Turning on the digital taps

Improving customer service in the water sector 

A recent green paper on consumer policy from the Department for Business, Energy and Industrial Strategy (BEIS) has increased pressure on all companies, particularly regulated operators, to improve levels of customer satisfaction. Regulators need to fundamentally change firms’ incentives to provide better service, the paper says. To that end, BEIS is looking at how companies can harness evolving digital technologies and data-handling capabilities.

In the water sector, the regulator, Ofwat, has developed a range of incentives over the years to raise service standards. More than ever, companies are being encouraged to engage proactively with their customers. We explore how new communication channels can help water suppliers to provide first-rate customer service. 

Incentives improve services

Ofwat introduced the Service Incentive Mechanism (SIM) in April 2010. SIM was used to monitor companies’ relative customer service performance and was made up of two elements:

  • Research into satisfaction levels based on surveys of customers who had recently contacted their water company
  • An assessment of the number of complaints lodged, with escalated complaints receiving a progressively higher weighting.

The initiative appeared to be successful. SIM scores improved markedly over time, and the industry converged on a higher level of service, as shown in the chart below.

Source: CMA analysis based on Ofwat data, CMA Pennon / Bournemouth merger inquiry

However, SIM had a number of limitations. For a start, it focused entirely on the service to customers who had already contacted the water company. It did not therefore provide a direct incentive for firms to actively engage with consumers or to improve general satisfaction levels. The way SIM was measured also became outdated, as it failed to take into account the digital revolution and the spread of new communications channels.

Ofwat’s new approach - C-MeX

Ofwat has recognised these shortcomings and plans to introduce a new incentive mechanism called the Customer Measure of Experience, or C-MeX. The main elements of C-MeX are:

  • As well as gauging customers’ satisfaction after they have contacted their water company to raise an issue, C-MeX will include an “experience survey” of a random set of consumers who may not have been in touch with the company. This should provide a broader overview of service standards and serve as an incentive for companies to take the initiative in dealing with customers.
  • Companies will need to provide at least five ways in which they can be contacted, including at least three online communication channels. This should ensure that C-MeX incorporates the views of customers who prefer to use options such as web chat.
  • Water suppliers’ results will be compared to those of other sectors, and they will be financially rewarded if they stack up particularly well. This should spur the industry to innovate, leading to higher levels of performance and customer service.

In short, C-MeX aims to better capture new ways of communicating and to encourage companies to engage more effectively with all of their customers.

How can companies improve customer service?

Like other utilities, water companies have found it difficult to get the attention of many of their customers. The view expressed time and again in focus groups is that people take their water supply for granted: if it’s working normally, they have no reason to think about it. Only when something goes wrong do they sit up and take notice. But there are a number of reasons why this may change.

  • Younger customers prefer to communicate by smartphone or the internet and are comfortable with data-heavy content, provided it is packaged in the right way. Adapting to changing habits is a challenge for companies but also an opportunity to communicate more effectively.For example, they have an opportunity to nudge customers to reduce water use and prevent sewer blockages, helping companies to meet the challenge from demographic and environmental pressures
  • The public increasingly expects companies to protect the more vulnerable members of society. Digital technology can help water companies do just that. They can identify priority customers and provide them with targeted services and information. For example, real-time updates when repairs are being carried out in their area, particularly if they are waiting for an engineer to come to their house.

Harnessing new technologies is a means for water companies to operate more efficiently, improve the service they provide and get closer to their customers. This, in turn, should lead to higher levels of satisfaction and perhaps a greater appreciation of the work that water companies do.