2014 customer research - kitchener utilities · 1999. project was led by dave kains, cmrp – a...

2014 Customer Research

Prepared by:

Metroline Research Group Inc.

Kitchener, Ontario

April, 2014

Metroline Research Group

• Started in Waterloo Region in 1991, headquartered in Kitchener since 1999. Project was led by Dave Kains, CMRP – a veteran of 30 years in the market research industry

• Started initially as a small business consulting firm serving the Kitchener-Waterloo area, Metroline’s roster of larger, national and international clients quickly grew. Today our staff of over 30 people (including 5 on the client service team) serve clients from around the world.

• Over more than 20 years, Metroline’s research team has reached out to virtually all major markets in North America, and hundreds of smaller markets in between. In 1998, Metroline expanded to include a Toronto location.

• Projects in the public sector includes work in water and energy efficiency, waste management and infrastructure development

• Other local clients in the public sector include City of Waterloo, Region of Waterloo and City of Guelph

2 Kitchener Utilities 2014 Customer Research


Background & Objectives

• Kitchener Utilities values the opinions of their customers and regularly conducts customer research to obtain customer insight on programs and services

• This time, the focus of the project was on Kitchener Utilities’ natural gas supply program, specifically to gain insight on customers’ perception of gas rates

• The main objectives of the research were to:

– understand resident perception about natural gas rates

– explore Kitchener Utilities’ pricing strategy for natural gas and see what is the preferred option (stable vs. variable rate policy)

– understand resident satisfaction with Kitchener Utilities


Research Methodology

• This research project took place in several parts

– First, focus groups of customers were conducted, so we could observe and discuss the ideas to be tested in the survey, including the rate policy concepts. City staff and council members were given the opportunity to attend and observe these sessions, which were conducted at Metroline on January 22nd, 2014

– A telephone survey of 596 randomly selected households in Kitchener was conducted between February 22nd and March 29th

– At the same time, all residents were given an opportunity to express their opinion using a survey conducted on-line via the City of Kitchener website, which was also available as a hard copy at city facilities. In total, 612 Kitchener residents completed a survey

– Lastly, a similar public survey invitation was sent to Small Business customers by Kitchener Utilities. 74 businesses completed the survey

Notes On Reading This Report • The telephone survey, conducted with randomly selected households in

Kitchener, was completed proportionate to population by age and gender. At the overall level it can be considered accurate to within +/- 4%, 19 times out of 20 (95% Confidence Interval)

• For the secondary public survey (public/hard copy) and Small Business survey, respondents self-selected their participation. The data for the public survey have been weighted to reflect the demographic composition of Kitchener. Because the sample is based on those who initially self-selected for participation rather than a probability sample, no estimates of sampling error can be calculated

• While sophisticated procedures and professional staff have been used to collect and analyze the information presented in this report, it must be remembered that surveys are not predictions. They are designed to measure opinion within identifiable statistical limits of accuracy at specific points in time. This survey is in no way a prediction of opinion or behaviour at any future point in time


Satisfaction & Brand Perception


Satisfaction & Brand Perception Overall, how satisfied are you with Kitchener Utilities?

• Over half of those interviewed consider themselves “very” satisfied with Kitchener Utilities overall. 56% from the random telephone survey, and 53% from the public survey scored Kitchener Utilities either 6 or 7 on a 7-point scale

(Scale 1-7) Random (n=596) Public (n=612)

Average 5.5 5.3

Very (6-7) 56% 53%

Somewhat (4-5) 35% 36%

Not Satisfied (1-3) 9% 12%


Satisfaction & Brand Perception Overall, how satisfied are you with Kitchener Utilities?

• In both the random and public survey, respondents 60+ years were mostly likely to be satisfied, as were residents who prefer stable to variable rates

• No difference male to female

Random Telephone (Scale 1-7)

Random (n=596)

Male (n=281)

Female (n=315)

25-49 years (n=247)

50-59 years (n=178)

60+ years (n=171)

Average 5.5 5.6 5.5 5.3 5.5 5.9

Very (6-7) 56% 57% 55% 46% 57% 68%

Somewhat (4-5) 35% 36% 35% 45% 33% 25%

Not Satisfied (1-3) 9% 8% 10% 9% 10% 6%


Administration/Billing

Administration/Billing Over the past 5 years, would you say that rates for the supply portion of

your natural gas bill have..?

• A large majority of respondents (71%) feel that rates have increased over the past 5 years, although more are saying “a little” (45%) than “a lot” (26%)

• About 1 in 5 respondents (19%) said they didn’t know

• Only 1% of those interviewed feel that rates have ‘decreased’

• NOTE: Responses between the random and

public survey were mostly similar

Increased a lot, 26%

Increased a little, 45%

Decreased, 1%

Stayed same, 9%

DK, 19%

Rates for Natural Gas Supply (Random - n=596)


Administration/Billing How have Kitchener Utilities gas rates compared to those of other

suppliers over the past year or two?

• More than half (54%) of the customers interviewed for the random survey do not know how the rates for Kitchener Utilities compare to other suppliers over the past year or two

• 28% of all customers interviewed feel that rates are higher (a little/a lot)

• The response rate was higher in the public survey, where 43% did not know, and 44% feel that rates for Kitchener Utilities have been higher


Random (n=596)

Public (n=612)

A lot higher 15% 25%

A little higher 13% 19%

About the same 12% 7%

Lower 6% 6%

Don’t know 54% 43%

Billing/Administration Do you know or believe that municipally owned utilities, such as

Kitchener Utilities, earn a profit on any or all of these portions of your

utility bill?

• 62% of customers interviewed for the telephone survey believe that Kitchener Utilities earns a profit on the supply portion of their natural gas bill. 12% said ‘no’, and 26% said they ‘don’t know’

• That number is lower for the public survey, where 42% say that a profit is earned on supply, compared to 29% who said ‘no’, and 29% who said they ‘don’t know’

54% 45%

53% 38%

62%

42%

Random Online

Delivery Transportation Supply


Other Natural Gas Suppliers


Other Natural Gas Suppliers Have you ever been approached to switch supplier for natural gas?

• Only a few respondents (5% random, 3% public) have ever purchased natural gas from another supplier while living in Kitchener

• Two-thirds (or a little more) of respondents have been approached in the past about switching natural gas suppliers

• Typically respondents 50+ years of age are most likely to have been approached (random sample): – 25-49 years 62%

– 50+ years 74%

69%

65%

Random

Public

Been approached to switch suppliers?


Other Natural Gas Suppliers Why did you decide not to make the switch away from Kitchener Utilities?

• Customers mentioned several things about why they didn’t switch away from Kitchener Utilities. The reasons can be summarized in three ways: – Didn’t like the door-to-door approach, the salesperson, or the company

– Like/trust Kitchener Utilities

– Did not want to sign a contract

Random (n=389)

Public (n=251)

Don’t like/trust door-to-door sales 36% 36%

Like/trust Kitchener Utilities 33% 26%

Suspicious/worried 12% 3%

Crooked/Scam Artists 10% 4%

Too much hassle 5% 3%

Don’t want to lock in to a contract 4% 3%

Hard sell/rude 3% 7%

Don’t know 1% 5%


Rate Setting Models



Rate Setting Models Descriptions used in the survey, after testing in focus groups

• Natural Gas utilities will use one of two business models to charge customers for their natural gas – using a stable rate method or a variable rate method. We’re going to ask you a few questions to help us better understand your opinions and preferences about this. First, please listen/read carefully to an explanation of the two different methods.

• There are two ways for utilities to purchase the natural gas supply from producers that gets delivered to your home – stable rates or variable rates. It is similar to the options you face when choosing a mortgage – a fixed rate or variable rate mortgage.

– With stable gas rates, similar to a blend of a fixed rate and a variable rate mortgage, the utility buys gas at fixed and variable prices. This protects customers to some extent against market rate increases but the utility cannot take full advantage of any price drops during the period the stable rate is in place. For example, Kitchener Utilities currently changes their gas rates once each year as the fixed price gas they buy is more stable than the variable price gas.

– With variable rates, the price paid for natural gas supply that is purchased from producers over a period of time changes with the market. This means the rate you are charged fluctuates more frequently and is less predictable. For example, Union Gas changes its gas rate every three months as the variable price gas it buys fluctuates with the market price. If market prices drop, then the utility can take advantage of lower rates, and charge their customers less. However, the utility cannot protect customers if the market price increases significantly and must raise the rate to recover the increase.

Rate Setting Models Prefer Stable or Variable?

• In both survey options, the majority choose stable rates over variable rates

• The stable rate option scored higher in the random sample than the public sample

– respondents in the public survey are self-selected, which typically means that those more engaged or concerned about a topic under study will participate. This may explain part of the difference

74%

61%

26%

39%

Random Online

Prefer Stable or Variable?

Stable Variable


Rate Setting Models Prefer Stable or Variable?

Total Gender Age Satisfaction with Kitchener Utilities

Male Female 25-49 years

50-59 years

60+ years

Very (6-7)

Somewhat (4-5)

Not (1-3)

Random

Stable 74% 69% 79% 74% 71% 77% 75% 76% 58%

Variable 26% 31% 21% 26% 29% 23% 25% 24% 42%

public

Stable 61% 54% 68% 60% 54% 71% 72% 57% 26%

Variable 39% 46% 32% 40% 46% 29% 28% 43% 74%

• Women are more likely than men to prefer a stable rate option

• Those who said they are “not” satisfied overall with Kitchener Utilities are significantly more likely to prefer a variable rate option, particularly in the public survey


Rate Setting Models Why do you prefer stable rates?

• Those who prefer stable rates feel they allow better budgeting, like the comfort in predictability, and feel safer knowing rates won’t fluctuate or give them a big surprise in their bill

Random (n=441)

Public (n=374)

Better for budgeting 33% 40%

Predictable/Like to know 32% 19%

Doesn’t fluctuate as much 13% 27%

Conservative/Safer/Less risk 10% 5%

Protects customers better 6% 3%

Fewer surprises 5% 12%

Better for customer in long run 4% --

What I am used to 1% 1%

Better for seniors/fixed incomes 1% 2%

No real preference either way 1% 1%

Don’t know 3% --


Sample comments about Stable Rates


“Choose a method, and stick with it. We have been in a declining price market, which is when Kitchener Utilities cost more. However, in a rising market, Kitchener Utilities will probably be cheaper. If we switch now, we will get burnt on a rising

market.“

“I prefer to know if I'm going to pay more or less from bill to bill, based only my consumption and not on severe fluctuations in market prices.”

“I like knowing what I'm paying and am aware that at times we will pay more than other gas companies but also will pay lower rates at other times. We like the stability and don't mind paying more since it stays with a city owned company.”

“My experience with variable rate has not been good. While living in Waterloo, I experienced quite volatile fluctuations in my heating costs. It made budgeting very difficult, at times impossible. This was quite upsetting when I was trying to keep up with other rising costs and a young family. When an opportunity to purchase a home in Kitchener was realized, one of the benefits was more stable heating cost.”

Rate Setting Models Why do you prefer variable rates?

• Those who would prefer variable rates feel they have more opportunity to save money, and that their utility would be able to respond to rate drops more quickly than in a stable rate environment

• There was some recognition, more so in the public survey, that Kitchener residents have paid significantly more for natural gas in the past few years than those in Waterloo and Cambridge

Random (n=155)

Public (n=238)

Take advantage of rate drops 37% 37%

Cheaper in the long run 16% 3%

More chances to save money 12% 16%

Fair way to do it 10% 3%

Reflects market better 10% 22%

Willing to take the risk to save 4% 7%

No real preference 3% --

More flexibility 2% 1%

Like variable rates better 1% 10%

Don’t know 7% 2%


Sample comments about Variable Rates


“I just glean from what I've read in the KW Record that anyone with a stable rate has been screwed over the last few years. I'd rather "ride the wave" than be locked into a fixed rate. I mean, I've read we've paid more than double what others have paid under a flexible scheme!!! I am a senior on a fixed income.”

“I say variable because Kitchener Utilities has not been as competitive as other suppliers such as Union Gas in the last five years. Kitchener residents have been paying too much for the supply portion on their gas bill.”

“For several years, we've paid significantly higher prices than Waterloo residents who are with Union Gas.”

“For 9 years in Waterloo and 10 years in Toronto we were on variable delivery rates and it was consistently more affordable than the locked in rates in our Kitchener home which is 2/3 the size and 50% more expensive to heat even with new windows,

doors, roof and insulation.”

Rate Setting Models How much would you say you trust Kitchener Utilities to adopt the

business model that best respects you as a customer?

• Most of those interviewed trust Kitchener Utilities to adopt the business model that best respects them as a customer

– 46% of customer in the random study, and 41% in the public survey, scored 6-7 on a 7-point trust scale

– those 60+ years are the most trusting – 56-57% scored 6-7

• Respondents who scored their overall satisfaction the lowest were least likely to trust Kitchener Utilities

Total Overall Satisfaction with KU

Very Satisfied

(6-7)

Somewhat Satisfied

(3-4)

Not Satisfied

(1-2)

Random (n=333) (n=211) (n=52)

Mean 5.1 5.7 4.7 3.1

Completely (6-7) 46% 60% 31% 15%

Somewhat (4-5) 41% 35% 55% 29%

Not at all (1-3) 13% 5% 14% 56%

Public (n=323) (n=217) (n=74)

Mean 4.9 5.8 4.4 2.4

Completely (6-7) 41% 67% 16% 2%

Somewhat (4-5) 41% 29% 66% 21%

Not at all (1-3) 17% 4% 18% 77%


Rate Setting Models Why do you NOT trust Kitchener Utilities? (Asked if respondent did not trust KU in previous question)

• Respondents who said they do not trust Kitchener Utilities (scored 3 or less) to adopt a business model that represents their best interests are concerned about how much more they are paying for gas than other municipalities


“Poor business decisions made in the past by the city means the rates are too high.”

“Truthfully- I think they are a business- out to make money - because of that and also that they have such a monopoly of the services, I am not totally convinced that they have our best interests at heart.”

“I feel that Kitchener Utilities are paying too much for gas, and offer bad rates to customers.”

“Their poor past performance in predicting market behaviour.”

“They've shown short sightedness in their gas supply policies in the past in their purchase of overpriced long term supply agreements.”

“I wouldn't trust KU because they don't have me the customer in mind, they are a for-profit entity, responsible for making the City as much revenue as possible.”

Variable Rate Policy


Variable Rate Policy Regardless of your preference, how concerned are you that the rate you

pay for natural gas supply could increase significantly and affect your

budget at home with a variable rate policy?

• A little over half of those interviewed in each survey say that with a variable rate policy, they are “very” concerned that rates for natural gas supply could increase significantly and affect their budget (scored 6-7 on a 7-point scale)

54% 53%

32%

26%

14%

21%

Random Online

Concern over significant rate increases

Very Somewhat Not





• Across both surveys, respondents who prefer a Variable Rate are considerably less concerned about significant price increases – 31% of those in the random survey who prefer Variable are “not” concerned with price

increases

– 49% of those in the public survey who prefer Variable are “not concerned

Random Public

Total Stable Variable Total Stable Variable

Very 54% 62% 30% 53% 73% 22%

Somewhat 32% 30% 39% 26% 23% 30%

Not 14% 8% 31% 21% 4% 49%





Total Gender Age

Male Female 25-49 years 50-59 years 60+ years

Random

Very 54% 49% 58% 50% 55% 58%

Somewhat 32% 32% 33% 33% 35% 30%

Not 14% 19% 9% 17% 10% 12%

Public

Very 53% 41% 64% 51% 59% 49%

Somewhat 26% 29% 23% 27% 21% 29%

Not 21% 30% 13% 22% 20% 22%

• Women are more concerned than men that significant increases could happen and affect the home budget

• Those 60+years in the random survey most concerned, no significant differences in the public survey by age group


Variable Rate Policy With a variable rate policy, the rates that customers pay for natural gas

could change on a quarterly basis, in other words, change up or down 4

times a year. How would you feel about that?

• Across both surveys, it is clear that respondents who have a preference for Stable rates feel that a rate change up to 4 times a year is too often for them – (58% random, and 54% public)

• It is also clear that those who have a preference for Variable rates are not concerned with a rate changing that often – about two-thirds or more feel that many rate changes in a year are “just right”


Random Public

Total (n=596)

Stable (n=441)

Variable (n=155)

Total (n=612)

Stable (n=374)

Variable (n=238)

Far too often 36% 45% 10% 24% 38% --

A little too often 22% 25% 13% 30% 41% 14%

Just right 37% 27% 64% 40% 19% 76%

A little too slowly 3% 1% 8% 4% 2% 7%

Far too slowly 2% 2% 5% 2% -- 3%

Variable Rate Policy What percentage increase or decrease in rates would you consider to be

a maximum on a quarterly basis?

• In a Variable Rate environment, two-thirds of respondents in the random survey feel that quarterly rate changes of 10% (up or down) is what they could handle

• In both surveys, about 70% of those preferring a Stable Rate say that a 10% change is their maximum

• Those preferring Variable Rate were more willing to accept rate swings greater than 10%, or whatever the market dictates


Random Public

Total (n=596)

Stable (n=441)

Variable (n=155)

Total (n=612)

Stable (n=374)

Variable (n=238)

20% or more 2% 1% 3% 2% 1% 4%

10-20% 7% 6% 10% 16% 13% 19%

Up to 10% 65% 72% 47% 44% 68% 27%

Whatever the market dictates

26% 21% 40% 38% 18% 50%

Small Business Customers Results Summary


Small Business Customers Satisfaction with Kitchener Utilities

• Overall satisfaction from these business customers is similar to the residential customers

• 89% of customers are “very” or “somewhat” satisfied

Very (6-7) 47%

Somewhat (4-5) 42%

Not (1-3) 11%

Overall Satisfaction (n=74)


Rate Setting Options Prefer Stable or Variable?

• After reading about the two different rate setting options available, a majority (61%) say they prefer a stable rate option, while 39% would prefer the variable rate option

• Stable rates are better for planning, budgeting, and provide some protection from price increases

• Variable rates allow the user to have more control, to save if prices drop, and to pay what the market dictates

Stable 61%

Variable 39%

Prefer Stable or Variable? (n=74)



Sample Comments about Stable/Variable Rates

“Stable rates allow us to plan expenses and although decreases are not realized immediately, an unexpected large increase is difficult for a non-profit organization.”

“I like the stability, and believe that over the long haul the price of gas will go up, which will make the "stable" option cheaper, since lower prices will tend to be "locked in" for a while each time the market price goes up. The recent fracking craze and significant drop in prices is an anomaly. Therefore prices dropping any further isn't likely, so we are back into the rising price scenario.”

“As a business owner, it is important to know, as much as possible, what our expenses will be. If the rates are stable, we can at least forecast with some certainty what our expenses will be and budget accordingly. If they are variable, it makes the budget process much more challenging and I have enough other things to worry about without adding this one.”

“Similar to buying gasoline. You pay the market price at the time. This is the method by which most transactions are done. Let the other resellers offer a fixed or stable rate, and the customer can choose.”

“I prefer variable as it adjusts frequently to the changing market - so I ensure that I am not locked in at an unfavourable rate.”

“I will pay the market rate for the fuel I consume. I don't need a nanny for protection. I do not want to overpay because of poor judgement of others. This is the most competitive way in the long term.”

“Like a mortgage, variable rates are the best.”

2014 customer research - kitchener utilities · 1999. project was led by dave kains, cmrp – a...

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