As competition intensifies amongst the UK's 14 utility suppliers, a plethora of sales and marketing techniques ranging from television advertising, to door-to-door salesmen have come into play in a bid to poach new customers from rival companies. However, new research from market analysts, Datamonitor, reveals that this activity may to a great extent be fruitless.

The research shows that at the same time as a utility company acquires a new customer, they are just as likely to have lost one of their existing customers to a competitor. This 'leaky bucket' syndrome effectively means that utilities are left chasing their tails. As such, a better strategy may well be to understand and address the root causes of customer dissatisfaction, which significantly contributes to the level of uptake for additional services.

Findings from Datamonitor's recent IMPACT survey show that as many as 3 out of 5 electricity customers choose not to inform their supplier of the reason they have switched. At the same time, 3 out of 10 customers stated that they would take an additional service from their utility supplier, were it not for poor customer service.

As such, Datamonitor suggests that rather than frantically throwing money into sales and marketing strategies, suppliers would be better advised to re-evaluate their customer service strategies and promote customer satisfaction amongst their existing base. In practical terms, rather than always chasing after un-chartered territory, they should look to develop their existing relationships by ironing out the problems and encouraging more commitment on both sides.

The price savings currently available through switching are not particularly significant and as such, many customers place more value on customer service and convenience. If suppliers were better able to understand their customers and respond to their needs and problems, the chances of them switching would be greatly reduced. By failing to understand why their customers leave, remedial action is akin to shooting in the dark. With marketing costs now reaching £6.7 million per week, utility companies can no longer afford to remain ignorant of customer motivations.

With 3 out of 10 utility customers stating that they would spend more with their supplier were it not for poor customer service, it is clear that customer service standards are not only having an impact on switching trends, but are also limiting the chances of customers taking additional services, such as dual-fuel, telephone or home insurance from their utility supplier. Failure to convince customers to take on more services means that suppliers are unable to generate more revenue per customer and customers are less tied to their supplier, making switching easier. With almost a third of customers effectively withholding revenue from their supplier for this reason it is clear that suppliers are not making the grade in terms of customer service. The question is whether utilities can raise their customer service levels for those customers who are most likely to spend more and prize open this untapped purse.

14.5% of UK utility customers say that they want to switch supplier but have not as yet done so, as such, the danger of failing to anticipate and pre-empt negative actions is considerable. These findings reinforce the fact that a significant proportion of utility customers are less than content with their current supplier. Understanding the customer is now starting to come into fashion in terms of budget allocation, although marketing budgets remain as high, if not higher than ever before. However, if utilities are to effectively plug the hole in their leaking buckets and generate more revenue from existing customers, they will need to get to know their customers on an individual case basis. With their extensive in-house databases, utility companies know more about their customers than most of us would think, however, they are currently overlooking this valuable marketing an customer services tool.

Datamonitor also recommends that they identify their customers and track their activities, then create profiles to second guess the likely directions various customers will take to aid in or profit from their activity. The scores produced from such profiling will bring to light both difficulties and opportunities - both of which are crucial for the utility to either resolve or exploit. For example, changes in a customer's behaviour in calling the call centre may indicate an unusual problem with which the customer may appreciate the utility's help. If the supplier can get in first and resolve such problems quickly and effectively, the customer will be more likely to stay, and their relationship with their supplier deepened.

In a similar way, profiling data such as age, income and status will make for more targeted marketing campaigns for add-on services. Rather than mass mailing product marketing such as online payment schemes, mobile phone services or even credit cards to each and every customer (which may cause customer dissatisfaction), the utility can specifically market products and services to those customers who are most likely to be receptive to them.

Either way, based on scoring information, the utility has the choice to either act, or not act. Courtesy calls or emails, product suggestions or loyalty schemes may be economically viable with higher value customers, whilst lower value customers may not be deemed worthwhile candidates for pro-active intervention. Since up-selling is largely dependent upon the trust and satisfaction of the customer with the utility, active intervention may prove to be the key to unlocking the 30% of customers currently withholding revenue. Utilities may well find that it is more economically valuable to concentrate their efforts on maintaining and up-selling to valuable customers, than dedicating resources to services such as sending reminder bills, or dealing with incoming queries from less valuable customers.

Alex Patient, utilities analyst at Datamonitor, comments; "In an age of choice, UK customers are demanding a higher level of service in return for increased spend and continued business with their supplier. Whilst price savings may form part of switching motivations, excellent service can limit their effect and reap rewards of its own. Indeed, such service can unlock an additional 30% of the up-selling market, currently withheld due to lack of customer loyalty and trust. If suppliers and customers are to benefit, the supplier must get to know their customers better, and help them in their hours of need. By helping the customer, they can helping themselves and, most importantly, the bottom line."