Knowledge is power in a competitive water market
In a competitive water market, it will be essential to know exactly who your best customers are so that you can target acquisition and retention strategies accordingly, says Rebecca Hammond.
With April 2017 fast approaching, the water industry enters new territory within the commercial sector – a competitive environment. Never before has there been the opportunity to grow market share and revenue in this space. Who will be the winners and losers in this new market setting?
Ofwat’s Open Water Market architecture plan will give business customers the right to choose their water and sewerage provider, empowering them to take decisions around the price and level of service they want. This will create a more competitive environment, which should encourage service providers to increase the quality of their offering to customers.
Over the past few years, water providers have had to make some big strategic decisions on how they address these new rules, which completely alter the structure of their market. These decisions will have involved choosing to defend, protect or attack the competition head on, or alternatively to expand and diversify their offering, for example by bundling a range of services into a package deal.
Since the announcement of the initiative, key players have exited the commercial market: Thames Water sold up to Scottish retailer Castle Water, Southern Water to Business Stream, with consolidations from Severn Trent and United Utilities, among others.
This has led providers to ask themselves how they should shape their strategy to capitalise on this unique opportunity and counter the competitive threat.
The answers to key questions around targeting customers, budgeting and resource management could provide a winning formula, and enable providers to thrive in the new environment.
The first point to consider is, who exactly are your customers?
The answer is not always as obvious as you would hope, and some companies have been left questioning the accuracy of their customer data. Deeper investigation of information held may find that some basic facts are missing, for example:
• Do you understand the profile of your business customers?
• Are they part of a wider network or group?
• Who is responsible for contracts and payments at a group level?
• Are the business details you hold up to date and accurate?
• Do you have the contact details necessary to adopt your retention or marketing strategy?
Under the new regime, water will no longer be a standard business cost but instead may fall under the responsibility of a procurement department within the business. Knowing the contact details, or better still the contact preferences, of the right person to speak with, and widening the channels of communication will not only increase the opportunity to create the desired successful outcome, but can also reduce costs.
In a market where businesses hold power over who they select as their provider, it is more important than ever to determine how to assign value to customers. Suppliers will need to use accurate customer data to help them differentiate between the businesses worth fighting to keep and the businesses worth acquiring.
According to Sir Francis Bacon, “knowledge is power”, and in this new competitive world, knowledge of customers will be vital for effective retention and acquisition tactics. Implementing well targeted and timely strategies will reduce wastage from misdirected marketing and improve success rates.
Providers must also determine how value is defined when assessing customers and prospects, and ways to optimise budgets. Utilising internal and external data and some relatively simple calculations will help to some extent. However, an invaluable tool which should also be used is third party utilisation models. These analyse consumption trends in certain businesses, identify other businesses with similar consumption patterns, and allow water companies to target their budget and resource towards these opportunities.
When examining how the water sector might adjust to new competitive settings, it is worth considering what has happened in the energy market. Energy start-ups are a strong example of how new entrants and nimble existing players who are flexible with price and service can compete against bigger companies tied to legacy systems.
Change in the water sector creates opportunities, and the companies entering the new competitive environment in April need to recognise the importance of third party data and insight, and leverage it to create a winning strategy. Additional data insight will provide invaluable information on both their existing and potential customer base, supporting growth and success under the Open Water initiative.
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