Water Industry Research Carried Out By DJS Reveals Divisions in Customer Management Tactics
The Water Bill and the continued significance of the service incentive mechanism (SIM) are two of the main drivers for water companies considering their approach to, and investment in, managing customer contact. Yet despite being driven by the same factors, there are indications of divergence in the water industry as companies take varying approaches to customer service success.
That is the conclusion of research commissioned by Echo Managed Services and conducted independently by DJS Research. The research explored how the UK water industry is preparing for the future requirements of customer service. Fourteen in-depth telephone interviews were conducted with specialists from a variety of disciplines within the industry, including customer service, information systems, strategy and billing.
All water companies were found to have the same goals for managing their customer contact: to be more efficient, reduce unwanted and repeat contacts and improve the way they communicate. For a number of companies it's been about increasing the number of communication channels they offer. Ten out of the 14 respondents indicated that they are now using social media to communicate with customers (chart 3, Social media), with eight out of those ten feeling it had been used successfully. Nine out of 14 are offering web self-service as a channel, although only five of those indicated that transactions are updated automatically in their billing system .
Increasing the number of customer channels you offer requires investment, and there are some indications in the research that the smaller companies can find this challenging, particularly when the returns are not always immediately visible. Instead they are keeping a watching brief on technology trends so that when they do make their investment it is in the right area. When asked if social media was a tool they were currently using to communicate with customers, one water only company said: "We will be watching closely what happens. When will it come to the forefront? I don't see it in the next two years as being part of our strategy."
There may be merit in this approach but, with the advent of competition, "wait and see" could become "left behind". Those currently debating whether to embrace social media should not wait too long before deciding whether to join the conversation as others forge ahead and hone the sophistication of their offering.
A good example of this is web self-service. There is evidence in the research to suggest that those who were early adopters of web self-service technology a few years ago are now starting to realise the results - both financial and in terms of reduction in contacts. Comments included: "It works, it's reducing calls in, we are continuing to reduce the number of complaints about billing, etc."
The industry also appears to be divided on its approach to other, alternative contact channels such as SMS and web chat. Just over half of our respondents use such channels (chart 4, Other contact channels). SMS is the most popular alternative channel and it is primarily used for specific outbound communications relating to debt and operational issues.
Respondents expressed a variety of concerns regarding the introduction of expanded retail competition, including losing customers, uncertainty about what will happen and whether their billing system will support competition (chart 1, Main challenges of retail competition). One commented: "We don't know what the rules are going to be yet, so until we know it's hard to make provision."
When it came to functionality of the billing system, consolidated billing and multi-tariff capabilities were deemed most important (chart 2, Functional capabilities required for a billing system that is ready for retail competition). "It's going to be about the capability for simple itemised billing across multiple sites," said one contributor.
We are now starting to see indications of divergence in the market. Some water companies are choosing not to wait for the market to be fully defined before commencing preparation for the introduction of competition. Instead they have taken steps based on what they believe the market could look like. Many of the larger water and sewerage companies have already made good progress on developing their retail companies, with most already having a website outlining the services they can provide to business customers, advice on water efficiency and so on. One respondent commented: "We've recently acquired a licence to operate in Scotland as a retail company, and there's work ongoing to start to put some energy into going out there."
On the other hand several are choosing not to compete actively and acquire customers. Whatever the strategy, having the right infrastructure in place to support that strategy is essential. For example, when it comes to having a billing system that is ready for competition, many respondents indicated that this would be an area where substantial investment was required - some indicating that two billing systems may be required: "Arguably you need two billing systems because you need a billing system for the wholesale company... and you need a billing system for the retail business to bill its retail customers and also to pay the wholesaler for those services that you've received from the wholesaler."
Monica Mackintosh, business and product development director for Echo, comments: "We believe that the window for water companies to get operations and systems ready is now open, and indeed several companies are now engaging with suppliers and considering the prospect of segmenting their customer base."
So is this divergence in approach having a service impact yet? According to the SIM Survey Annual Report 2012/13 there are big and small companies at both ends of the league table, so it is still unclear which approach will be successful. Water-only companies continue to perform better than water and sewerage companies when it comes to overall satisfaction with query handling. However, the gap is shrinking, so perhaps the investment larger firms are making is starting to pay off.
Most contacts received via alternative contact methods are not currently integrated with core billing systems so the challenge for water companies is that from a regulatory perspective these contacts are likely to be included in SIM in the near future.
In addition, some of those companies you could expect to compete proactively for customers are currently positioned towards the bottom of the SIM league table. The question is, will this affect their ability to win and retain business customers? And will we see those who do focus on winning business customers move up or down the SIM league table in future?
This article first appeared in Utility Week's print edition of 20th September July 2013. Rob Stait is head of business development and marketing at Echo Managed Services and authored this article. Ali Sims leads utilities market research for DJS Research Ltd.
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