Searching for the x-factor

Utilities are investing in customer service but satisfaction levels remain low. A roundtable hosted by Utility Week in association with Tata Consultancy Services asked what they can do about it.

Utility customer service is bad – and getting worse. That was the verdict laid down before delegates at a recent roundtable discussion hosted by Utility Week in association with Tata Consultancy Services. As the gathered experts acknowledged, utilities are spending hundreds of millions of pounds on improving their processes and systems, but customer satisfaction remains elusive. What’s the x-factor that will lift net promoter scores?

Well, let’s not get ahead of ourselves. First things first, was the key message from those assembled. While energy and water companies still struggle to send accurate and timely bills, there is a lot of work to be done on getting the basics right. Delegates felt that simple issues such as a sluggish response time and the difficulty customers face when trying to get through on the phone with a query or complaint are still all too prevalent.

Unresolved, these issues can have far-reaching consequences. It was pointed out that when utilities get customer service wrong, there is a much bigger impact compared with industries such as retail: a faulty pair of shoes will not have the same impact as a disruption in supply of an essential commodity such as water or energy.

Consultant Andrew McMillan, formerly head of customer service at John Lewis, provided some inspirational insights for delegates from an industry traditionally far more focused on customers. He said the very term “customer satisfaction” may have to be reconsidered, because it “aims too low”.

An overall strategy is important, said McMillan. Competing aggressively on price is problematic for utilities because margins are thin, so improving customer service is crucial. “You have to stand for something and this becomes the x-factor,” he said.

Providing a number of channels for consumer interaction is vital, as well as delivering a high-quality product. Incorrect billing is another problem – what should be a passive relationship can become one of “active hate”, he added. His verdict on utilities’ customer satisfaction? “We’re a million miles away from the x-factor.”

Despite this, it was accepted that utilities face a difficult task serving up excellent customer service, since many consumers take utility provision for granted. In many ways, utilities have a tougher time than retailers because the benefits of their products are not immediately obvious.

As Barbara Hughes, director of consumer policy at Ofwat, pointed out, householders have no choice of water provider. “They can’t walk away from that relationship,” she said. Customers only notice their level of service when something goes wrong and it costs them money – and the same for energy.

More than 50 per cent of complaints in water are to do with billing and it is about trying to join up the dots in a user-friendly way, one delegate said. “The bill comes in as a grudge payment, which is hated. All those lovely baths you have had – that’s what you are paying for.”

So how to get it right? Tony Smith, chief executive of the Consumer Council for Water (CCWater) said there may be no simple x-factor, but rather a range of “extra” factors. According to a recent customer survey from the consumer watchdog, there is an increasing gap between service satisfaction, which tends to be high, and perceived value for money. Bills have risen on average by 55 per cent since 2004 – roughly three times the rise in average incomes – and delegates were concerned that service has not always been improved alongside price rises.

“Customers want a balance between price and service and won’t accept low service levels in exchange for a cheap deal,” said Hughes.

Regulator Ofwat’s service incentive mechanism, which rewards or penalises water companies on their levels of customer satisfaction, could go some way to making life easier for customers, said delegates. One of the Water Act’s key inclusions was the introduction of non-domestic retail competition, scheduled for April 2017. The experts were divided on how much this could improve customer service.

There are some rays of hope. Although utilities in general, and water companies in particular, have been slow to adopt customer segmentation, this is beginning to change. Water companies are also spending more money on finding out about their customers’ experience, through surveys and customer challenge groups, which are mandated by Ofwat and will have a direct input into what water companies can charge in 2015-20.

Times are changing: one delegate recalled a customer service director recently remarking: “We are now trying to address the customer complaint rather than get rid of it”.

Some argued that the elusive x-factor utilities need is the skill of listening to customers, hearing them and providing services that meet those needs.

One way companies can achieve this is learning from their customers, for example through social media. A number of companies do not integrate social media, and have social media teams working separately from customer engagement teams. It was also argued that companies should not use social media for the sake of it. It can be dangerous to offer up social media merely as another channel for complaints.

It was acknowledged that the proportion of utility customers using social media is relatively small, with few companies understanding how to get the most out of it.

McMillan insisted that, like his former employer John Lewis, every business should “stand for something” – a unique selling point that identified it in customers’ minds. This, he said, would help build a two-way relationship and enable utilities to differentiate themselves from their peers.

By being proactive and offering “genuine customer experience” rather than just answering the phone in a certain amount of time,  companies would benefit as well, because they could manage their time and resources more efficiently. In the meantime, utilities had to “open their ears” to customers of all types and “visualise a strategy that puts the customer at the heart the business”.

A more dynamic, responsive and customer-driven approach is going to be required to improve customer service beyond the level of satisfaction.