Severn Trent’s Managing Director Business Services, Andy Smith expounded his vision of a retail water sector committed to exceptional customer service before an influential audience at the Water Event, NEC 16-17 September 2014.

What a difference a year makes – times in the water industry are changing, there can be no doubt about that.

We meet this year under very different circumstances to last, with the Water Act in place and a firm timetable for full opening of the competitive water retail market in April 2017. It would not be going too far to say there is a new reality, to which we must adapt. And that new reality is very good news for customers, and customer service.

The early changes are already happening – with the threshold reduced to 5ML per year, 26,000 businesses are now able to switch water supplier. When the market opens fully in April 2017, the numbers eligible to switch will soar to around a million customers. The market value is estimated at £2.5 Billion, and as the experience in Scotland has already showed, the potential for both customers and suppliers to benefit is enormous.

The market will undoubtedly do more than change the basic mechanisms for deciding on a supplier. It should – it must –drive a greatly increased emphasis on customer service, and as a result it will transform the companies that provide these services.

We know we have to change, and ST have been actively planning and initiating change for some time, we want customers to reap the benefits of this new market, sooner rather than later.  I’ve spent the last ten years running Severn Trent Water’s drinking water business prior to that I’ve worked for a variety of companies.

Our commitment to this is underlined by my own appointment, as Managing Director, Business Services  –  and in every case customer service was a number one priority.

"Customers simply cannot be taken for granted"

My experience has taken me into some of the biggest, most heavily scrutinised sectors in the world, where customers simply cannot be taken for granted and customer service is constantly evolving and improving – we have to put customers at the heart of what we do, and any business that forgets that won't last very long. Suppliers entering the competitive retail market have to take that message on board.

Our Group has already established its customer service credentials through projects, such as our work with the MOD across the north and east of England. This contract is worth some £1 Billion in total revenues and under this we are responsible for all water and wastewater management and treatment at over 1500 sites.

The contract was the first major PPP in the UK water sector, a significant project covering the entire country and outside the regulated water industry. It provides a high quality, end-to-end service including leak detection and asset management.  We deliver continuous service improvements with a focus on sustainability and safe partnering.

And as part of this in 2009 we met the Government target of cutting water consumption by 25% by the year 2020 a decade ahead of schedule. We improved security of supply, compliance with DWI standards, and water provision.

MOD contract invaluable in delivering industry best practice

This contract has been invaluable in developing industry best practice, and above all in delivering and tailoring services to match what the customer needs. It enables the MOD to focus on its core activity, whilst we take care of water management, a message we have taken with us in our services for other customers.

Today we provide water and wastewater services and operating facilities at 400 municipal locations throughout the US, have a global presence with a further 1000 non-US wastewater facilities;  we provide water and wastewater services to over 15 million people worldwide, and we have an expanding range of products and services that are in use around the globe.

We - and the industry as a whole - have come a long way since 1989, when our industry was privatised. Before then, there were ten regional water authorities funded through revenue from customers and public finances, and 29 statutory water-only companies.

At this time customers basically got what they were given, although if you look at the press of the time you can see there was support for the water authorities - even during the major drought of 1976, one of the few times when standpipes have actually been used in the UK. You may recall we were all told to ‘take a bath with a friend’ and the environmentally conscious among us happily obliged, purely for altruistic reasons of course.

Post-privatisation, there have been huge improvements right across the industry. There has been massive capital investment in infrastructure – over £110 billion of private capital so far - and customers now enjoy nearly 100% compliance with drinking water and environmental standards, as well as improved customer service.

However one thing that has not improved, disappointingly, is customer perceptions of the service we provide.  This has been soured by issues such as leakage, flooding and rising bills. This began with post-privatisation disillusionment – people viewing water as a commodity for the first time - and has gathered pace, fuelled by climate change and the culture of increased customer expectations shaped by other sectors - notably retail - as well as on-going infrastructure challenges. These issues are particularly toxic in a competitive retail environment, and need to be addressed in new and much more creative ways.

Water industry needs to act on what it has seen and learnt from other sectors

Going forward, we have to take more than one leaf out of the retail customer services book. It is a given that we will need to get regulation right, and avoid the challenges of lack of transparency legitimacy and credibility that surround the banking, power and telecoms sectors – tariffs so complicated that it’s impossible to understand them, perceived high profits, and broken regulatory systems.   We need to act on what we have seen and learnt from other sectors so that all of these issues need to be fixed urgently, and must not be allowed to take root in the retail water industry.

This will require, among other substantive changes, exceptional customer service. In Scotland, competition has driven delivery of innovative customer service, and customer satisfaction has increased by 25% in the first five years. To replicate this south of the border we will have to transfer the lessons we have learned in that early market and landmark contracts such as our MOD project, and develop them for the market in England.

Radical change of culture needed

One of the keys to achieving this success will be a radical change of culture. The water industry has traditionally been asset focused. ‘Concrete and Pipes ‘R Us’, you might say. We have got the engineering right: we have delivered operational success. Our rivers and seas are cleaner than at any time since the industrial revolution. We are rightly proud of this record, but it is no longer enough.

As an industry, we have to move on. Good infrastructure is now taken for granted, and rightly so - customers shouldn’t be marveling that we got the basics right. The step-change in customer expectations in the new age of competition has shifted the emphasis firmly towards service, and in the new service economy it is necessary to go well beyond the concrete, plastic and steel. There is a real change of emphasis under way that the industry must take on board.

So what of the future? We will need to measure up to standards that have been set outside of the water sector. The new benchmark is retail, and the obsessive focus on the entire customer experience that you find throughout that sector. I can tell you that keen attention to what customers are saying, to understanding what they say they need and anticipating what they will need next, is a vital element of business success.

What lessons can we learn? Above all, customers must find us easy to do business with – which means a single bill, a single point of contact, and proactive communication. It means a focus on people rather than process. Our response has to be warm – we have to listen to what our customers are saying and empathise with them. We have to be open and transparent. We have to deliver resilience and sustainable solutions. We also have to occasionally surprise our customers (in a good way) with a service that is exemplary and customised to their needs. Above all, we have to tell customers what we intend to do, and do it.

I recently bought a phone from a big supermarket retailer, they said the would deliver it to store for me to collect ~ they didn’t.  I phoned and the lady said she would arrange delivery.  The delivery firm sent me a text telling me the day and offering alternatives.  They offered me the chance to explain where to leave the parcel if I wasn’t in.  They then sent me a text saying the hour slot it would be delivered. Excellent.  They even told me it would be Paul who delivered it. 

That was interesting, why did they bother?  I don’t know Paul or even it was Paul who actually delivered it.  They told me because it makes it personal to me and importantly him.  As I said loads to go at in utilities.

We will have to evolve – transform - from being ‘utilities’ – providers of water and wastewater networks and treatment - to ‘service organisations’, which means developing the skills of our people to enhance the customer experience.

There are many lessons from retail – not all will apply to water, but many do. We have to look at the lessons from companies like Amazon, which has regularly headed the American Customer Satisfaction Index. CEO Jeff Bezos believes every employee must be able to understand customers and their needs. He speaks of being ‘customer obsessed’. He believes in Henry Ford’s adage – the customer pays your wages, and changing the focus from make ourselves better to making our customers more successful. In fact, Bezos famously leaves an empty chair at boardroom meetings as a reminder of the real boss – the customer.

This is a practice we have adopted – we have ‘Sam’, who sits at our executive table to represent the customer. It is an excellent way to ensure we focus on who is most important to our business.

The lessons are critical: every decision we make should take the customer into account. We must not be satisfied till our customers are 100% satisfied. As Bezos says, we have to focus on what is going to be good for our customers. And we have to base this on what they tell us they want.

Looking at other major retailers with acknowledged success, such as John Lewis, there are some universal lessons – getting staff care about customer service, empowering them to make decisions, making sure feedback on what customers want is taken into account, from the top to the bottom of the company. Know your stuff – be exceptional.

Role of utilities is shifting

The role of utilities is also shifting - companies will need to develop new business directions to complement their core (brand diversification). Utilities are already moving in this direction –some of the larger companies offer service agreements that extend beyond the utility they provide, for example power companies that offer insurance cover for plumbing and drains.

So what can water retail companies do in terms of diversification? We can provide enhanced reliability and resilience, create efficiency programmes, and undertake water management. In short, we must create opportunities to diversify the way we interact with customers to deliver added value.

This is important, because today’s consumers are used to an enhanced customer experience through a variety of media. The online generation use tablets and mobiles to communicate on the move – Customers expect fast and efficient online responses and transactions – they don’t always want to talk to a person, but they do want to be able to get the answers they need quickly.

Companies that fail to match expectations face adjudication online – social media is now the medium where complaints are made. If companies are not careful they can be defined by negative feedback, which spreads fast, and widely. Customers communicate with each other in a multitude of ways now and act as both judge and jury, so they will increasingly tell companies what they want as part of the digital dialogue.

This new customer service model encompasses ‘networked experts’ – peer-level feedback - and in-house expertise. If you go online at any time with a problem, any problem, you can find people who will provide advice. One intriguing change is that customers are now as likely, if not more so, to turn to the internet to find answers to problems as they are to contact their utility or a company directly. There are forums and peer groups that provide expert-level support on virtually every issue across every sector.  We need to participate in these forums.

This means pretty well every answer is out there in the Cloud including the meaning of life and the winner of the next Grand National, or so I hear. There are also apparently one or two photographs not intending for wide publication!  On a serious note ~ data integrity and protection is essential.  What suppliers need to provide is a wonderful ‘back office’ where all the answers to their customers’ main questions can be found online and an outstanding ‘front of house’ of tailored customer service with exemplary levels of expertise in each sector must be in place.

Retail water suppliers will need to have deep understanding of customer groups and segments

This new reality means retail water suppliers will need to have real flexibility and a deep understanding of customer groups and segments, in order to create the perfect blend of accessible digital channels and personal service.

How does this blend present itself in real life? Instances from other sectors would include air travel – most people are used to the concept of online check-in but when they reach the airport lounge, they expect and prefer a personal service.

Or you might find a great suit online - but if you want a perfect fit, you still need a tailor to customise your fit. If suppliers are efficient, the back office can take care of 90% of contacts automatically. If this does not happen, it will cost money that could be dedicated to those areas of importance which do need that exemplary personal service.

For the retail water sector, understanding the needs of each customer segment will be key. Every sector has its own, quite particular needs and aims, and even within sectors individual companies will have their own preferred approaches. We must respect the diversity of the customer base and their varying needs, and match our services to our customers.

We have to have an in-depth understanding of these needs to work productively with our customers, and give them the level of support they require.

So what does good service look like? An absolute baseline will be bills that are correct every time, and excellent value for money. Retail water margins may well be quite slim, so it is probable that cost – volumetric charges - will not be a major differentiator.

Instead, customers will choose suppliers based on the quality and suitability of the services they are offered, which will include call centres with empowerment; leak detection and water management; dedicated personnel that provide sector-specific, expert advice; consolidated, coherent billing; reduced costs and added value services that deliver for businesses’ sustainability strategies, CSR agendas and bottom lines.

Innovation will be key, regulation will have to be flexible

Innovation will be key. We must suggest strategies that help customers to cope with climate change, preserve the environment, minimise risks or that leverage renewable energy.

In summary, customers will expect standards to go up, and bills to be fair –  in AMP 6 all water utility bill increases are below inflation, and we must work to find ways to make this the norm wherever possible. We must work in partnership with customers to achieve sustainable solutions, rather than focusing on asset building.

Importantly, to achieve these ambitions, regulation will have to be flexible – it must not impede the development of the market.

Innovation must be a supplier led process, and the roles of Government and regulator are, respectively, to provide some fundamental R&D support and to create an incentive structure with the right balance of reward for assuming innovation risk. We see this as the way forward.

Great customer service ultimately entails delivering something that customers are delighted to pay for. Don’t expect cost to be the major differentiator, understanding customers and market segmentation are key to providing that exemplary bespoke experience that is required at the front end – a service matched to customer needs, rather than the tired, disliked one size fits all approach.

We have come a long way since privatisation in 1989. The first 25 years have seen a remarkable transformation of the industry, but the next 25 will make even more difference and be significantly more challenging, particularly in the face of climate change. Customers will expect us to be ready.