Picking Peaches: Service quality in the Victorian energy market

Regulatory inquiries and Royal Commissions continue to identify poor practices by firms delivering essential and complex services, resulting in consumer detriment. Yet in many of these markets there is little information available to consumers to enable them to differentiate companies by the quality of their service, reflecting a key information asymmetry.Where consumers cannot pick ‘lemons’ from ‘peaches’, firms do not face competitive pressure to improve their service offering.

This report provides a summary of the findings from a collaborative research project between RMIT’s BehaviouralBusiness Lab and the Consumer Policy Research Centre. This research has produced unique empirical data about the value of service quality and how it affects consumer choice in the context of the Victorian retail energy market.*

This project adopted a multi-stage, iterative and self-validating approach to first develop a prototype measure of service quality, and then to test whether service quality information affects consumer choice in an experimental setting and if so, how it affects choices.

Project Aims

This collaborative research project with RMIT’s Behavioural Business Lab sought to understand what aspects of customer service consumers considered most important in the context of the Victorian energy market. From these insights, we develop and then tested a prototype measure of service quality.

We aimed to identify whether:

• Consumers consider aspects other than price are important when assessing energy companies, and to examine how valuable consumers consider these non-price aspects.
• Consumers with different decision-making styles seek different kinds of information and respond differently to that information.
• Consumers make different choices about energy providers when service quality information is made available.
• Consumers are more likely to choose companies with a higher service quality rating when service quality information is made available.

*The views and recommendations expressed in this report reflect those of CPRC.