From SIM to C-MeX: New customer service challenges ahead for the water sector Kier Utilities Kier Water
Contents White paper author:... 3 White paper objectives:... 3 From SIM to C-MeX New Customer Service challenges ahead for the water sector.4 Introduction... 4 The Great unknown... 4 National Survey... 4 The Results... 5 Regional differences... 6 The Good... 7 The Bad Cost & Value for Money... 8 Other drivers for dissatisfaction... 9 Experience or Loyalty? Is NPS the right measure?... 9 Confirmation that Ofwat has got its priorities right... 9 Summary... 9 Is there a formula for C-MeX success?... 11 2
White paper author: Ben Bax Customer Services Director, Kier Utilities Ben Bax is a Customer Service Director at Kier and has over 20 years experience. Ben s work has predominantly focussed on the utility sector but has also worked with clients to improve their customer's experiences in housing maintenance, facilities management, rail and environmental services sectors. Ben has a proven track record in improving customer service in operational and technical environments and is a specialist in driving customer centric cultures through behavioural change and process improvement. He stands passionately by his principal that customer service isn t a function but an accountability that everyone in an organisation must deliver. In his current role for Kier Utilities, Ben leads customer service and works closely with Chief Customer Officers and Directors within Kier s utility clients to ensure that customer challenges are approached in a strategic and collaborative manner. Foreword: As one of the market leaders in delivering customer service in the water sector Kier was keen to look at the effect the introduction by Ofwat of the Customer Measure of Experience (C-MeX) as a new measure of customer experience would have on the water industry. Under C-MeX, up to 12% of residential retail values will be at stake. With such large incentives available for the best performing water companies or penalties being charged for the poorest performing water companies we commissioned our own research to understand consumers perceptions of their water supply. Using a TLF Panel www.tlfresearch.com, we surveyed two thousand consumers to understand how they viewed their water company and what sort of results Ofwat s survey might yield given the focus on both customers who have contacted their water company but also a sample of those who have not made direct contact with their water company. This paper sets out to summarise our findings, establish any trends that could inform future strategies and provide recommendations to water companies to enable them to successfully implement the C-MeX measures into their business. 3
From SIM to C-MeX New customer service challenges ahead for the water sector Introduction When Ofwat introduced the Service Incentive Mechanism (SIM) in 2010, it was arguably the biggest change in the industry since privatisation. There is no denying that SIM has brought a dramatic shift in customer focus right across the industry. However, it is generally believed that SIM has come to the end of its useful life and that a fresh approach to customer service measurement is needed. The C-MeX that Ofwat will be introducing fully next year, will consist of two surveys, aimed at two different groups of customers. These will be: the Customer Experience Survey, much like the current SIM survey where customers have contacted their water company to raise an issue the Customer Perception Survey that will test the satisfaction levels of the general customer base that have had no need to contact their water company, recently or indeed ever. The Great Unknown The challenges of the SIM survey are now well understood, with speed of response and pro-active customer communication being two of the key drivers for customer satisfaction. However, as an industry we don t yet know how the silent majority of water customers feel about their water supplier. So, when Ofwat starts the C-MeX pilot, how will customers respond when asked how satisfied they are with their water company? What will the key drivers for satisfaction and dissatisfaction be for those customers that have made no contact with their water company? National Survey At Kier, we were keen to find out how the new C-MeX measure would affect our clients and what the key challenges for the industry would be in achieving the best scores to secure a place at the top of the C-MeX table. We carried out a national survey of over 2,000 customers right across the UK, including those customers of water companies not regulated by Ofwat, such as Scotland and both sides of the Irish border. Customers were asked simply How satisfied are you with your water company? (on a scale of 1 to 10). In order to better understand the reasons for customer satisfaction, customers were also asked What is your water company good at? and What could your water company do better? As Ofwat is intending to use Net Promoter Score (NPS) as the basis for C-MeX, customers were also asked How likely are you to recommend your water company? 4
The Results Overall, the results for this survey are encouraging for the regulator and water companies alike. When asked How satisfied with your water company are you? the average score from our panel was 75%. If we compare this against the latest (Jan 18) UK Customer Satisfaction Index (UKCSI) this is broadly in line with the utilities sector score of 74.4 and is a little way behind the current overall UKCSI benchmark of 78.1. Ofwat is keen to compare the Water Companies customer satisfaction with leading out of sector organisations, using the UKCSI as a benchmark. The utilities sector is improving but is currently in the lower half of the UKCSI. Clearly there is work to do as an industry to achieve upper quartile performance but this result by no means suggests that the UK wide customer base as a whole is dissatisfied with the service provided by their water company today. The table below shows the average score from our survey to the question Overall, how satisfied are you with your water company? The names of the water companies have been kept anonymous however, the customers of Scottish Water, DC Welsh Water and Portsmouth Water were the most satisfied with scores of 8.0 and above. An interesting observation here is the scale of difference between the top performing company (8.5) and the lowest score (6.2). This is in stark contrast to the SIM table which had a difference of just.36 points from top to bottom. 8.5 8.5 Overall Water Company CSAT 8.0 8.0 8.0 7.8 7.7 7.7 7.7 7.6 7.6 7.6 7.6 7.5 7.5 7.5 7.5 7.4 7.4 7.4 7.3 7.1 7.0 6.9 6.6 6.5 6.5 6.2 6.0 5.5 (Data from responses of circa 2000 customers across the UK) 5
Regional differences Analysing the data from across the UK raised a couple of interesting questions about regional drivers for customer satisfaction. In the sentiment analysis, customers from both Yorkshire Water, Scottish Water and Welsh Water, were most complimentary and proud of clean and fresh water supplies, with some believing that they had better quality drinking water than the rest of the UK. Illustrated by quotes such as Providing the best tasting tap water in Britain from a Scottish Water customer, and Supplying me with the best tasting water in England from a customer of Yorkshire Water. So, do these customers really enjoy a better standard of drinking water? Or are these perceived differences based on regional pride or the marketing provided to customers within those regions? The strong and consistent compliance results reported by the Drinking Water Inspectorate (DWI) (England & Wales 99.96%, Scotland 99.91%, Northern Ireland 99.86% - July 2017) right across the UK, could suggest that more is at play here. Are those customers really experiencing higher water quality than other customers or are the customers quoted above simply more bought into the regional nature of their water provider and the messages it has provided? This suggests that how water companies market themselves to their customers could be hugely important in terms of achieving a high score under the C-MeX measure. There were other regional differences in opinion linked to charging mechanisms. For example, customers from both Scottish Water and Northern Ireland Water were positive about the low cost of water, with some customers believing that their water is free. My water is still free says one Northern Ireland Water customer, whilst a Scottish Water Customer comments water Being free is the best thing about his water supply. This could lead us to conclude that customers overall satisfaction with their water company is increased when they do not directly pay a bill to their water supplier No surprises? In some regards, an initial glance at the data provides predictable results, with provisions of basic water and sewerage services ranking at the top of the majority of customers priorities. There were also many specific comments about drinking water quality and a clean or fresh supply. Whilst it s no surprise that provision of high quality, reliable, useable water and sewerage services is the biggest driver for both satisfied and dissatisfied customers, if we dig a little deeper the results do get more interesting. One point worth noting is that from the comments provided in this survey, there is far more awareness and understanding of drinking water supply as a service than there is of the waste water network. Less than 1% of all customer comments reference waste water or sewerage in any way. This could be a case of out of sight and out of mind for many customers but this could suggest that as an industry we still have a long way to go in terms of educating customers about what happens to water once it disappears from our toilets, showers, sinks and baths. 6
The Good The chart below shows that beyond the provision of a high quality reliable water supply, as discussed above, the highest drivers for customer satisfaction in our survey were fixing problems & responding to emergencies, customer service and having never experienced a problem. This further reinforces that what water company customers are looking for is the basic service they pay for, delivered in a hassle-free way. When things go wrong, either with billing issues or operational problems, customers appreciate it if the resolution is delivered both swiftly and in a courteous manner. It is interesting that customers (10%) appear to value having never had a problem with their water supply or bill. Another 10% of customers also state that the level of customer service that they have received is one of the things their water company does well. Whilst this is positive, it does indicate that customer expectations with regards to service are still increasing. One surprise was that there are a good number of customers who believe that their water company provides good value for money and quote this as a driver for their level of customer satisfaction. Whilst this is encouraging, it is worth noting that cost / value for money is also overwhelmingly the biggest driver for customer dissatisfaction (see next section). It is also worth noting a significant number of customers recognised that their water company was good at keeping them informed and cited this as a driver for customer satisfaction. This means that proactive communication with customers will remain a key area of focus for customers under the new C-MeX measure. 7
The Bad Cost & Value for Money Perhaps it s not a surprise, but by some margin the cost of water and the perceived value for money of those bills is by far and away the biggest driver for customer dissatisfaction, with 38% of customers citing this as an issue in our survey. Great expectations? Do customers want Amazon levels of service? Interestingly, 13% of customers expressing dissatisfaction with their water company knew that they weren t completely satisfied but didn t know what it was that their water company could do better, with 10% stating that there was nothing their water company could do to improve their score. Partly, one could argue this is about needing to engage more with customers. However, this could be a reflection on the level of interest that customers take in the sector. As one customer says I did not rate them higher simply because water is water. I do not think about the supplier. If they want at higher mark they need to do something positive to make me notice them. This hints at the scale of the challenge for water companies in delighting their customers. Many customers take their supply for granted and don t view it as an exciting transaction in the same way as they do when say, ordering a parcel from Amazon. This is important when considering Ofwat s intention under C-MeX to compare water companies with the leading organisations in the UK using the UKCSI. There is evidence here to suggest that customers don t necessarily have the same expectations from their water company as they do from the likes of the best performing retailers. Drivers for Dissatisfaction: "What could your water company do better?" Customer Service Other Basic Service Water / Sewerage (inc. Reliability) Billing Communications / Customers Kept Informed Cost / Value For Money Water Quality Taste / Clean / Fresh Nothing Fixing Problems / Restoring Supplies / Responding to Emergencies Don't Know 8
Other drivers for dissatisfaction Apart from the cost of bills and customers not knowing or not caring what it is their company could do better, what else do customers want water suppliers to improve in the future? 12% of the customers commented that their water company needed to be better at fixing problems & responding to emergencies. Water quality issues (5%), keeping Customers informed (5%) and getting the basic service right (4%) are also key drivers for customers who were less than completely satisfied with their water company. Experience or Loyalty? Ofwat has elected to use Net Promoter Score (NPS) as the measurement for the C-MeX pilot starting in April 2018. In our survey, we also included an NPS question to understand if there is any difference in the score between NPS and a question focussed more on experience than loyalty. Interestingly, in every single case, the water company NPS score was lower than the overall satisfaction score. (NB: Based solely on responses out of ten to the question How likely are you to recommend your water company? rather than NPS calculations.) Whilst there are some changes in the ordering of the rank by company between the NPS and the CSAT questions, the overall results are broadly comparable. Ofwat is making huge leaps forward with C-MeX. However, C-MeX is short for the Customer Measure of Experience, not Customer Measure of Loyalty and it will be interesting to see the results of the first pilot. The observation here is that by asking customer s a question based on likelihood to recommend when they have no choice of provider may promote more negative responses than a question based purely on customer experience. Confirmation that Ofwat has got its priorities right Ofwat has cited affordability, resilience, customer service and innovation as its four key priorities for AMP7. It is also pushing for greater levels of customer engagement in order to help build trust and confidence in the sector from customers and wider society. The feedback from customers in this survey suggest that Ofwat is spot on with these themes. Cost and value for money is the biggest driver for dissatisfaction here and providing a reliable basic service (resilience) features as a key driver for both satisfied and dissatisfied customers. Customer service is key to customers when things go wrong. Whilst only very small numbers of customers in this survey talk about innovation and customer engagement explicitly, we wouldn t necessarily expect customers to think in those terms. If companies are to succeed during AMP7, then deeper engagement with their customers and innovating to meet their needs to become an essential part of the business model. 9
Summary The purpose of this survey was, with the shift away from SIM to C-MeX being imminent, to try and gauge public perception of water companies and establish any trends that could inform future strategies and meet the challenges ahead. So, what can we conclude? Overall, the results are encouraging. As an industry, the overall satisfaction result of 75% CSAT represents a good base to build from. Indeed, this arguably contradicts the misconception from some quarters that large numbers of water customers are dissatisfied and in support of renationalising the water industry. From the results we have here, it is clear however that customers want a high quality, reliable water and sewerage service. It is also clear that when things go wrong, it is important to customers that things are repaired quickly and efficiently and that they are pro-actively kept informed. This means that water companies need to think hard about how they set themselves up to respond to operational issues under the C-MeX regime. Arguably, with many of these services outsourced, contractors have a large role to play here and could be the difference between success and failure under C-MeX. Contractors often act as the face of the water company. With the perception survey, a customer s last interaction or experience of their water company will be hugely important and this could easily be of a contractor or work site that the customer passes as they go about their daily business. With the transition from AMP6 to AMP7 approaching, water companies have a good opportunity when reletting service contracts to ensure that the incentives for delivering customer service are appropriate and that their contractors customer service capability is tested robustly during any tendering processes. It will also be important for water companies to structure their customer experience performance data properly so that they can ensure they have the management information required to drive improvements across all areas of their business. Simply replicating the regulatory measures will not provide the right level of detail going forward. Cost and value for money are also key drivers for customers both in terms of dissatisfaction where customers believe their bills are too high but also a key driver for satisfaction where customers recognise the value of the service they receive. There are also some regional differences in the data that we have gathered. This could represent an opportunity for other water companies to engage more with their customer base and build that same sense of pride and community elsewhere across the industry. A final observation for us all is that from being inside the industry it s easy to overestimate the level of understanding and interest in the sector and this needs consideration when aiming to benchmark water companies against those organisations at the top of the UKCSI. 10
Is there a formula for C-MeX success? It will be interesting to see if those companies performing well in the SIM measure will also be at the head of the pack in the new C-MeX measure. However, if the results of this survey are anything to go by, the following will be key: You re only as good as your last interaction or customer experience. Customers want a reliable, hassle free service. Field operations are highly visible and will have impact - swift, right first-time resolutions are vital. Quality customer service and proactive communication remains important to customers. Cost of bills and perceived value for money cannot be ignored. 11
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