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Dissertation proposal
. Proposed working title
What part consumer attitudes play in choosing or switching utility supplier in U.K? A case study of British Gas.
2. Research Background/context
This dissertation proposes the research of the consumer attitudes which is part of consumer buying behaviour. The dissertation will be based on studying the consumer attitudes in utility market of U.K. The focus of the study will be on how attitudes play their role in choosing of a utility supplier and what are the things which are important for a consumer when choosing a utility supplier e.g. is it price, service or renewable energy.
This dissertation will also focus on consumer attitudes towards switching supplier. This research project will be able to answer some of the questions like do the customer switch supplier easily? What are the reasons of switching? And what are the reasons for not switching their supplier?
As mentioned in the title this research is being done for British Gas one of the leading utility company of U.K. British Gas is a Centrica owned firm which holds more then 16 million customers but last year British Gas lost nearly one million customers. The gas and electricity provider, which has put up prices twice in 2004, lost 290,000 customers in the first half of the year and 630,000 in the second. (BBC news, http://news.bbc.co.uk/2/low/business/4084481.stm). This is the main problem of the company that it is loosing many customers because of price increase but despite of high prices compared to other utility suppliers British Gas is still a leading firm. The question is why the company is loosing so many customers? As far I see the main reason for loosing customers is price but if we see the past British Gas prices were always high compared to its competitors but it got more points on service. Are consumers of utility market only going for price or still they prefer premium price for good service? I want to do this research to understand consumer attitudes in choosing and switching of suppliers in utility market which will help British Gas to develop their marketing strategy. This research will also be able to give recommendations to the firm to win back their old customers and make new customers by understanding their needs wants and demands.
Before going into the research objectives and research methodology let's briefly describe consumer behaviour and consumer attitudes.
2.1 consumer buying behaviour
Consumer behaviour studies how individuals, groups , and organizations select buy, use, and dispose of goods, services, ideas or experiences to satisfy their needs and desires (Philip kotler,1999).
Lancaster and Massingham described Consumer behaviour as the acts of individuals directly involved in obtaining and using economic goods and services, including the decision processes that precede and determine these acts (Lancaster and Massingham,1999). Consumer behaviour is also defined as the study of how people buy, what they buy, and why they buy.
This marketing discipline applies knowledge from areas such as psychology, sociology, anthropology, and economics to describe and understand how consumers are likely to behave. It attempts to understand the buyer decision making process, both individually and in groups. Consumer buying consists of the activities involved in the buying and using the products or services for personnel and household use (Lancaster and massingham,1999).
Knowledge of consumer behaviour principles allows marketers and other managers to become more effective at making good decisions. They can better predict consumer actions, determine the needs of target markets, and understand how consumers perceive and understand marketing information.
Geoff Lancaster (1999) described a simplified framework of consumer behvaiour. As seen in the diagram below ,environmental influences that are external to the consumer have an effect on purchase behaviour. The consumer also has influences that are individually determined. These are carried out consciously or subconsciously on the memory. The diagram also show the decision making process in which information can be fed back and the purchase process can be stopped and resumed at an earlier stage.
As described by Cohen (1991), the marketing mix inputs (or the four P's of price, place, promotion, and product) are adapted and focused upon the consumer. The psychology of each individual considers the product or service on offer in relation to their own culture, attitude, previous learning, and personal perception. The consumer then decides whether or not to purchase, where to purchase, the brand that he or she prefers, and other choices.
2.2 Attitudes
Attitudes has been one of the most important subjects of study in the field of consumer behaviour. Attitude research forms the basis for developing new products, repositioning existing products, creating advertising campaigns and predicting brand preferences as well as general purchase behaviour.
Social psychologists, unfortunately, do not agree on the precise definition of attitude. One concept is that an attitude is how positive or negative, favorable or pro or con a person feels towards an object( Loudon and Della Bitta,1999). Allport views attitudes as " learned predispositions to respond to an object or ...
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2.2 Attitudes
Attitudes has been one of the most important subjects of study in the field of consumer behaviour. Attitude research forms the basis for developing new products, repositioning existing products, creating advertising campaigns and predicting brand preferences as well as general purchase behaviour.
Social psychologists, unfortunately, do not agree on the precise definition of attitude. One concept is that an attitude is how positive or negative, favorable or pro or con a person feels towards an object( Loudon and Della Bitta,1999). Allport views attitudes as " learned predispositions to respond to an object or class of objects in a consistently favorable or unfavorable way. This definition incorporates the, notion of readiness to respond towards an object.
The definition provided by Leon and Leslie is much more simple in which the authors stated that attitudes are an expression of inner feelings that reflect whether a person is favourably or unfavourably predisposed to some "object" (Leon G. Schiffman and Leslie Lazar Kanuk,2000).
More recently, theorists has given more attention to a new definition according to which a person's overall attitude is seen to be a function of the strength of each of a number of beliefs the person holds about various aspects of the object and the evaluation he gives to each belief as it relates to the object.
2.2.1Characteristics of attitudes
Loudon and Della Bitta (1999) described characteristics or properties of attitudes as;
* Attitudes have an object
* Attitudes have direction, degree, and intensity
* Attitudes are Learned predisposition
* Attitudes have consistency
a)Attitudes have objects
The word object in the definitions of attitude includes specific consumption, or marketing related concepts, such as product , product category, brand, service, product use, causes or issues, people, advertisement, price, medium or retailer.
b) Attitudes have direction, degree, and intensity
An attitude express either for or against the object(direction), how much the person either likes or dislikes the object(degree) and the level of sureness or confidence of expression about the object(intensity).
c) Attitudes are learned predisposition
There is a general agreement that attitudes are learned which means that attitudes are formed as a result of direct experience with the product, information acquired from others or exposure to mass media advertising or by direct marketing.
c) Attitudes have consistency
Another characteristic of attitude is that they are relatively consistent with the behaviour they reflect. Despite their consistency attitudes are not necessarily permanent.
This research will focus on what are the attitudes of the customers towards the largest company in the utility market of UK, British Gas Plc and how does these attitudes effects the consumer buying behaviour in the utility market of UK. I have given detailed explanations of consumer buying behaviour , attitudes and characteristics of attitudes. Now I will discuss the structure of utility industry in UK and the background of British Gas.
3. Literature Review
There is not much research done in the utility market but still few researchers have done research on consumer attitudes towards utility company i.e. what the consumers prefer when choosing their supplier a research done by Yongxin Cai, Iraj Deilami, Kenneth Train in 1988 studies customers retention in a competitive power market of USA. The research main purpose was to forecast that after the deregulation of electric market how many customers will switch if they are offered price discount. In this research they found some great answers that is if the competitor is offering nearly 10 percent discount only 20 percent of people will switch where as if the discount is more 22.5 percent half of the customers will switch supplier based that the service provided is the same. This means that price is the number one factor for choosing supplier but according to Yongxin Cai, Iraj Deilami and Kenneth Train good service is not less important because it can stop people from switching i.e if the service is seen more reliable with 10 percent discount only 5 percent of customers will switch compared to 20 percent with same service and 20 percent will switch with 22.5 percent discount compared to 50 percent with same service level. These are the finding of Yongxin Cai, Iraj Deilami and Kenneth Train in 1998 in USA electric market.
Another research in the year 2005 shows that Price remains the deciding factor for choosing an energy supplier for 64% of consumers in Europe and the US, but utility brands must address the more complex demands of today's consumers, abandoning "one-size-fits all" strategies. In Europe and the US, 28% of consumers are seeking value for money and premium customer service. Another 28% are less concerned with tariffs and service and more responsive to branding and advertising. The results showed by this research is that Utilities can no longer afford to differentiate themselves on price alone (brand strategy, 2005).
A research by clarities which is a consumer information firm show that between 20.3 per cent and 26.8 per cent of gas and electricity customers have switched supplier at least once. The research also showed that the gas market has experienced the highest levels of switching, but suppliers have also invested a lot of time and money on trying to convince customers to do just that. The most churn has occurred among those who spend between pound 76 and pound 99 a quarter, with 26.8 per cent of customers in this bracket switching supplier. This figure drops to 25.5 per cent for customers that spend less than pound 75 or between pound 100 to pound 150 a quarter. The least movement is among the highest spending customers (more than pound 151), where 23 per cent of customers have made the move to switch.
These are the research projects that have been conducted in order to find out consumer preferences in the terms of price, service and renewable energy. Also the research by clarities have found out how many people have switched their suppliers in UK but there are no reasons of why these people have not switched and also there is no explanation of why they have switched from one supplier to another.
My research will be focused to find out consumer preferences in UK utility market after the continuous increase in prices. Due to the continuous increase in the prices of gas and electricity people are now giving less importance to service and reliability of the supplier. I will also research that what is consumer attitudes towards switching suppliers and what are the reasons for either switching or staying with the old supplier.
3.Organisation Background
Energy deregulation in the UK took place between September 1998 and September 1999, allowing UK consumers (industrial, commercial and domestic) to select the power provider that best suits their needs. This means that there will be no monopoly of a company and the customers can choose different companies such as National Power, Scottish Gas, Powergen, London Energy and many more. Customers who switch power suppliers continue to use the same electricity meters and local emergency services as previously; the only difference is in the invoicing company.
British Gas was formed in 1948 which was a nationalised gas industry throughout England, Scotland and Wales. The 1986 Gas Act saw the return of the gas industry to the private sector and the company's name was changed to British Gas Plc.
British gas brand promise 'to do the right thing' . With over 12 million gas customers and 6 million electricity customers British Gas is currently the market leader within the energy sector and has developed a strategic vision that builds on this heritage but moves the business forward, its aim is to become the people the nation turns to first for value and service in home essentials.
Apart from Gas and electricity British Gas offers a range of products such as broadband internet, home phone and mobile, maintenance and breakdown break down care, home appliances, central heating systems, loans, home security and home improvements.
4. Rationale for the Chosen Topic
There is lot of research already done in the field of consumer attitudes in other markets such as in the industry of food, electronics , automobiles and computers but very less appropriate research is being done in energy market.
I have decided to research on the proposed topic because of my work experience in British Gas Plc. My position of sales executive has exposed me with the buying behaviour of the customers and their attitudes and beliefs towards choosing utility supplier and towards switching their supplier.
I have to visit a lot of customers every day to sell the products offered by British Gas. During this I have noticed that each customers have different buying behaviour and different attitudes towards certain objects e.g. some customers give importance to the brand name where for some customers price and service provided by the company is more important .
I want to find out what exactly customers attitudes are towards choosing supplier or swicthing supplier . The research will also focus on products and services offered by British Gas. The result of the research can help the company to understand its customer needs, wants and demands and act acordingly which can help gain competitive advantage over the rivals. Also the company can know what their customers think about their products e.g. how the customers feels about British Gas supplying electricity. This will help the company to decide that weather there is a need to change certain customer attitudes through education and advertisement.
5. Research Questions
The basic question of the proposed research will be what are the consumer attitudes? How does consumer make different attitudes? What are the sources of attitude development? Can the attitudes be changed? Are attitudes important in consumer buying behaviour?
The research will be based on the questions like, How does the consumer attitudes play their part in choosing utility supplier? What consumers prefer in buying utility product e.g price, service or renewable energy? Some additional questions such as What are the attitudes of consumers towards switching suppliers? What are the reasons of customers switching supplier? Is switching a hassle free and easy task? What is the attitude of customers towards products and services offered by British gas? What attitudes make customers accept or reject a product? Do British gas needs to change consumer attitudes through advertisements and promotions?
6. Research objective
The objective of the research is to find out what customer prefers when choosing a utility supplier and does consumer attitudes play a part in deciding of a particular utility supplier. Is it price, service, brand or renewable energy what is the deciding factor for choosing utility supplier. What is the proportion of customers in terms of price, service, brand, and renewable energy?
This research which also focus on the consumer attitudes towards switching supplier. If there is reluctance towards switching utility suppliers what are the core reasons behind it e.g. is it lack of information or lack of trust for the new utility supplier etc.
The detailed objectives are mentioned as follow
* To find out consumer attitudes in utility market i.e. what they prefer in choosing their supplier e.g price, service, brand and renewable energy. Also to find what is the proportion of customers in terms these deciding factors.
* To find the consumer attitudes towards switching supplier in UK utility market.
* To find out the reasons for switching and reluctance in switching utility supplier.
* To find attitude of customers towards British gas and other utility companies of U.K.
* To discover attitudes of customer towards products of British gas e.g electricy, gas, and price freeze until 2010.
7. Methodology
I have chosen descriptive research for conducting my dissertation. Descriptive research method is a useful tool to find out the characteristics of population or phenomenon (William G. Zikmund, 2000). In this form of research surveys will be done on respondents with the help of carefully designed questionnaire. Selection of a sample will be simple random sampling in which any one can be selected.
I have done informal exploratory research during my job and found out that majority of the customers rate price as the number one factor for choosing supplier but there are other customers as well which are willing to pay more for better service and renewable energy. I have chosen descriptive research method so I can find out the exact percentage of customers that prefer price, service, green energy or brand.
I have done in depth interviews with many customers and found out that there is a reluctance towards switching supplier e.g a customer will say that he rate price as the number factor when choosing utility supplier still if he is offered cheapest utility supplier he will not switch. I have to find out the reasons for this reluctance e.g is it too much hassle, lack of trust for the new supplier, lack of information or fear of change. Descriptive research method will allow me to find out the reasons behind the reluctance towards switching and the exact proportion of reasons of reluctance.
8. Data collection methods
The categories of descriptive research methods that I will be using for collecting data will be
. secondary data analysis
2. case study method
3. surveys
Secondary data analysis will be used which preliminary review data collected for another purpose to clarify issues in early stages of research effort. Secondary data analysis involves the use of existing data, collected for the purposes of prior study, in order to peruse a research interest which is distinct from that of original work; this may be a new research question or an alternative perspective on the original question (Hinds, Vogal and Clarke-steffen,1997).
Case study method will be also used if required to obtain information from other situations that are similar to the problem situation.
Surveys will be conducted on the customers of different utility companies using a written questionnaire. The people who will be interviewed respondents will be from east London, north London and Essex. As this research is being conducted for British gas therefore the respondents are divided into four sub categories i.e. existing customer of gas only from British Gas , existing customer of electricity only from British Gas , existing customer of both gas and electricity from British Gas , not a customer of both gas and electricity of British Gas.
Human interactive media will be used for communication with the respondents through personal interviews. Personal interviews will be conducted at respondents home place i.e. door-to-door interviews and also in shopping malls and high street i.e. mall intercept interviews.
Survey questionnaire will be made using summated rating method in which respondents attitudes will be checked that how strongly they agree or disagree with a carefully constructed statements that range from very positive to very negative towards the attitudinal object. e.g Is switching gas and electricity supplier hassle free?
Strongly disagree disagree uncertain agree strongly agree.
Apart from it the questionnaire will also have few open ended questions so that the customer's inner beliefs should be taken out.
9. Data analysis
Data analysis is the process of systematically applying statistical and logical techniques to describe, summarise and companre data(www.ojp.usdog.gov/VJA/evaluation/glossary/glossary_d.htm).
Different methods will be used to analyze the data obtained from the data collection methods. These methods include simple tabulation, percentage, cross tabulation and data transformation.
Apart from this other computer programs will be used if required for analysis of the data. These are user-friendly packages for performing descriptive analysis and hypothesis testing. Output can be easily tested. E.g.( SYSTAT , SPSS).
0.Resource Requirements
The Secondary data required for the dissertation will be largely obtained from different libraries with in UK which includes British Library. Apart from electronic resources such as online journals like Proquest , International Journal of Business and Internet will be used to get the review of the literature.
Special permission will be required from British Gas to conduct research on their customers and using their customer data for conducting research.
2. Timescale
Activity
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Week commencing
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Read literature
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Finalize objectives
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Read methodology literature
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Proposal
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Devise research approach & draft research strategy and method
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Feedback on proposal
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Develop schedule of questions for interview
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In-depth & focus group interviews with customers
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Gather data
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Analyse data
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Draft findings
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Update literature read
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Draft to supervisor for feedback
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Print, bind
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References
Research methods for business By Uma Sekaran fourth edition (2000).
Business Research Methods sixth edition by William G. Zikmund (2000).
www.house.co.uk ( site of British Gas).
Consumer Behaviour 4th edition by David L Loudon & Albert J Della Bitta (1999).
Consumer Behaviour by Leon G Schiffman and Leslie Lazar Kanuk 6th edition.(2000)
Essentials of Marketing 2nd edition by Geoff Lancaster and Massingham(1999) .
Marketing Management by Philip Kotler (1999).
www.ojp.usdog.gov/VJA/evaluation/glossary/glossary_d.htm.