Evelyn Rodrigues, WSAA’s Manager, Customer and Community provides an insightful look at benchmarking customer performance.

Some background

Over the last ten years, the Australian water sector has shifted its focus from asset centric to customer focused organisations. This is reflected in developments in the economic regulatory models of the two largest regulators in the country: the Essential Services Commission of Victoria (ESC) and IPART (NSW). Recently, they have embraced customer performance monitoring and benchmarking that is based on how customers perceive their water utility.

This follows what most water utilities have been doing for quite some time, that is, asking customers what they think about the service, reputation, trust and value for money of their water and wastewater provider. Most water utilities have strategic aspirations around becoming customer centric and include at least one customer related Corporate Key Performance Indicator (KPI) alongside water quality, reliability, financial, safety and employee engagement KPIs.

One of the challenges of benchmarking using customer perception is that this perception can be influenced by factors outside the control of the water utility. The other challenge is whether a water utility should benchmark against other essential services (rather than against other water utilities) since this is more reflective of the experience of the customer.

There are a few things we need to ask first.

Why benchmark customer performance?

In the case of regulators such as the ESC and IPART, they mainly want to compare and rank water utilities to get an idea of who is performing well, which utilities are improving and whether the sector as a whole is improving. Both regulators produce regular performance reports comparing water utilities.

Essential Services Commission – How customers rate their water business

IPART – Water utility customer satisfaction survey results

Water utilities benchmark (against other water utilities and other service providers in their area of operation such as energy and banks) to not only understand and track performance but to also determine whether initiatives, investments and campaigns are having the desired impact on KPIs.

How do we measure and benchmark customer performance?

There are two main customer outcome measures

  1. The overall perception of the broader customer base: This is sometimes called brand or reputation tracking. It generally involves surveying a demographically representative sample size of the population. The most common KPIs are score for “trust” or “value for money”.
  2. The customer experience of those customers who interact or contact their water utility: The ESC uses a technique called ‘mystery shopping’ to benchmark customer service experience. This involves a specialist service provider ringing water utilities pretending to be a customer and then ranking them against criteria to produce an overall score. For more information refer to pages 44 – 47 of the ESC Water Performance Report 2020-21.

The regulators should be commended for moving away from the old quantitative measures of number of complaints, how long it takes to answer the phone or abandonment rates. These metrics, while easy to measure and report, are not reflective of what actually drives the customer experience.

So, what do we do with the results?

The regulators want to provide reputational incentives for water utilities to provide good customer service and improve their brand perception with the public. In the UK, there are also financial incentives linked to good performance. As a result, regulators measure and publicly benchmark water utilities on customer perceptions of trust, value for money, reputation and overall satisfaction.

The water utilities want to track their performance and understand what impacts their score and drive improvement by prioritising investment in those things that will give the biggest improvement. They measure and survey customers about many attributes and knowledge of water business and the analysis yields insights that feed into decision making.

At WSAA, we want to also understand what drives improvement in perception and customer experience and track the performance of the sector as a whole (through comparison with other sectors). WSAA carries out a detailed customer perception survey every two years and used with the data and insights from the water utilities, it helps us identify and share successful strategies of individual water utilities.

What have we learnt so far?

The perception survey has also given us some key insights:

  • Size doesn’t matter. Our top performing water utilities include some of the smallest and some of the biggest utilities. However, the reasons why they are top performers can be very different.
  • The sector will often improve (or decline together) depending on external factors. In COVID, we saw the perception of not just water utilities but also banks, energy companies go up.

Figure 1 . In COVID, we saw the perception of not just water utilities but also banks, energy companies go up

  • One of the biggest factors that impacts trust and value for money is bill movement; but it is about the perception of bill movement, not necessarily what really happens. Obviously, a perception of a water bill increase has a negative impact on perceptions, however, there is no significant difference between the bill going down or staying the same. A water utility is better-off keeping the bill stable if it will avoid a bill increase in the future.

Figure 2 One of the biggest factors that impacts trust and value for money is bill movement

  • Making it easy for customers to transact, contact or interact with their water provider has a significantly positive impact on trust and value for money.
  • Good communication with customers during service interruptions is perhaps the best way to turn a negative situation into a positive experience for the customer.
  • Customers believe we should be supporting those that are in financial hardship. If a customer is aware that their water provider has support programs in place, they score higher, whether or not they themselves need support.

In summary, customer performance benchmarking is a valuable tool in driving improvement in the water sector. However, we should make sure any benchmarks we choose reflect what is important to customers and can be measured consistently across water utilities. And just as importantly, particularly where customer perceptions form the basis of these benchmarks, we need to recognise that there may be external factors that may impact on the score. We should be focused on improvement, not the score.