Water market awareness campaign: too little too late?

There are just two months left until the opening of the non-domestic water market to competition, but just one third of business customers know that it is happening. Lois Vallely looks at the engagement challenge ahead.

The opening of the non-domestic water market to competition is fast approaching. In a concerted effort to raise business customer awareness of the changes, Open Water launched a £300,000 campaign on 23 January to raise awareness among small and medium-sized businesses. But is this too ­little too late?

With only two months to go until the biggest shake-up of the water industry since privatisation, research by Ofwat has shown that just one-third of customers are currently aware they will be able to switch supplier from 3 April.

Consumer Council for Water chief executive Tony Smith says that, although awareness appears to be “heading in the right direction”, the job is not yet done, as two-thirds of customers are still “oblivious to the changes”. “Our challenge to the industry is to ensure the majority of customers in England know about the new market,” he adds. “We want to see a vibrant marketplace where customers are well-informed about the choices they can make.”

Water UK head of corporate affairs Neil Dhot tells Utility Week the awareness campaign – which is jointly funded by the incumbent wholesalers – is targeted at SMEs that are heavier users of water, such as ­hairdressers, brewers and garden centres.

Meanwhile, Ofwat chief executive Cathryn Ross insists the campaign is a “critical enabler” to customers engaging with the market. The regulator did a customer awareness survey “to inform the campaign, so this is the level of awareness before the campaign – it’s not bad, but it needs to be better. I hope, when we’ve done the campaign, that we’ll come back and have another look and we should see some markedly different results”.

But will the campaign be enough to wake up business customers to the fact that the market is opening and educate them about the choices they will be able to make about their water supply? What will it mean for retailers in the new market if awareness stays low?

Jacob Tompkins and Lord Redesdale – founders of new entrant The Water Retail Company – warn that awareness among businesses, especially SMEs, will be “virtually non-existent” on day one, creating “a massive problem for incumbents”.

“Nobody is going to know about it,” said Redesdale in a recent interview with ­Utility Week. “The first they’re going to know is when they get a new bill coming in.”

“Customers will be phoning up saying ‘who’s this?’ or not paying because they think it’s a scam,” Tompkins added. “There is a major problem with awareness around water.”

This being the case, some might think a longer lead time for raising awareness would have been wise. But Ross insists the timing of the campaign is right. “We spoke to customers last year and for a lot of them it was a bit theoretical, it was a bit far in the future,” she says. “But now when we talk about the market opening in April, customers realise they’ve got a decision to make fairly soon. It’s the information at the right time – that’s the key.”

The awareness campaign hopes it can engage customers in the idea of switching with the promise of better deals and service, although even the most optimistic of water retailers anticipate that switching rates in the first year will be relatively low. In a recent straw poll, Utility Week heard estimates that anything between 1 per cent and 10 per cent of customers might be tempted to change their retailer in the first year of competition.

Anglian Water Business, SES Business Water and Northumbrian Water Group Business are most optimistic about switching levels in the first year, while Cobalt Water operations director Scott MacLeod says he expects rates to be much lower, and that he would be surprised if as many as 1 per cent of customers switch in year one. “Our opinion is that apart from some larger multi-site operations, there will be very little switching activity in England post market opening,” he says.

Dhot is calm in the face of concern about customer awareness. He says the campaign is more about “kick-starting awareness” of both market opening and the Open Water brand than targeting an early switching surge.

“It won’t lead to a big bang of customers suddenly switching or getting better deals, but it’s a way to stimulate interest in this market and get it to the front of peoples’ ­consciousness,” he says.

One thing is for sure, as companies gear up for their great debut on 1 April, both incumbents and new entrants with strategies reliant on the rapid gain of market share will have a tough job ahead. It’s doubtful the official market awareness campaign alone will be enough to alert and inspire customers to change their status quo, so company investment in the clear communication of values, brand and products will be key.