Over the past few years, the improvement of customer experience in other sectors has increased expectations of monopoly service providers. As utilities seek to maintain legitimacy, customer experience is key.
Regulators have seized on this agenda and Ofwat is leading the way. Coupled with a wider focus on legitimacy and affordability, Ofwat has driven a new regulatory model that seeks to put customers at the heart of water companies’ strategies.
Central to this is the SIM. This is a regulatory tool that uses financial penalties and rewards to drive improvements in customer experience in the water sector.
This report focuses on the comparative performance of the nine water and wastewater companies (WASCs) operating in England with regard to SIM, since the measure’s introduction in 2010. It highlights the top performers and laggards, and brings out the insights and learnings from each. It also asks to what extent SIM has achieved its objectives, and what the future holds.
How are water companies performing?
In 2014, the average customer satisfaction score for a WASC was 4.49 out of 5 – an improvement of 0.39 points from 4.10 in 2010/11, the measure’s first year. They now rank higher than the water-only companies.
The Ofwat league table can be divided into three sections, shown in Figure 1. At the left are high performers, companies that have exceeded Ofwat’s targets and will be rewarded with up to 0.5 per cent of their total integrated revenue. Wessex Water has consistently led the table since its introduction with an average score of 86. Anglian Water and Northumbrian Water follow closely in the upper quartile, scoring 83 (+0.3 per cent year on year) and 81 (+0.2 per cent year on year), respectively.
Yorkshire Water, Severn Trent and United Utilities are average performers, that is, they have not performed badly, but have not outperformed the targets to the degree where they merit financial reward.
At the right are poor performers – South East, Southern Water and Thames Water – which close the table with comparatively low scores of 68, 67 and 65, respectively. Each of these faces a financial penalty.
WASCs have achieved considerable improvement in customer service scores since the introduction of SIM, and now rank higher than smaller water-only companies, which led the table at its introduction in 2010. In 2014, the average customer satisfaction score for a water and sewerage company was 4.49 out of 5. This is up 0.39 points from 4.10 in 2010-11, the measure’s first year.
Comparative company performance
According to data from consultancy McCallum Layton, each of the nine WASCs has shown considerable improvement with SIM. Figure 2 (overleaf) is a view of WASC performance over the past two years.
Southern Water has shown the largest improvement, with a 0.19 point rise, from 4.22 (2012-13) to 4.41 (2013-14). Northumbrian Water’s performance has also been notable with a 0.16 point rise to 4.62 out of 5.
Anglian Water, typically a league table leader, was the only WASC to show a dip in its overall satisfaction scores – of 0.03 point between 2012-13 (4.69) and 2013-14 (4.66).
Laggards: these are companies that have little or no change in their satisfaction scores. They continue to take the bottom spot in the rankings.
Thames Water has consistently been at the bottom end of the SIM league table with a comparatively low score. However, Figure 1 shows a slight upwards trend with an eight-point increase to an average score of 70.67 in 2013-14. Even though Thames is at the lower end of the table, a detailed view of the satisfaction scores indicate a consistent (but small) rise in almost all areas of SIM.
Top performers: these are companies that lead the SIM league table with high overall satisfaction scores. They have continued to improve their performance every year.
Anglian Water scores second place in the league table, based on a high score in areas such as satisfaction with visits and staff helpfulness and attitude, at 4.81 and 4.82, respectively. There has been a small drop in score in areas such as ease of contacting call centres and satisfaction with visits, which may have pulled Anglian from the number one spot.
Northumbrian Water has moved into the top bracket in the past two years. It has seen a +0.28 point improvement in its score for keeping customers informed, which has helped push up the overall score. Another high performing area, with a +0.18 point increase, is staff knowledge and professionalism.
Stable performers: these are companies that have consistently and continuously improved their performance.
Wessex Water has led the league table since the inception of SIM, and continues to do so today – with an overall average of 4.70 out of 5. Wessex has maintained its position by making investments and improvements in its strategy and technical ability, but most importantly, in its employees and company culture.
Most improved: these companies have been low performers in the past but have begun to turn around their performance. These are companies to watch out for.
Yorkshire Water has shown considerable improvement in its scores, with the overall average increasing from 4.47 in 2012/13 to 4.62 in 2014, bringing it in line with Northumbrian and Wessex Water. Areas of notable improvement include a 0.26 point rise in investing to keep its customers informed and an additional increase of 0.6 point improvement in time taken to resolve queries and satisfaction with visits.
What are the limitations of SIM?
While SIM is widely acknowledged to have driven improvement in the water sector, it also has a number of clear limitations.
The data sample for SIM is small – just 200 responses per company per quarter, or 800 per year. The sample size is the same whatever the size of the company, and is entirely random – there is no geographic or demographic profiling. The random nature of the sampling also creates challenges – for example, if a company’s customers were surveyed the week after very heavy rainfall, their scores may be lower because of increased flooding. A bad week, if that’s when the survey falls, can drag down the score for a full year.
It is becoming clear that there is a reputational “halo” effect that SIM does not take into account. A company that has a good brand reputation is likely to see the knock-on effect in its SIM score, with surveyed customers being more “forgiving” than those of a less well-liked brand.
The SIM score does not take into account the average bill. A company’s customers may have comparatively poor service but be paying considerably less. Under SIM, there is no way to reflect this, nor to allow the customers the choice of how much they want to pay versus what quality of service they want to receive.
Data
The SIM score can only be as good as the data that feeds into it. The quality of data varies from company to company, as shown by McCallum Layton’s annual report on data quality. Although data provided by each WASC does not directly feed into its SIM score, quality of data gathered does have an impact on the SIM.
Northumbrian Water has shown an improvement in data quality with the highest number of usable and valid records, standing at 89 per cent. These are the records that are correct and can be used to capture customer feedback. Thames, on the other hand, has the highest number of duplicates in records (21 per cent), which does not necessarily imply poor data quality but means additional effort to get the correct number of individuals for the survey. United Utilities has the highest number of untraceable telephone numbers, at 18 per cent (an increase from 10 per cent in 2012-13).
Net promoter score was until recently a widely accepted measure of how successful a company was in terms of brand value and satisfaction. However, recently a new measure – customer effort score (CES) – has emerged. This looks at customer experience from four perspectives of cognitive (thinking effort), emotion (emotional effort and distress), physical and time taken (versus expectations). According to researchers from the Corporate Executive Board (CEB), the more effort a customer has to make in each of these areas, the less likely they are to bother.
For more information on CES, click here
What is the future of SIM?
Ofwat has acknowledged the need for SIM to evolve, with a number of changes being introduced to the measure this spring.
The SIM survey has been relaunched in a new, shorter format. There will be ten questions asked per quarter and an additional ten, on demographics, asked once a year.
The survey will focus on two significant questions – overall what did the company do well; and what could it do better, while dealing with a customer complaint. In addition the focus is on five key areas: how the customer contacted the water company; reasons for contact; satisfaction with the company on overall complaint handling; areas of dissatisfaction; and how the company could improve. Finally, their customer experience in the water sector will be compared to that of another sector.
The weighting that was previously 50:50 will now stand at 75 per cent qualitative and 25 per cent quantitative. Financial incentives will be awarded in 2019, based on data collected over 2015-16 and 2018/19.
In addition to the survey, Ofwat has incorporated basic changes to how and when the data will be collected. Customers will be surveyed based on contacts received from the water company, regardless if they have been resolved or not. The regulator will request contacts from companies on any given Monday, for data from the previous seven days.
While the introduction of competition for non-household customers will be introduced in April 2017, contacts for those customers will remain in the sample data, and will be filtered out at interview stage by the question: “Was this contact in regard to supplying you as a domestic or business user?”
There has been a visible shift in Ofwat’s approach to capturing customer feedback. For example, multiple choice questions regarding the nature of contact have been changed to open-ended questions. Clearly, Ofwat is interested in the quality of the experience beyond mere numbers. Ofwat conducted a pilot survey of all 18 water companies’ customers using the new survey earlier this year. The initial findings make concerning reading for WASCs, whose overall customer satisfaction scores have dipped under the new approach, seeing them overtaken by water-only companies (WOCs) in the customer satisfaction league table.
• 79 per cent of water customers are satisfied in comparison with a maximum of 69 per cent of those contacting other types of organisations.
• Of these, WOCs achieved a significantly higher SIM score than WASCs.
• With the inclusion of unresolved contacts, customer satisfaction scores for WASCs have seen a slight dip.
• Higher SIM scores were seen for billing queries than either clean water or wastewater.
The pilot revealed low customer satisfaction levels on the speed of response and resolution from the water company. Data indicates customers want to be kept in the loop at all times, through progress reports, updates and outcomes.
WASCs leading the new league table resulting from the pilot survey are: Wessex Water (4.45 out 5) and Northumbrian Water (4.40). Thames and Southern Water closed the table with overall satisfaction scores of 3.94 and 3.88 out of 5, respectively.
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