Special feature: Water

Since that time, businesses north of the border, from corner shops to industrial conglomerates, have been able to choose their supplier, regardless of water consumption levels.

On April 1 next year, all businesses in England will have the same option, putting them on an equal footing with the largest corporate counterparts.

Sector restructuring has in large measure delivered the tangibles set out in the original text book blueprint. The Scottish experience has ticked boxes in technical innovations – including automatic metering, tariff options, tailored service availability, advisory capacities and convenient online customer account self-management for small and medium-sized (SME) customer enterprises. Here, both newly founded Scottish operations and established English-based service companies have thrown their offer into the competitive non-domestic supply marketplace.

Meanwhile the pre-2008 incumbent Business Stream, part of the publicly-owned Scottish Water group, has necessarily altered course in response, retaining its position as the largest provider in Scotland with 50% of the market, split roughly 50-50 between corporate and SME.

And as English business consumers await their new choices, Scottish and indigenous suppliers with Scottish presence are assessing the market with a view to applying all of the knowledge gained during almost a decade of exposure to commercial demands. Business Stream, for example, has bought the non-domestic customer base of Southern Water, the south-coast utility. It means that in April it becomes the UK’s third largest water business. Choice, coupled to the ongoing option to switch – and with claimed ease – is a major driver of attitudes.

One overarching fundament is therefore king: client satisfaction.

That one remains a work in progress, according to one respected independent customer service index. Standards are rising, complaints are moving downward and customer collaboration increasingly appears to be welcomed, however. Building customer rapport is the new tactic towards creating enduring profitable relationships.

Service attracts gushing praise: Raising customer satisfaction levels in the water industry is becoming an increasingly complex business. By Ken Mann

Back in 2008, before the supply of Scottish water and waste water services supply to commercial premises was opened up to competition, and even for a time after that, Business Stream – a component of the publicly-owned Scottish Water group – had a grip on the commercial customer base, from Gretna Green to John O’Groats.

Today only half of that market is accounted for within its portfolio, yet it remains Scotland’s biggest non-domestic water supplier – one boasting a new position of power, partly as a response to ongoing legislative change.

Imminent English deregulation and a strategic acquisition south of the border that will almost double its future customer numbers account for some of its bullish stance.

But a deeper understanding of customer service is arguably an equal player in articulating the organisation’s strengths to prospective customers.

Customers’ perceptions of partnership and relationship building are now key for all who hope to succeed in this sector.

Mike Petrook, Director of Policy at the Institute of Customer Service (IoCS) in London, is well placed to comment on this rationale. IoCS analyses satisfaction across 13 industry sectors, utilities being one and water being a major element in this category.

Looking at the utilities as a whole Petrook notes: "What we’re finding is customer satisfaction is going up and it has gone up to its highest point for three years."

IoCS applies 35 different measures in its annual UK Customer Satisfaction Index, the 2016 version of which has just been published.

Is this scenario simply a reflection of frustrated customers lowering their expectations.

"I don’t think it is that," he says. "We’ve seen complaints levels fall but at the same time we have seen a number of organisations making greater effort to improve their customer service.

"Some of that has been about increasing the number of channels that consumers have in order to raise a complaint, some has been increasing the level of engagement their organisation has with customers.

"When people think of customer service they think of complaining. Wider research that we’ve done shows that 39 per cent of people actually engage with a particular brand in order to provide feedback.

"In other words, they’re saying: ‘If I buy from you I want to be involved in developing the product’. It’s not just people complaining, it’s actually getting involved and saying: ‘Think about this’.

"Go back five years or so and we were in what might be described as a transactional economy – want a product or service, pay for it, get it. I believe we’re now in the middle of what I’m calling a ‘relationship economy’. It’s not just about paying the money and getting a service.

"What brands are realising is they have to build a relationship in order to increase loyalty and trust. One thing that we’ve discovered from the latest piece of research is that being good (in the pure supply function) isn’t good enough anymore."

Petrook offers some statistical eye openers as evidence.

"If an organisation scores eight out of 10 for satisfaction people are 38 per cent likely to recommend that organisation. If however, they are scoring nine or 10 out of 10 for customer satisfaction, that recommendation goes from 38 per cent to 54per cent.

"In other words, there is a massive difference between being good and delivering excellence in customer service. Five years ago price was the dominant factor in people’s choices. Now it is about behaviours. Employee attitude, employee skills and employee competence.

"Because people are extremely busy, when we want to do something we want to make sure that it’s right first time.

"That means if I’m phoning to ask a question about my water bill I need to be confident that I’m going to get the right response. If I’m phoning to ask a question about changing the rate that I’m on, am I going to get the right level of advice?"

With further number crunching Petrook suggests only 26 per cent of utilities customers, domestic and business, are today swayed by price over behaviour.

"How easy an organisation is to do business with is an important factor. It is slightly down in the utilities sector compared to the national average (for all sectors).

On a 10 point scale, it’s 7.5 for the utilities sector compared to 7.9

for the all-sector average," he indicates.

"But there are other things in there, such as the helpfulness of staff. That’s a score of 7.8 for the utilities sector. So the suggestion is that they’re not doing badly. Three things are important: convenience, choice and value.

"It’s not an easy business, that’s for sure. But that is why getting it right first time is so important. One of the things I think is interesting is that in 70% of cases the sector does get it right first time."

The message of choice, convenience and value carries resonance with Kate Bremner, Business Stream’s Head of Commercial Development – with some caveats. It’s a month since her employer bought Sussex-based Southern Water’s non-domestic customer base, then launched new pricing into the business market in Scotland.

The English deal in one go will create the third biggest UK non-domestic water retailer and waste water services provider.

It will have a combined UK market share of 10%, giving the Scottish player a major foothold in an English market opening to competition on April 1 next year. Only the largest businesses in England have previously had the option to choose supplier.

It means up to 40 new jobs landing at Business Stream’s Edinburgh headquarters.

Bremner has no reason not to welcome competition.

"Absolutely," she agrees. "I joined the business before the market opened in Scotland and it’s brilliant to see the transformation that’s happened for customers – better service, improved pricing, more innovation in the market and with the opening-up of the English market next year we’re actually going to see that increase. What’s good for customers is good for us."

It might not always have seemed so.When predatory English suppliers saw an opportunity in Scotland’s now mature open water market, there were competitive concerns.

"When it wasn’t definite that the market was to open up down south it did feel unfair but we got on with it," remarks Bremner. "But with the market opening up in England the playing field is now much more level."

Not as level as she’d like, however. The margin may initially be less attractive.

"Scale is important," she adds. "Hence the reason for our Southern Water acquisition.

Size may matter in the financial analysis but, as IoCS’s Petrook implies, customer service standards are likely to count as being just as bankable.

In seeking to avoid a one size fits all label, Bremner reasons: "It all depends on the customer group. Different sizes and make-ups of customer look for different things. It’s about providing a tailored service back to them while doing it at a price that the customer sees as value.

"So, yes, price is important to the majority of our customers – but it is not the only thing.

"We offer 60 different services to our customers, ranging from consolidated billing to the best online account management portal in the market to clever AMR (automatic meter reading) technology that lets people track their consumption, through to big water and wastewater treatment projects. Offering a wider range of added value services comes into the mix as well."

She refutes any suggestion this seems only to favour high-spend corporate customers. "One of the biggest launches we’ve done over the past three months is a first-in-market online quoting and contracting tool," she says.

"Instead of a customer having someone turn up at their door or phone them they can do it all online." It is a method attractive to smaller business owner/managers.

In a mature Scottish competitive market customers are naturally conscious of their ability to switch supplier. Bremner takes a balanced view, having seen a return of some customers who had elected to try other service providers, lured there on price and curiosity.

"The grass isn’t always greener," she asserts. "Maybe some of the tariffs that competitors were offering weren’t as transparent as they initially appeared. Sometimes the customer service wasn’t great where they went.

"Also, I think having competition has naturally forced us to raise our game. Our prices are keener than they were two years ago, while the customer service and the range of online services we offer is continuing.

"People say you have to switch to get a better price. In the past year we’ve invested more in making sure that customers don’t have to. We’re being proactive." 

Choice sets a firm path for growth

English deregulation will reward Scots providers with new revenue opportunities – and raise the bar on customer service

Eight years on from deregulation and the non-domestic water and wastewater services market in Scotland is both mature and maturing.

Suppliers have entered the market with a variety of USP boasts to satisfy an increasingly sophisticated range of demands.

Director at Hamilton-based Clear Business Water (CBW) John O’Donnell suggests innovative internal infrastructure is at the root of his own company’s success.

"Information systems, people we can rely on to produce accurate billing systems, a customer portal that’s second to none – we have all of that back of house infrastructure that a lot of companies lack," he insists. "It’s one of our strongest USPs. We are ultimately backed by a multi-million organisation whose view is to build the business and expand it in Scotland – and with more than an eye on 2017 (English deregulation).

"When we came into the business, three and half years ago, Business Stream (Scottish Water’s commercial enterprise) still had 98.5 per cent of the market. The only other companies doing anything then were the English water suppliers who were more interested in attracting larger corporates.

"We capitalised on that (and) it made us a small business specialist in the water market."

CBW has switched more than 30,000 customers. "Broadly they are in the SME category, however we now have a corporate sales team who are making in-roads to larger accounts.

"We feel that more and more we are selling on quality – like our e-billing. Our meter readers use electronic technology. It is constantly communicating with the back office – it can detect a meter reading that is out of calibration with the last three or four readings."

Hugh Brown, sales director at 2013-established, Ayrshire headquartered Cobalt Water publicly announced a near 100 per cent satisfaction from a sampling survey conducted when the business was a mere two year old.

"Our clients were properly surveyed," he notes. "We’ve got just over 3,000 customer now. Our main focus has been in the populous areas of the central belt and up towards Aberdeen, Dundee and Perth. We do both SME and corporate," Brown responds. "When we started (we) very quickly acquired a number of large clients, those who spend a lot of money on water. But we realised we needed a cross-section. If you lose one (large customer) then all your eggs may be in the big market."

Another main claim, aside from an 18 per cent average saving, is the ease with which switching can be accomplished. "It’s very simple," says its SD.

"All we ask for is confirmation of the supply point ID. We pride ourselves in the fact that we don’t make mistakes. So we ask for sight of a customer’s recent bill. That clarifies. We’ve built reputation and trust. We’ve got about five per cent of the (Scottish) market.

"Because of deregulation in England next year we’re increasingly seeing English providers getting ready for that deregulation and quoting for businesses in Scotland. Next year is a great opportunity for Cobalt to look after Scottish clients who have sites south of the border. And a huge opportunity for new relationships with businesses in the south.Margins are likely to be smaller in England, initially. But our focus on service will become even more important."

Tony McHardy is Sales Director at United Utilities Business. He now has another title, pertinent to customers from September onwards. As Corporate Director of Water Plus, a joint venture between United Utilities Business and Severn Trent Services arm, he will be stewarding what will be the UK’s largest water retailer.

The move will simultaneously rebrand United Utilities Scotland’s operations and make ready for English deregulation.

McHardy says: "One of the reasons for establishing the joint venture is about getting economies of scale and of efficiency to allow us to operate across all areas of the market. A competitive market delivers several things, choice being one. But it also raises the bar on service – so service becomes a differentiator for your business.

"If I take the corner shop by example – they’ll want to manage their account online. They might not want to see an account manager on a regular basis. The large industrial customer will probably want an account manager as well as water efficiency or process advice.

"That large industrial customer could end up losing a lot more money through inefficient water use or process use. That’s of greater value to them than just the cheapest price.

"As a result of that venture we will produce a cost to serve which is at the top quartile of the marketplace; we can be very price competitive through scale. We have a lot of customers who say to us they want us to be more than just a retailer.

"They want us to become their water industry experts, helping manage consumption. Some of the smaller retailers won’t have that experience or expertise."

Head of Commercial at Source for Business (SFB), Graeme Milne, agrees. SFB is the water services brand of the FTSE250 Pennon Group plc. Its portfolio includes England’s South West Water and national recycling to renewable energy firm Viridor. The customer service main centre is in Bournemouth. It first received its operations licence in September 2014 and started recruiting customers in the summer of 2015.

"Since securing our first customer in Scotland in July last year, our aim has been to help businesses save water and money and operate more efficiently – from independent retailers to hoteliers, to farmers and manufacturers.

"We group businesses by their industry. We don’t focus on how much water they use, or the (financial) value of their business; rather, we choose to concentrate on how they use the water – and make sure we’re experts on that."

Efficiency is important in water use. From hygiene management to reducing network leakage and reinforcing resilience, SFB has developed a set of added value services under its Aquacare programme.

"We can carry out water audits and data analysis to help businesses understand how they are using their water," Milne adds. "If a customer wishes to reduce their consumption, we can offer tailored advice and a range of resources – from zero-energy pumping solutions to leak detection and repair."

And he admits Scotland has offered a good test bed for the English open market.

"Participating in the market in Scotland means we’re already dealing with customers switching and we understand what drives them to take the plunge." 

Glasgow to host major conference

HE primary importance of maintaining major water infrastructure with affordable supply and profitable prospects means sharing best practice.

Now in its fifth year in the mature Scottish competitive non-domestic water and wastewater marketplace, the Water Scotland Conference & Exhibition returns to Glasgow in October with a varied agenda of top topics.

Senior conference producer Olivia Ryan-Hill underlines that this is "very much a senior level conference" for sector movers and shakers, as well as those who manage the implementation of key decisions affecting business performance, programmes designed to address customer service issues and new business acquisition and retention.

Staged as a "flagship annual platform", Ryan-Hill indicates that more than 150 stakeholders are attracted.

Insight subject matter embraces:

 Retail competition, both in Scotland and south of the Border.

Driving employee satisfaction, throughout the water sector

Actions to tackle floods and SuDS (Sustainable Drainage Systems) through regulation, collaboration and modelling.

Improving water quality and customer service, across Scotland.

Asset management and innovation: how to drive a cutting edge and efficient sector.

Central to the agenda is a session dedicated to updating the position on deregulation in England next year, what it means for the Scottish sector, optimising the "head start" Scottish operators have and the potential impacts of a more unified Anglo-Scottish market.

Creating the flexibility to move forward in two UK water markets will certainly occupy decision making minds.

Business adaptability in the context of growth, further innovation in pursuit of gains in customer service satisfaction levels and looking at the lessons to be learned and applied from the Scottish market will need careful consideration if individual company performance across vital measures is to be marketed as a draw. Alan Sutherland, CEO of the Water Commission for Scotland, will tackle the salient points.

At this still early stage, the speaker line-up is expected to include a ministerial address from Roseanna Cunningham, Scottish Government Cabinet Secretary for environment, climate change and land reform.

Lucy Darch, managing director of Northumbrian Water Group – Business, will touch on how companies can better understand the role played by staff in improving customer satisfaction and engagement. Driving satisfaction while reducing costs will be her major platform, including benchmarking competitor approaches to the subject.

The Scottish sector is now viewed as a leading light for the structure of water utility services across the UK. As companies south of the border increase their exposure to supply arrangements on commercial terms, the Scots sector – more precisely the Scottish-based sector – needs to ensure no loss of headway.

It would be too easy to be overtaken by an English sector poised to take advantage of a position where development of best practice, rather than re-invention, will be the chief mantra.

The conference is being held at Glasgow’s Crowne Plaza Hotel on October 5. 