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Water companies face major challenges to reach high bar set for PR19

From the Knowledge Centre

Recent results from The Institute of Customer Service's July 2017 UK Customer Satisfaction Index highlight just how far the water industry has to travel to meet the standards set out by Ofwat in its plans for the 2019 price review...

The utility (energy and water) sector has once again been highlighted as one of the lowest performing sectors, according to the bi-annual UK Customer Satisfaction Index, published by The Institute of Customer Service in July 2017.

It comes in the same week that Ofwat announces it will intervene in water companies whose business plans for PR19 don’t match the “high bar” it expects for customer service and responsiveness, and announces new and stretching customer experience performance measures to replace the current Service Incentive Mechanism (SIM).

To break this cycle water companies need to work quickly to develop a better understanding of their customers wants and needs, according to sector expert Echo Managed Services.


"The UKCSI report shows just how far the water industry has to travel to meet the standards set out by Ofwat in its plans for the 2019 price review. The sector has long languished towards the bottom of these performance tables and (despite some encouraging progress – it was the 2nd most improved sector this time) still ranks third lowest, narrowly ahead of telecoms and transport."

Monica Mackintosh, customer services director, Echo Managed Services

That’s not to say that it’s all bad news for the water sector. Encouragingly, four water companies achieved a UK CSI score above the National average and six water companies were among the UK’s twenty most improved organisations.

The report from The Institute of Customer Service places great emphasis on customer service staff and complaint handling as being the key differentiators between organisations with the best and worst customer service.

This backs up our own research about customer frustrations with their everyday service providers. In competitive utility markets, a study of 1,000 customers found that poor service was the reason for switching for 33% of people. Poor complaint handling also scored highly with 18% of people having switched for this reason.

Until the opening up of a competitive market for domestic water services, such frustrations may be invisible to water companies unless they actively seek them out. Ofwat appears determined to force the situation, however, in order to get water companies ‘competition-ready’ regardless of the actual timetable for the market to be opened.

Our research also suggests water companies need to look to their wider corporate reputation in order to satisfy customers.

In addition to price and service, we found that a significant number of consumers want an ‘ethical’ provider. 12% of consumers would actively seek to switch to providers that offer ethical alternatives, i.e. greater use of renewable energy or efforts to reduce water leakages or pollution of open water areas. 6% also said that they would consider switching if a supplier became tainted by scandal, i.e. was subject to fines from a regulator.


"Therefore in line with Ofwat’s PR19 vision for great customer service, it’s clear that water companies need to become stronger in actively listening to their customers to better understand levels of satisfaction and how they can work to improve reputation. To do this they will need to look to learn from outside the sector and increase their proactivity and flexibility."

Monica Mackintosh, customer services director, Echo Managed Services

While water companies have, until now, been able to offer a largely one-size-fits-all approach to billing and customer engagement, this will cease to be the case. All of our studies and experiences show that customers have an increasingly wide variety of needs, interests and preferences.

We live in an ‘on-demand’ society where people expect businesses to fit around them not the other way round. This will be a major factor for one of the few remaining monopoly sectors to embrace.

However, the lessons are out there. By taking an outward-looking approach and investing in best practice from other sectors, water companies have a chance to avoid the current challenges faced by the energy sector, for whom an open market has not necessarily led to universally greater customer satisfaction.

Planning needs to begin immediately for water companies. Ofwat has set the bar high and the sector needs to make the step change required in order to foster customer loyalty and advocacy.

Ends.

Suggested Further Reading

Knowledge Centre: Research

Retaining Customers in a World of Choice

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