all customers) are prepared to pay well over-the-odds if they feel they are getting better customer service from a more expensive supplier. Proof indeed that providing exceptional customer service can help to increase profitability.