Our View What the water market can learn from power
What the water market can learn from power
It’s an intriguing time for the water market. This year, the English business water market becomes deregulated, almost a decade after the deregulation of the Scottish water market. The aim of course is to provide a better deal for business customers, but critics of deregulation in general often point out that up until 2014, with over 15 years of deregulation in the electricity market, 37% of electricity customers and 40% of gas customers had not switched from their pre-deregulation supplier. But supplier switching is now far more common for domestic customers, with Ofgem reporting that over 6 million households switched in 2015.This provides a huge opportunity for suppliers to capture new customers and, of course, a huge challenge in stopping churn in the existing customer base.
There is no denying that the power provider market has become far more competitive in the years since deregulation, and although the big six still hold sway, there has been ample opportunity for smaller provider brands to carve some space for themselves through offerings based on their green credentials or a better customer experience.
It will be a step into the unknown for existing water suppliers who have existed in a regional monopoly, so what can they learn from almost two decades of a consumer deregulated power market?
As with many markets that consist of a number of companies offering a similar (or sometimes identical) product, price is and always will be a key driver. This search for a better deal on price is reflected in many of the articles and communications in the public domain that deal with power provider switching, and is seen by many businesses, associations and governing bodies as the key element in encouraging consumers to switch. According to a YouGov study at the end of 2016 around a third (32%) of customers would consider switching power provider for savings of £100 or less, suggesting that even small savings have the potential to win over new customers.
When your customers have no choice but to use you, an appealing brand and the accompanying value proposition can often fall by the wayside. But a strong brand, visual identity and point of difference with competitors can have a huge impact in forming relationships with customers and gaining their trust. In the power supplier market new brands such as Ecotricity are coming to the table with a green offering and a family-oriented identity, they’re not just offering an electricity supply, but endeavouring to be seen as lifestyle partner, a way in which the consumer can express themselves through their supplier.
CX will be a key area in the water utilities market, particularly when it comes to arresting churn and building customer retention. Due to the rise of the empowered consumer in the electricity market, driven in turn by customer experience improvements in many other markets, CX is now a key area of focus for many power providers. The Aberdeen Group found that the percentage of energy and utilities companies that have a primary focus on boosting levels of consumer satisfaction nearly doubled between 2012 and 2015, and you can expect the water provider market to reflect this change in focus in the coming years. With new CX solutions providing a granular level insight into the journey and experience customers, water providers that get a head start on their CX programmes can expect to reap big rewards.
Technological advancement can open and disrupt any market. As an example, the “Internet of Things” is a key trend that will, in time, impact almost all markets. In the electricity market smart meters are starting to inspire behavioural change and make a noticeable difference to customers’ lives. Although a recent study by PwC suggests that 75% of consumers are unlikely to introduce smart technology within the next 12 months, of those that already have it, 81% have noticed a positive impact from smart heating. Much like the adoption of smart phones you can expect momentum to build at an accelerating pace. But innovation isn’t limited to smart meters, it can potentially be rolled into any aspect of the offering from tariffs to billing, and can provide a brand a unique point of differentiation in what might be a very competitive market.
Water deregulation offers a number of challenges for a fledgling competitive market, but if providers can move quickly and learn some important lessons from their cousins in power the opportunities are huge.