Australians Switching Behaviour in Banking and Essential Services

1 REPORT Australians Switching Behaviour in Banking and Essential Services Prepared by: Dr. Eugene Chan UTS Business School University of Technology Sydney On behalf of: Heritage Bank October 2016 Disclaimer This report is of commercial nature and was prepared for the commissioning client Heritage Bank. Any interpretation and dissemination of the information in this report which is different in any way to the original information contained in the report is beyond the University of Technology Sydney s and the report s author s responsibility.

2 TABLE OF CONTENTS Summary of Findings 3 Switching Behaviours, Motivations & Savings 3 Non-Switching Behaviours, Motivations & Desired Savings 4 Perceptions of Choice & Searching Behaviours 4 Background 5 Methodology & Respondent Pool 6 Data Analyses 7 Home Loan Providers 7 Credit Card Providers 9 Grocery Suppliers 12 Energy Suppliers 15 Internet Provider 18 Mobile Service Providers 21 Perceptions of Choice 24 Searching Behaviours 25 References 26 Appendix 1: Savings by Switching 27 Appendix 2: Money Wasted by Not Switching 28

3 SUMMARY OF FINDINGS Many previous studies have suggested that people are reluctant to switch their service providers for many reasons, even if they are not receiving the most efficient service. As such, they are often stuck with service providers that are costly. Despite the financial importance of switching, however, there is actually little empirical evidence regarding switching behaviours, the motivations to switch to less expensive service providers and the financial savings from switching. In this report, we present the main findings of a study conducted with over 1,000 Australian adults in which we examined their switching behaviours in home loan providers and other essential services including credit card providers, grocery suppliers, energy suppliers, Internet providers and mobile service providers. Specifically, we report on: 1) the proportion of Australians who have switched service providers; 2) the motivations for their switching; 3) the savings that resulted from switching; and 4) differences in switching behaviours and motivations between spendthrifts and tightwads. Switching Behaviours, Motivations & Savings In the past five years (2011 to 2016), 5 indicated that they have switched service providers in at least one of the following categories: home loan providers (3), credit card providers (24%), grocery suppliers (3), energy suppliers (33%), Internet providers (31%), or their mobile service providers (3). The primary motivation for switching in all categories is because consumers found lower rates or fees elsewhere (71% for home loan providers; 44% for credit card providers; 67% for grocery suppliers; 72% for energy suppliers; 58% for Internet providers; 66% for mobile service providers). The secondary motivations in all categories except for credit card providers and grocery suppliers are all related to poor customer service with existing providers, such as a complaint with a service provider that was not resolved, which motivated respondents to switch: home loan providers (3), energy suppliers (26%), Internet providers (42%) and mobile service providers (33%). For credit card providers, the secondary motivation was because of better rewards elsewhere (38%). For grocery suppliers, the secondary motivation for switching was because of better food quality or choice elsewhere (66%). By switching, it is estimated that consumers have achieved the following savings: For home loan providers, $717,966,750 per year. For credit card providers, $537,465,600. For grocery suppliers, $944,524,752. For energy suppliers, $448,284,529. For Internet providers, $176,275,116. For mobile service providers, $408,672,000. There is also the distinction between spendthrifts, who pay little attention to savings but more on enjoying their purchases and experiences, and tightwads, who are frugal consumers who watch and limit what they spend (Rick, Cryder, and Loewenstein 2008). Importantly, this difference in attitudes toward money affected perceptions of choice in the marketplace and their frequency of searching for the best deals: in major categories such as

home loans where financial investments are large and long-term, tightwads see more choice, so they don t make the effort to go out and search, thus making them less likely to switch in these categories. In minor categories such as grocery suppliers where financial investments are smaller and variable on a daily basis, tightwads see less choice, but this motivates them to search for the best deals and thus increases their likelihood of switching. Non-Switching Behaviours, Motivations & Desired Savings What about Australians who did not switch? Time and effort was chosen by Australians as a key reason why they stayed put with many of their existing service providers even if it cost them more financially: home loan providers (28%), credit card providers (24%), energy suppliers () and Internet providers (24%). In other product-specific categories, there were other barriers to switching aside from time and effort. For grocery suppliers, 49% indicated their existing supplier was close to home or work; for mobile service providers, 3 indicated that they had good coverage with their existing network. But these consumers would be motivated to switch if they could save the following amounts: For home loan providers, >$3,001 per year. For credit card providers, >$501 per year. For grocery suppliers, >$1,001 per year. For energy suppliers, >$501 per year. For Internet providers, >201 per year. For mobile service providers, <$50 per year. Largely, spendthrifts and tightwads did not differ in their motivations for staying put with existing service providers. In most categories, more tightwads (41%) indicated that they had a low rate compared to spendthrifts (37%), thus demotivating them to switch, but low rates was selected as a key motivation for not switching relative to all other motivations including good customer service at existing service providers, time and effort and a complaint that was resolved. Perceptions of Choice & Searching Behaviours There are key antecedents for switching. After all, if consumers do not perceive choice in the marketplace and if they do not actively search around and look for the best deals, they are unlikely to switch. The findings indicate that such perceptions of choice and searching behaviours differed by category and by spendthrifts/tightwads. In minor categories, tightwads saw less choice, so they searched more. But since such greater searching behaviours involve time and effort, this reduced their switching likelihood. But in major categories, tightwads saw more choice and so they do not see themselves putting time and effort into searching for the best deals. This makes it less effortful and cumbersome to search, thus increasing their likelihood of switching. 4

5 BACKGROUND Although it is important to understand consumers switching behaviour, particularly in the banking and financial services sector given its importance for consumers financial wellbeing, there is actually little research on this topic. It is thus important to understand what motivates individuals to switch and, more importantly, what deters consumers from switching to other service providers with more desirable conditions from the consumers perspective. In the academic literature, there are mixed findings regarding why consumers switch. Colgate and Lang (2001) pointed out that the main reasons for consumer inertia are the loss of relationship investments. According to these authors, if consumers perceive that they receive important relational benefits, they may keep the same service providers even if its core attributes are not optimal. However, Keaveney (1995) argued that all consumers attach equal weight to each reason for switching between service providers, thus contradicting Colgate and Lang. Gerrard and Cunningham (2004) developed a weighting model and applied it to the banking industry. They reported that high prices or rates at existing financial institutions was the key reason for switching, followed by poor customer service and inconvenience to consumers. Indeed, there are likely many reasons why consumers switch. Financial costs with switching (e.g., break-up fees) are also important deterrent factors. Moreover, there may be risks or uncertainty about loss or gain from switching since consumers are joining new service providers that they did not know about previously. The lack of choice between different providers has also been identified as an important discouraging factor for switching. In general, across a wide range of industries, consumers who switch are typically young, earn high incomes and are more educated than those who do not switch. In this report, we also investigate possible differences in switching behaviours and underlying motivations between spendthrifts and tightwads (Rick et al. 2008). Because tightwads are more frugal and watch what they spend, they are more likely to search for the best deals and switch more when they see a cheaper financial alternative elsewhere, compared to spendthrifts. Interestingly, this tightwad mentality has not been examined in the context of service switching behaviours. We thus investigate these differences in the frugal mindset and how they not only impact switching behaviours but the motivations for switching as well as non-switching. The purpose of this research is to determine the primary motivations for switching among Australian adults in six categories: home loan providers, credit card providers, grocery suppliers, energy suppliers, Internet providers and mobile service providers.

6 METHODOLOGY & RESPONDENT POOL Our analysis is based on self-reported information involving a national representative of 1000 Australian adults 18 years of age or older, collected through an online survey. The respondents received small monetary compensation in exchange for their time and responses. The survey was conducted in October 2016. All respondents in our survey have home loan providers, credit card providers, grocery suppliers, energy suppliers, Internet contract and mobile service providers. The survey asked about past and intended switching behaviour and motives for such decisions. Respondents were also asked about the monetary amounts saved that would lead them to switch from the current service providers to an alternative one. Gender: 46% male; 54% female. Age: 59% indicated they were between 35 and 65 years of age; 21% were between 25 and 34 years of age; 11% were 66 years of age or older; and 8% were between 18 and 24 years of age. State: 29% reside in New South Wales; in Victoria; 21% in Queensland; 11% in South Australia; 9% in Western Australia; 2% in the Australian Capital Territory; 3% in Tasmania; and less than 1% in the Northern Territory. Household Size: 33% have 2 members (including the respondent) in the household; have 4 members; 21% have 3 members; 11% have 1 member; and 1 have 5 or more members. Also, 5 have no children under the age of 18 residing within the household; have 1 child; 19% have 2 children; and 7% have 3 or more children. Annual Household Income: 17% reported an annual household income of $150,001 or more; 13% indicated an income between $120,001 and $150,000; 12% between $100,001 and $120,000; 8% between $90,001 and $100,000; 8% between $80,001 and $90,000; 8% between $70,001 and $80,000; 6% between $60,001 and $70,000; 8% between $50,001 and $60,000; 7% between $40,001 and $50,000; 6% between $30,001 and $40,000; between $20,001 and $30,000; and 3% indicated an income of $20,000 or less. Spendthrifts/Tightwads: 76% of respondents self-identified as tightwads, while 24% selfidentified as spendthrifts. Distribution of spendthrifts and tightwads between men and women, and by age range are as follows. Although there are no differences by age, men are more likely to be tightwads than women, consistent with gender stereotypes about men and women s spending and shopping behaviours (Rick et al. 2008). Tightwads Spendthrifts Men 76% 24% = 10 Women 72% 28% Tightwads Spendthrifts 18 to 24 years old 76% 24% = 10 25 to 34 74% 26% 35 to 65 73% 27% 66 or older 76% 24%

7 DATA ANALYSES Home Loan Providers 3 reported that they had switched their home loan providers in the past five years. Of these individuals, 71% said that the key reason was that they found lower rates elsewhere. Other reasons included: staff at the previous home loan providers were not helpful (); they received clear and detailed information from their new home loan providers (18%); and they had a complaint at the previous home loan providers that was not resolved (1). 8 7 6 5 4 3 1 Lower Rates Staff Not Helpful Info From New Provider Figure 1: Reasons for Switching Home Loan Providers Unresolved Complaint Switching behaviours differed between spendthrifts or tightwads. 39% of spendthrifts switched home loan providers in the past five years, compared to 44% of tightwads. Further analyses revealed that the primary reason why tightwads switched home loan providers was because of lower rates (61%), compared to 5 of spendthrifts. 7 6 5 4 3 1 Lower Rates Staff Not Helpful Info From New Provider Complaint Spendthrifts Tightwads Figure 2: Reasons for Switching Home Loan Providers by Spendthrifts/Tightwads

8 Also, of those who switched, 32% said they saved between $1,001 and $2,000 per year by switching; between $501 and $1,000 (23%); $3,001 or more (19%); between $2,001 and $3,000 (); and $500 or less (11%). 3 3 1 <$500 $501 - $1000 $1001 - $2000 $2001 - $3000 >$3001 Figure 3: Money Saved from Switching Home Loan Providers (Household-Level) What about the 7 who did not switch their home loan providers in the past five years? Of these individuals, 33% said it was because they were confident they had the best rate; it was too much bother in terms of time and effort (28%); the financial costs of switching were too high (28%); they received preferential treatment from their existing home loan providers (18%); staff at their existing home loan providers knew them personally (); they did not know which other home loan providers to choose (12%); and they felt there was no choice among home loan providers (9%). Only 2% said that they did not switch because they had a complaint at their existing home loan providers that was resolved. 3 3 1 Figure 4: Reasons for Not Switching Home Loan Providers The reasons for not switching also differed between spendthrifts and tightwads. For spendthrifts, three key motivations because the financial costs of switching were too high

(36%), they had low rates (3) and because of time and effort (29%). However, for tightwads, the key reason was low rates instead (34%) and time and effort was reported by only one-quarter of respondents (). Reasons related to good customer service at existing home loan providers, such as preferential treatment, personal staff and a complaint that was resolved, did not rank highly for both spendthrifts (26%) and tightwads (39%). 9 4 3 3 1 Spendthrifts Tightwads Figure 5: Reasons for Not Switching Home Loan Providers by Spendthrifts/Tightwads Also, of these individuals, 33% said they would switch their home loan providers if they could save $3,001 or more per year; between $1,001 and $2,000 per year (23%), between $501 and $1,000 per year (19%); between $2,001 and $3,000 per year (17%); and $500 or less per year (8%). 3 3 1 <$500 $501 - $1000 $1001 - $2000 $2001 - $3000 >$3001 Figure 6: Savings Needed to Switch Home Loan Providers Credit Card Providers 24% reported that they had switched their credit card providers in the past five years. Of these individuals, 44% said that the key reason was because they found lower rates and fees

elsewhere; to receive better rewards (38%); staff at their previous credit card providers were not helpful (16%); they received clear and detailed information from their new credit card providers (); and they had a complaint at the previous credit card providers that was not resolved (9%). 10 5 4 4 3 3 1 Lower Rates Better Rewards Staff Not Helpful Info from New Provider Figure 7: Reasons for Switching Credit Card Providers Unresolved Complaint Switching behaviours did not differ between spendthrifts or tightwads. 26% of spendthrifts switched credit card providers in the past five years, compared to 23% of tightwads. However, further analyses revealed some differences in why they switched. Among spendthrifts, 61% switched because of lower rates, compared to just 41% of tightwads. However, among tightwads, 44% switched because of better rewards, 26% said it was because staff at their previous credit card providers were not helpful and 18% said it was because they had a complaint that was not resolved, compared to spendthrifts (27%, 14% and 7%, respectively). 7 6 5 4 3 1 Lower Rates Better Rewards Staff Not Helpful Info from New Provider Unresolved Complaint Spendthrifts Tightwads Figure 8: Reasons for Switching Credit Card Providers by Spendthrifts/Tightwads

Also, of those who switched, 32% said they saved less than $100 per year in interest by switching; 19% said they saved between $201 and $300; said they saved between $101 and $200; said they saved $501 or more; and 14% said they saved between $301 and $400. Only 6% said they saved between $401 and $500. 11 3 3 1 <$100 $101 - $200 $201 - $300 $301 - $400 $401 - $500 >$501 Figure 9: Money Saved from Switching Credit Card Providers What about the 76% who did not switch their credit card providers in the past five years? Of these individuals, 32% said it was because they were confident they had the best rate; it was too much bother in terms of time and effort (24%); all credit card providers offered the same conditions (16%); they received preferential treatment from their existing home loan providers (13%); they did not know which other credit card providers to choose (1); the financial costs of switching were too high (8%); and staff at their existing home loan providers knew them personally (7%). Only 2% said that they did not switch because they had a complaint at their existing credit card providers that was resolved. 3 3 1 Figure 10: Reasons for Not Switching Credit Card Providers

The reasons for not switching did not differ between spendthrifts and tightwads. More tightwads indicated that they stayed with existing credit card providers because of low rates (33%) than spendthrifts (28%), but both groups indicated this as a key reason for not switching relative to all other reasons. Time and effort was the second key motivation for tightwads (18%) and spendthrifts () and good customer service at existing credit card providers, including staff offering personal attention and having a complaint that was resolved, was only selected by a minority (9% total for tightwads, 7% total for spendthrifts). 12 3 3 1 Spendthrifts Tightwads Figure 11: Reasons for Not Switching Credit Card Providers by Spendthrifts/Tightwads Also, of these individuals, 24% said they would switch their credit card providers if they could save $100 or less per year in interest; $501 or more (33%); between $101 and $200 (13%); between $201 and $300 (12%); between $301 and $400 (9%); and between $401 and $500 (9%). 3 3 1 <$100 $101 - $200 $201 - $300 $301 - $400 $401 - $500 >$501 Figure 12: Savings Needed to Switch Credit Card Providers Grocery Suppliers

3 reported that they had switched their grocery suppliers in the past five years. Of these individuals, 67% said that the key reason was because they found lower prices elsewhere; they found better food quality (39%); there was a wider food choice at the other grocery suppliers (27%); the other grocery suppliers was closer to home or work (17%); and staff at their previous grocery suppliers were not helpful (9%). 13 8 7 6 5 4 3 1 Lower Prices Better Quality Wider Choice Close to Home/Work Figure 13: Reasons for Switching Grocery Suppliers Staff Not Helpful Switching behaviours also differed between spendthrifts or tightwads. 46% of spendthrifts switched grocery suppliers in the past five years, compared to 42% of tightwads. However, further analyses revealed no systematic differences in why spendthrifts and tightwads switched grocery suppliers. 7 6 5 4 3 1 Lower Prices Better Quality Wider Choice Close to Home/Work Staff Not Helpful Spendthrifts Tightwads Figure 14: Reasons for Switching Grocery Suppliers by Spendthrifts/Tightwads Also, of those who switched, 41% indicated that they saved less than $400 a year by switching; between $401 and $600 (32%); between $601 and $1,000 (14%); and $1,001 or more (13%).

14 4 4 3 3 1 <$400 $401 - $600 $601 - $1000 >$1001 Figure 15: Money Saved from Switching Grocery Suppliers What about the 6 who did not switch their grocery suppliers in the past five years? Of these individuals, 49% said it was because their existing grocery suppliers was closer to home or work; they were confident they had the best prices (41%); their existing grocery suppliers had high food quality (27%); all grocery suppliers offered the same prices and food quality (23%); it was too much bother in terms of time and effort (1); and staff at their existing grocery suppliers were helpful (9%). 6 5 4 3 1 Close to Home/Work Low Prices High Quality No Choice Time and Effort Figure 16: Reasons for Not Switching Grocery Suppliers Staff Helpful The reasons for not switching did not differ between spendthrifts and tightwads. More tightwads indicated that they stayed with existing grocery suppliers because of convenience to home or work (5) than spendthrifts (46%), but both groups indicated this as a key reason for not switching relative to all other reasons. Low prices was the second key motivation for tightwads (41%) and spendthrifts (41%) and high quality was the third most important motivation for tightwads (26%) and spendthrifts (29%). Helpful staff were only chosen by a minority of both tightwads and spendthrifts (9% each).

15 6 5 4 3 1 Close to Home/Work Low Prices High Quality No Choice Time and Effort Staff Helpful Spendthrifts Tightwads Figure 17: Reasons for Not Switching Grocery Suppliers by Spendthrifts/Tightwads Also, of these individuals, 3 said they would switch their grocery suppliers if they could save $400 or less per year; $1,001 or more (29%); between $401 and $600 (22%); and between $601 and $1,001 (19%). 3 3 1 <$400 $401 - $600 $601 - $1000 >$1001 Figure 18: Savings Needed to Switch Grocery Suppliers Energy Suppliers 33% reported that they had switched their energy suppliers in the past five years. Of these individuals, 72% said that the key reason was they found lower rates elsewhere; they received clear and detailed information from their new energy suppliers (19%); staff at the previous energy suppliers were not helpful (); and they had a complaint at the previous energy suppliers that was not resolved (11%).

16 8 7 6 5 4 3 1 Lower Rates Info from New Provider Staff Not Helpful Figure 19: Reasons for Switching Energy Suppliers Unresolved Complaint Switching behaviours did not differ between spendthrifts or tightwads. 33% of spendthrifts switched energy suppliers in the past five years, compared to 3 of tightwads. Further analyses also revealed no systematic differences in why spendthrifts and tightwads switched energy suppliers. 7 6 5 4 3 1 Lower Rates Info from New Provider Staff Not Helpful Unresolved Complaint Spendthrifts Tightwads Figure 20: Reasons for Switching Energy Suppliers by Spendthrifts/Tightwads Also, of those who switched, 22% said they saved between $201 and $300 per year by switching; between $101 and $200 (21%); less than $100 (19%); between $301 and $400 (); $501 or more (13%); and between $401 and $500 (11%).

17 1 <$100 $101 - $200 $201 - $300 $301 - $400 $401 - $500 >$501 Figure 21: Money Saved from Switching Energy Suppliers What about the 6 who did not switch their energy suppliers in the past five years? Of these individuals, 44% said it was because they had the best rate (44%); their existing energy suppliers had a good price to performance ratio (24%); it was too much bother in terms of time and effort (21%); their existing energy suppliers billing was clear and correct (); they did not know which other energy suppliers to choose (14%); their existing energy suppliers was more environmentally friendly than others (6%); and the financial costs of switching were too high (4%). Only 3% said they were concerned about energy supply security and only 2% said that they did not switch because they had a complaint at their existing energy suppliers providers that was resolved. 5 4 4 3 3 1 Figure 22: Reasons for Not Switching Energy Suppliers The reasons for not switching did not differ between spendthrifts and tightwads. More tightwads indicated that they stayed with existing energy suppliers because of low rates (47%) than spendthrifts (36%), but both groups indicated this as a key reason for not switching relative to all other reasons. A good price-to-performance ratio was the second key motivating for not switching for both tightwads (24%) and spendthrifts () and time and

effort was the third reason for spendthrifts (23%), but it was the fourth for tightwads (17%). Energy supply security and a resolved complaint were only chosen by a handful as reasons for not switching ( for both tightwads and spendthrifts). 18 5 4 4 3 3 1 Spendthrifts Tightwads Figure 23: Reasons for Not Switching Energy Suppliers by Spendthrifts/Tightwads Also, of these individuals, 3 said they would switch their energy suppliers if they could save $501 or more per year; $100 or less (16%); between $201 and $300 (16%); between $101 and $200 (); between $301 and $400 (13%); and between $401 and $500 (1). 3 3 1 <$100 $101 - $200 $201 - $300 $301 - $400 $401 - $500 >$501 Figure 24: Savings Needed to Switch Energy Suppliers Internet Providers 31% reported that they had switched their Internet providers in the past five years. Of these individuals, 58% said it was because they found lower rates elsewhere; staff at the previous Internet providers were not helpful (23%); they received clear and detailed information from their new Internet providers (21%); and they had a complaint at the previous Internet providers that was not resolved (19%).

19 7 6 5 4 3 1 Lower Rates Staff Not Helpful Info from New Provider Figure 25: Reasons for Switching Internet Providers Unresolved Complaint Switching behaviours did not differ between spendthrifts or tightwads. 28% of spendthrifts switched Internet providers in the past five years, compared to 37% of tightwads. However, further analyses revealed two primary differences why spendthrifts and tightwads switched Internet providers. Spendthrifts did so primarily because of lower rates (6), compared to 46% of tightwads, but tightwads did so primarily because of a complaint that was not resolved (26%), compared to just 16% of spendthrifts. 7 6 5 4 3 1 Lower Rates Staff Not Helpful Info from New Provider Unresolved Complaint Spendthrifts Tightwads Figure 26: Reasons for Switching Internet Providers by Spendthrifts/Tightwads Also, of those who switched, 32% said they saved $50 or less; $201 or more (21%); between $51 and $100 (21%); between $101 and $150 (16%); and between $151 and $200 (11%).

20 3 3 1 <$50 $51 - $100 $101 - $150 $151 - $200 >$201 Figure 27: Money Saved from Switching Internet Providers What about the 6 who did not switch their Internet providers in the past five years? Of these individuals, 5 said it was because they had the best rate; staff at their existing Internet providers were helpful (29%); their existing Internet providers billing was clear and correct (24%); it was too much bother in terms of time and effort (24%); the financial costs of switching were too high (11%); and they did not know which other Internet providers to choose (8%). Only 1% said they did not switch because they had a complaint that was resolved. 6 5 4 3 1 Low Rates Staff Helpful Clear and Correct Billing Time and Effort Costs Too High Figure 28: Reasons for Not Switching Internet Providers Confused Resolved Complaint The reasons for not switching did not differ between spendthrifts and tightwads. Both tightwads (5) and spendthrifts (48%) indicated that they had a good rate at existing Internet providers and time and effort was also selected as a key motivation for staying put, equally for both tightwads (24%) and spendthrifts (26%), as was clear and correct billing from existing Internet providers for both tightwads (24%) and spendthrifts (23%).

21 6 5 4 3 1 Low Rates Staff Helpful Clear and Correct Billing Time and Effort Costs Too High Confused Resolved Complaint Spendthrifts Tightwads Figure 29: Reasons for Not Switching Internet Providers by Spendthrifts/Tightwads Also, of these individuals, 41% said they would switch their Internet providers if they could save $201 or more per year; between $101 and $150 (17%); between $51 and $100 (16%); between $151 and $200 (13%); and $50 or less (12%). 4 4 3 3 1 <$50 $51 - $100 $101 - $150 $151 - $200 >$201 Figure 30: Savings Needed to Switch Internet Providers Mobile Service Providers 3 reported that they had switched their mobile service providers in the past five years. Of these individuals, 66% said it was because they found lower rates elsewhere; staff at the previous mobile service providers were not helpful (); they received clear and detailed information from their new mobile service providers (); and they had a complaint at the previous mobile service providers that was not resolved (13%).

22 7 6 5 4 3 1 Lower Rates Staff Not Helpful Info from New Provider Figure 31: Reasons for Switching Mobile Service Providers Unresolved Complaint Switching behaviours differed between spendthrifts or tightwads. 33% of spendthrifts switched mobile service providers in the past five years, compared to 39% of tightwads. Further analyses revealed primary differences why spendthrifts and tightwads switched mobile service providers. Spendthrifts did so primarily because lower rates elsewhere (4), followed closely by staff at existing providers not being helpful (37%). For tightwads, their key reason for switching was also lower rates elsewhere (6), but other reasons such as unhelpful staff only counted for 21% or less of their switching motivations. 7 6 5 4 3 1 Lower Rates Staff Not Helpful Info from New Provider Unresolved Complaint Spendthrifts Tightwads Figure 32: Reasons for Switching Mobile Service Providers by Spendthrifts/Tightwads Also, of those who switched, 32% said they saved $50 or less; $201 or more (22%); between $51 and $100 (18%); between $101 and $150 (16%); and between $151 and $200 (13%).

23 3 3 1 <$50 $51 - $100 $101 - $150 $151 - $200 >$201 Figure 33: Money Saved from Switching Mobile Service Providers What about the 7 who did not switch their mobile service providers in the past five years? Of these individuals, 38% said it was because they had the best rate; their existing mobile service coverage was good (3); staff at their existing mobile service providers were helpful (24%); their existing mobile service providers billing was clear and correct (21%); it was too much bother in terms of time and effort (18%); the financial costs of switching were too high (11%); and they did not know which other mobile service providers to choose (6%). Only 2% said they did not switch because they had a complaint that was resolved. 4 3 3 1 Figure 34: Reasons for Not Switching Mobile Service Providers The reasons for not switching differed between spendthrifts and tightwads. The key motivation for staying put with existing mobile service providers for spendthrifts was good coverage (4), but the key reason for tightwads was low rates (39%). The secondary motivations for not switching were similar for both tightwads and spendthrifts. Time and effort was chosen more by tightwads (22%) than spendthrifts (16%). Resolved complaints was selected by the least number of both tightwads (2%) and spendthrifts (3%).

24 4 4 3 3 1 Spendthrifts Tightwads Figure 35: Reasons for Not Switching Mobile Service Providers by Spendthrifts/Tightwads Also, of these individuals, 41% said they would switch their mobile service providers if they could save $201 or more per year; $50 or less (16%); between $51 and $100 (); between $101 and $150 (); and between $151 and $200 (12%). 4 4 3 3 1 <$50 $51 - $100 $101 - $150 $151 - $200 >$201 Figure 36: Savings Needed to Switch Mobile Service Providers Perceptions of Choice Respondents saw different amounts of choice in the marketplace, depending on the category: clothing (61%), travel (59%), electronics (5), groceries (54%), cars (54%), credit cards (4) and home loans (41%). However, perceptions of choice differed between spendthrifts and tightwads. Although spendthrifts saw more choice, compared to tightwads, in clothing (63% to 6), travel (64% to 6), electronics (56% to 54%) and groceries (57% to 54%), they saw less choice in cars (49% to 5), credit cards (42% to 46%) and home loans (3 to 43%).

25 7 6 6 5 5 4 4 3 3 Clothing Travel Electronics Groceries Cars Credit Cards Home Loans Spendthrifts Tightwads Searching Behaviours Figure 37: Perceptions of Choice by Spendthrifts/Tightwads Searching behaviours also differed by category. Respondents searched for the best deals most often in electronics (97%), then travel (9), clothing (93%), cars (93%), groceries (9), home loans (67%) and credit cards (79%). However, searching behaviours also differed between spendthrifts and tightwads. Both spendthrifts and tightwads search at very similar rates in electronics (98% to 97%), travel (93% to 9), clothing (93% to 93%), cars (93% to 93%), home loans (84% to 84%) and credit cards (8 to 79%). However, spendthrifts searched less in groceries (84% to 91%). 10 9 9 8 8 7 Spendthrifts Tightwads Figure 38: Searching Behaviours by Spendthrifts/Tightwads

26 REFERENCES Colgate, Mark and Rachel Hedge. An investigation into the switching process in retail banking services. International Journal of Bank Marketing 19.5 (2001): 201-212. Colgate, Mark and Bodo Lang. Switching barriers in consumer markets: an investigation of the financial services industry. Journal of Consumer Marketing 18.4 (2001): 332-347. Gerrard, Phillip and J. Barton Cunningham. Consumer switching behavior in the Asian banking market. Journal of Services Marketing 18.3 (2004): 215-223. Keaveney, Susan M. Customer switching behavior in service industries: An exploratory study. Journal of Marketing 59.2 (1995): 71-82. Rick, Scott I., Cynthia E. Cryder and George Loewenstein. Tightwads and spendthrifts. Journal of Consumer Research 34.6 (2008): 767-782.

27 APPENDIX 1: SAVINGS BY SWITCHING Home loan providers: Number of households in Australia (2011 Census): 9,117,033 Percentage with home loans: 3 Number of households with home loans: 9,117,033 3 = 3,190,962 Percentage who have switched: 3 Number of households who have switched: 3,190,962 3 = 957,289 Lower bound of savings: $750 per year Lower bound for national savings from switching = 957,289 $750 = $717,966,750 Credit card providers: Number of Australian adults (2011 Census): 17,200,000 Percentage of adults with credit cards: 7 Number of adults with credit cards: 17,200,000 7 = 12,040,000 Percentage who have switched: 24% Number of adults who have switched: 12,040,000 24% = 2,889,600 Lower bound of savings: $186 per year Lower bound for national savings from switching: 2,889,600 $186 = $537,465,600 Grocery suppliers: Percentage who have switched: 3 Number of households who have switched = 9,117,033 3 = 3,190,962 Lower bound for savings: $296 per year Lower bound of national savings from switching: 3,190,962 $296 = $944,524,752 Energy suppliers: Percentage who have switched: 33% Number of households who have switched: 9,117,033 33% = 3,008,621 Lower bound of savings: $149 per year Lower bound of national savings from switching = 3,008,621 $149 = $448,284,529 Internet providers: Percentage of households with Internet access: 77% Number of households with Internet access: 9,117,033 77% = 7,020,115 Percentage of households who have switched: 31% Number of households who have switched: 7,020,115 31% = 2,176,236 Lower bound for savings: $81 per year Lower bound for national savings from switching: 2,176,236 $81 = $176,275,116 Mobile service providers: Percentage of Australian adults with mobile phone: 9 Number of Australian adults with mobile phone: 17,200,000 9 = 15,480,000 Percentage who have switched: 3 Number of Australian adults who have switched: 15,480,000 3 = 4,644,000 Lower bound for savings: $88 per year Lower bound of national savings from switching: 4,644,000 $88 = $408,672,000 Total: $3,233,188,737

28 APPENDIX 2: MONEY WASTED BY NOT SWITCHING Home loan providers: $750 lower bound of savings 2,233,673 (7 of households who did not switch) = $1,675,254,750 Credit card providers: $186 lower bound 9,150,400 (76% of individuals who did not switch) = $1,701,974,400 Grocery suppliers: $296 5,926,072 (6 of households who did not switch) = $1,754,117,149 Energy suppliers: $149 6,108,412 (67% of households who did not switch) = $910,153,404 Internet providers: $81 4,843,879 (69% of households who did not switch) = $392,354,227 Mobile providers: $88 10,836,000 (7 of individuals who did not switch) = $95,356,800 Total: $7,387,422,231