{"id":2702,"date":"2024-07-27T15:32:34","date_gmt":"2024-07-27T05:32:34","guid":{"rendered":"https:\/\/www.ecam.org.au\/?p=2702"},"modified":"2024-07-31T17:55:54","modified_gmt":"2024-07-31T07:55:54","slug":"customer-or-consumer","status":"publish","type":"post","link":"https:\/\/www.ecam.org.au\/index.php\/2024\/07\/27\/customer-or-consumer\/","title":{"rendered":"Are you a customer or consumer?"},"content":{"rendered":"\t\t
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This is the second post inspired by Ron Ben-David’s call for structural revolution<\/a>\u00a0in our approach to retail energy services: the first is on why the electricity market is not a market<\/a>.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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The customer is always right<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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Marshall Field in Chicago and Harry Selfridge in the UK are famed for championing the slogan “the customer is always right” in their department stores in the early 20th Century.<\/p>

While the slogan contains elements of sales pitch and advertising, an industry notorious for creating the “needs” that its products solve, like all durable sayings and proverbs is built on a kernel of truth.<\/p>

That truth we touched on in the first post in this series, that the customer is searching in the market for the right solution providing the combination of utility and price that satifies their need. The customer is searching for the purchase that is right – if the salesperson can convince them they have found it, so much the better for the salesperson.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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A simple way to think about utility<\/strong> <\/em>is to take money out of the equation \u2013 think about a barter society. You and I meet and have things to trade \u2013 if I find utility in you chicken and you find utility in my spade we\u2019ll agree to a trade. But what if I don\u2019t want to trade a whole spade, or you just want a hole dug? I can offer my time digging with the spade instead. The market facilitate a trade, and we are both better off as a result.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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In familiar terms, if a telco salesperson can convince me that a phone\/contract combination is the right one that lets me enjoy live sports while texting friends on my train commute, I am satisfied with the utility<\/em> I have purchased.\u00a0The market has facilitated a satisfying trade and happy with my purchase I am, as close as reality allows, the economically rational actor\u00a0<\/span>home economicus<\/em> of economic textbooks.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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So what's the problem in the electricity \"market\"?<\/h5>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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At its simplest, the retail market does not satisfy its customers.<\/p>

Since its introduction in the 1990s an enormous amount of effort has gone into advertising energy retailers, regulatory monitoring of customers switching between retailers, academic and government research into people engaging (or not) the “market”, their\u00a0 behaviours, motives, and thoughts about energy retailers. Time after time we find people are simply not interested and do not think about it, and most of us feel ripped of to some degree and are not inclined to trust energy retailers.<\/p>

How can this be so after 25 years?<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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The consumer is unable or unwilling<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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In general the energy sector response, government and industry, is that “consumers are unwilling or unable<\/em>“.<\/p>

The energy market design is premised on neo-classical economic principles<\/em> – there are suppliers and consumers that meet in a market and make rational decisions for their own maximum well-being weighing utility and price. If optimum outcomes do not result, that is because of “market failures” across a range of possible categories for causes.<\/p>

In the energy sector the focus tends to fall on two, again and again:<\/p>