As water companies prepare to submit their business plans to Ofwat – demonstrating what they’ll be doing for customers in 2020-25 – Steven Hobbs, Senior Policy Manager at the Consumer Council for Water, explains why customer acceptability testing should lie at the heart of this process.
With the 3 September deadline for business plan submission fast approaching, water companies should now be in the midst of customer acceptability testing, the process by which companies engage with a representative sample of their customer base to make sure the plans they’ve drawn up – and the prices they set for the coming five-year period – have widespread customer support.
While every water company will take a slightly different approach to conducting its customer acceptability testing, one thing is for sure: companies should be aiming for high levels of customer support. But why is this so important?
Firstly, the water sector is a monopoly industry, meaning household customers can’t switch suppliers if they’re unhappy with their bills or the service they receive. In a competitive market, customers finding either of these things unacceptable would simply move to a different supplier and water companies would lose custom. Customer acceptability testing is therefore a prime opportunity to mirror what would usually happen in a competitive industry, giving customers the chance to have their say on companies’ plans for investment and bill levels before they’re made final.
Secondly is the issue of the water sector’s legitimacy. Recent months have seen companies come under fire from all angles on issues such as financial transparency, executive pay, leakage and supply interruptions caused by severe weather conditions. All of these factors can significantly erode consumer trust in the water sector, and can contribute to customer perceptions of fairness and value for money.
Recent research by the Consumer Council for Water revealed that customers’ perceptions of fairness have remained disappointingly static for seven years, with only six in ten customers considering their water bills to be fair. Here’s where customer acceptability testing of business plans can make a huge difference, as by involving customers in the planning process and securing their support for charges and investment plans, companies can turn around some perceptions that bills are unfair.
So, as the water industry’s consumer champion, what does the Consumer Council for Water want to see resulting from customer acceptability testing? Primarily, we will be looking for companies to be ambitious, aiming for high levels of customer acceptability (based on uninformed customer views) and we continue to push for this through our own activity as well as our involvement in water companies’ Customer Challenge Groups (CCGs). As well as testing acceptability of price, we want to see companies also testing what customers think about the service improvements proposed in their plans.
We’ll also be looking for evidence that companies have thought about how they convey the right messages to their customer base in order to drive increased levels of acceptability. Water companies should also use this research to measure support for their business plan proposals to improve the quality of customer service, and how they propose to deliver a resilient and reliable service both now and in the long term. Water companies’ failure to communicate effectively with customers was a big issue highlighted by our research following March’s severe cold weather, and companies need to learn from these findings to make every contact count in terms of customer engagement.
Finally, we want to see companies with low levels of customer acceptability addressing this as a matter of urgency to address the concerns of those who find plans unacceptable. Customer acceptability testing may reveal certain customer groups who find the plans less acceptable than others, and we will expect companies to take action to address the concerns of these customers. Although business plans will be submitted on 3rd September, there’s still time after this date for plans to be adjusted to ensure the needs of all customers are met.
With acceptability research already underway for most companies, we should expect to see the results emerge in the next month, and will continue to act in the interests of customers to make sure acceptability levels are ambitiously high.
What’s clear at this stage is that all water companies should be trying to improve the legitimacy of this industry in the eyes of customers, which is why their involvement in this stage of the price review process is so crucial.
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