Regulated water companies in England and Wales are currently preparing for the next price review (PR19), and regulator Ofwat will consult on its methodology for PR19 in July 2017. One thing is already clear. Ofwat, as detailed in its recent report ‘Tapped in – from passive customer to active participant’, expects water companies to put their customers at the centre of their thinking.
But if you want to be a truly frontier water company, demonstrating a collection of spot initiatives where customers ‘participate’ won’t cut it. Instead, you need to show you’re transforming to become truly customer-led. You will need to find new and sustainable ways of engaging customers across all four PR19 themes – customer service, affordable bills, innovation and long-term resilience.
This drive to become customer-led in the water sector reflects a revolution in customer-provider relationships across all sectors. We call this Customer 4.0.
Customer 1.0 was a world where customers were viewed solely as consumers of available products. As customers gained some degree of product choice and companies innovated, the relationship evolved. The growth of demand-led and, more recently, experience-led interactions created Customer 2.0 and Customer 3.0 which you can see below.
From a supply-side perspective, the water sector can be characterised as a monopoly provider of a commodity product (Customer 1.0), more recently with a nod towards brand (Customer 2.0) and experience (Customer 3.0).
But now we’re in the Customer 4.0 world, companies have to deal with the reality of a more empowered customer who’s at the centre of their own ‘universe’ – and can choose who helps them achieve their goals.
How the relationship between the customer and the provider has changed
Our work across a number of sectors, including retail banking, government and academia, has shown that being customer-led delivers significant benefits to all types of organisations. Where customers don’t have choice of product or service – as is the case with household customers in the water sector – but do have choice about the level to which they engage with their provider, being customer-led is a key differentiator. It enhances engagement levels, builds trust, improves overall customer experience and, crucially, turns customers into advocates. Significantly, it also reduces friction in delivering customer services, removing cost-to-serve and improving employee satisfaction and retention.
In a Customer 4.0 world, you need to constantly review how value is created and delivered for your customers in the context of their ‘universe’, even in a non-competitive environment. You can read more about what you should do to get to grips with your range of customers – and some examples of what their goals are – in our article published in Utility Week.
Applying a Customer 4.0 lens is therefore a first step for you to develop a robust, defensible route to defining, designing and implementing truly customer-led businesses. And this will define what frontier customer participation looks like. Getting ready for the Customer 4.0 revolution isn’t just a nice-to-have – it’s essential for frontier performance.