In an Expert Focus article for Waterbriefing, Chris Cullen, head of sales and marketing at specialist outsourcer Echo Managed Services discusses whether the Open Water market is set to kick-start a multi-utility revolution.

Chris Cullen: With the UK’s non-household water market now open, the landscape for suppliers has become much more competitive.

Incumbent companies as well as new entrants are being faced with potential opportunities, and threats, now businesses can choose their retail water provider.

By the end of the first week following market opening, nearly 9,000 businesses changed supplier, demonstrating the market disruption we can expect from the move to customer choice.

We have already seen a number of mergers, acquisitions and consolidations of existing businesses – and we fully expect to see more in the future – and the potential of businesses from the energy sector entering the market is the factor to keep an eye on.

Yu Water, a subsidiary of independent business energy supplier Yu Energy has recently applied for a licence while Regent Water, a subsidiary of Regent Gas has already been granted their licence to compete.

Discussions continue around the prospect of others entering the market, or partnering with incumbents, as suppliers consider expanding their dual fuel offering into a true multi-utility package.

Whether new entrants jump right into the retail water market, continue to monitor developments or even wait until the household market opens, which is a distinct possibility, the sector will likely look very different by the end of the year.

For energy companies looking to enter the market, there a number of key considerations to keep in mind:

Understanding individual water customers

There are undoubtedly exciting possibilities for companies who wish to enter the water retail sector, but like any market evolution there will inevitably be some barriers that need to be overcome and issues that will creep up.

With that in mind, understanding water customers and their individual requirements is vitally important and there is a significant challenge to be found in trying to understand and successfully meet the needs of such a varied customer base.

The requirements of smaller businesses are likely to differ from large corporates or multi-site businesses, and some customers might demand self-service options, data on their usage and efficiency indicators while others may put more weight into account management and customer service.

This is not to suggest that energy retailers are not already highly capable when it comes to segmenting their customers, but developing a deep understanding of the nuances of the water sector will be essential to add customer value and stand out in a competitive market.

Further challenge for both sectors may come from the General Data Protection Regulation (GDPR), and its possible future customer profiling rules. If, for example we arrive at a point where consumers need to consent to profiling that helps determine customer value and drives offers, that will clearly cause many additional challenges for companies.

Using and getting the most out of technology

New market entrants should not underestimate that billing water customers will bring fundamentally different challenges to those they face now and a water specific billing system, which they can integrate into their current solution, may need to be investigated so billing, a key customer touchpoint, remains accurate and reliable. In recent research, customers rated water companies higher than energy retailers when it came to how well their bills and billing processes are handled, so new entrants would be advised to prioritise effective billing systems and processes.

Of course, businesses will also need systems in place that equip them with the tools they need to provide added value to customers, and it is vital that any billing solution can interact with the market operator and enable consolidated and multi-site billing.

This is particularly important considering research we recently commissioned which found that 45% of consumers would consider switching suppliers if they experienced problems with bills.

Systems should also be able to provide insightful customer data that can be used to assist the customer service function of a business and ensure continuous service improvement and product innovation.

Striking the balance between technology and the human touch

While technology plays a much bigger role in customer service than in previous years, retailers must maintain a consistently high level of service across multiple channels, including online and offline, if they are to provide a well-rounded offering that satisfies customers.

Like billing, this is not an issue energy companies will be unfamiliar with and most will without doubt already be striving to provide an efficient level of customer service. However, it is essential that customer service teams build a professional level of water sector knowledge so they are able to provide the level of service required.

Ensuring teams have the experience to handle water, sewerage, metering and billing and charges contacts efficiently and effectively will be a key part of a market entrant’s business plan, and is something they must get right from day one.

As operating margins are expected to be extremely tight, ensuring this is done at a low cost is essential, so businesses should investigate the best use of technology to streamline services while ensuring they maintain a certain level of human contact for customers seeking assistance.

The wholesale/retail relationship

Avoiding disruption in the customer journey will be a key issue to tackle during early trading in a competitive market, and developing strong relationships between retailers and wholesalers will be critical in ensuring that happens.

In the new market, it is not unlikely that customers may become confused about who they need to contact if they experience a service problem like low water pressure or inconsistencies with meter readings.

Retailers must ensure they have a robust communications strategy in place with their wholesaler to avoid confusion and make sure focus remains on the customer at all times.

Failing to open clear paths of engagement is likely to cause customers to look elsewhere if they feel they are not receiving the service level they expect, and once gone, it could be difficult to get them back.

The debt challenge

Another issue to consider is one of debt, which is a challenge in most industry sectors. While incumbent water companies may fully grasp the issues associated with water debt, newer entrants may not and this is something they must quickly overcome.

In a market with low margins, retailers could easily run into cash flow problems if they incur debt from non-paying customers. It will be vital for retailers to weigh up which new customers to accept through accurate customer profiling, keeping in mind that wholesalers must be paid for the water they provide, no matter what.

Retailers could decide not to take on customers in bad debt, or put their focus on intervening early to ensure debt issues are dealt with promptly and are not allowed to escalate.

Unlike the wider energy market, where pre-payment meters can be fitted to ensure services are paid for, water retailers are not able to employ this non-payment sanction, meaning cost-effective collections approaches will be needed which are balanced alongside customer retention strategies.

The water sector is heading into an exciting period during the next few months as suppliers and customers become accustomed to the competitive nature of the new market and undoubtedly the sector will continue to evolve as it matures.

Energy companies investigating whether to enter the water retail market should recognise the importance of remaining agile in a fast evolving and ever developing marketplace and ensure they truly understand the nuances of water customer service before dipping their toes into the sector.