Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/879860
Customers 26 | 29TH SEPTEMBER - 5TH OCTOBER 2017 | UTILITY WEEK Market view F or customer-facing companies in com- petitive markets, providing good ser- vice has become a key component of success. However for monopoly markets, like the water sector, companies can be in greater danger of not focusing on customer experi- ence strategy because they don't have the same level of incentive to actively improve. The UK water market has historically been non-competitive and, perhaps as a result of this, water companies have mainly not been known for leading customer service excellence and oen sit in the lower half of customer satisfaction league tables. While previously there have been some moves to challenge this status quo, indus- try regulator Ofwat has stepped up efforts recently to bring the water sector more in line with other sectors through PR19 – part of its Water 2020 strategy – which aims to cre- ate a "competition ready" market to improve outcomes for consumers. Evolution of customer service Speaking earlier this year, Ofwat chief execu- tive Cathryn Ross warned that companies which fail to provide ambitious business plans will have a "very tough" time during the PR19 review. When it comes to customer service effec- tiveness and measuring success, one of the main proposed changes to impact water companies will be replacing the current service incentive mechanism (SIM) with WaterworCX. A key principle of WaterworCX is to stretch companies to improve their customer experiences. While customers cannot cur- rently choose their provider, there is no rea- son why they should not expect to receive the same high levels of customer service they are used to from businesses in competitive markets. So, what are the main changes between SIM and the suggested WaterworCX mecha- nism? And what steps will water companies need to take in order to both rank well and be rewarded for driving customer service improvements? Ofwat proposes under WaterworCX to measure customer satisfaction with both contact handling and resolution, whereas SIM only currently measures satisfaction levels with contact handling. This is a posi- tive move because it is important for water companies to consider the cus- tomer's view on resolution of a matter or complaint. Potentially this could mean some companies may score lower than they would have under SIM if they have simply focused their efforts on improving their contact handling. However, many water companies will already be taking a proactive approach here and will be measuring contact resolution internally. So in many cases they will not need to massively change processes in order to score well under WaterworCX. The challenge of engaging silent customers Under the proposed WaterworCX, water com- panies will be subject to separate customer service and experience surveys. These will be conducted with customers who have actively contacted a company with an enquiry, and registered bill payers who have not contacted a company, to see how they view the service they have received. This change, to survey registered bill pay- ers who have not contacted the company, could be a big challenge for water compa- nies. In many ways, water can be considered a "commodity" purchase which does not necessarily invoke particular interest from customers. Bill payers may not know much, if anything, about their water company or what they provide for the community. There- fore, expect to see a step change in commu- nity engagement and promotional materials in order to raise positive brand awareness and inform the community about the water company's policies and programmes. Can water compete on customer experience? Ofwat proposes that water companies be benchmarked against other sectors, includ- ing highly competitive markets, and to receive the highest rewards, they will be expected to be as good as companies in the upper quartile of the UK Customer Satisfac- tion Index (CSI), which is compiled by The Institute of Cus- tomer Service. This will be challenging to achieve, given that those in the upper quar- tile have been operating in competitive mar- kets for years, and are greatly experienced in providing excellent customer service. A key question for water companies to consider is how much they will need to invest in order to improve their service to be among the all-sector best. If the investment required outweighs the additional incentive being offered, then companies may choose not to focus on achieving this target. In the July 2017 UK CSI report, no water companies made it into the table of the top 50 UK organisations, but a couple were close to the all-sector upper quartile score, which is the proposed threshold benchmark. So, for the few currently scoring well, this addi- tional incentive could be easily reachable in the near future, while those currently scoring the lowest in the UK CSI may have a lot more work to do. Reducing complaints and improving complaint handling Under WaterworCX, it is proposed that the volume of complaints a water company receives will only be used as a reputational measure, rather than being weighted as per the current SIM. While there is a small risk that this could lead to a lower focus on preventing complaints, this risk should be largely abated due to the benefits that come from reviewing customer grievances. Analysing complaints helps water compa- nies to identify the root causes of customer issues and provides great insight into how to improve overall service for all. Therefore Goodbye SIM, hello WaterworCX Ofwat is determined that water companies raise their game when it comes to customer service, so for PR19 its is replacing SIM with WaterworCX. Monica Mackintosh assesses the challenge ahead. "Water companies be benchmarked against other sectors, including highly competitive markets"