Water businesses will be deregulated in England this year in a bid to introduce more competition into the utilities market. This will ultimately lead to more benefits for consumers – but how can water companies benefit from a paradigm shift? And how can they be best prepared?
The Scottish Success Story
Deregulation has proved a success story in Scotland since it came into force in 2008, with better customer service being the most significant and positive outcome of the regulatory changes in the Scottish market. Customers have seen a raft of benefits including: savings in water charges; a reduction in C02 emissions; and water supply efficiencies; as well as a increased understanding of water use.
Credit: Creative Commons - Google Images: Steve A Johnson
The evidence is compelling as demonstrated by Business Stream which lists the following improvements to have emerged:
- Achieving more than £35 million in water efficiency savings
- Saving Scottish businesses £65 million
- Reaching a 26% increase in customer satisfaction
- Making £30m worth of discounts available to customers
- Saving public sector customers more than £20m in three years
- Reducing water consumption by 16 billion litres
Perhaps the most interesting aspect is that businesses which operate across multiple sites and different regions are now able to simply deal with one single supplier instead of lots of separate ones. And if they have a particular problem or disagreement with one supplier, a business has more power of recourse to switch away.
When will change happen in England?
Water industry deregulation will start in England in April 2017, giving businesses, charities and public sector organisations the ability to shop around and switch retail service provider.
Furthermore, the Government has committed to opening up the consumer market by the end of the current parliament in 2020.
Why the change?
Traditionally the water market has mostly operated as a series of regional monopolies like Thames Water, Yorkshire Water and Northumbrian Water. But under the new rules of deregulation this rigid, regionally-based system will be left behind, with business customers now left free to choose a supplier from anywhere in England and Wales that happens to have a good reputation for customer service and the ability to offer value-added packages to best suit customers’ individual needs.
Inevitably business customers will be able to demand more from their water companies, and as a result any suppliers that don’t live up to expectations will stand to lose business. Ultimately this move will encourage efficiency and innovation.
How can companies prepare?
To compound the challenge businesses will need to develop a distinct brand proposition and address the competitive marketplace selling a low margin, commodity product and new challengers. As with energy sector, the new breed of competitors may have no direct generation or distribution capabilities.
Taking lessons from the Financial Services the Water industry will do well to learn from the continued emergence of FinTech companies that are both disrupting the market and stealing market share at the margins – think of a death by a thousand little cuts.
The five key challenges we’ve identified:
- Low margins – this is challenging environment to be profitable and make a ROI
- Changing market landscape - driven by new, agile competitors
- Regulatory changes - integrating processes and marketing with business/ legacy systems
- Higher consumer expectation
- Customers can vote with their feet
But as the age old saying goes, with change comes opportunity. And one might argue that change is no longer a choice when competing in todays’ marketplace but increasingly the imperative.
Established Players vs. Challenger Companies
The established players need to embrace the changes being brought to their market by new entrants: the disruptors which are looking to grab a share of the customer wallet by harnessing technology to make people’s lives simpler or simply more fun in today’s connected world.
On the other side of table, the disruptors rapidly need to turn switching apathy into new customers and convert potential into profitable business. Retaining a share of market will be as important as attracting switchers.
The (water) cycle of benefit
What is inarguable is that the time is now – deregulation is an opportunity for existing suppliers to harness customer loyalty before 2020, and for new providers to be absolutely primed to steal marketshare from the suppliers who fail to adapt.
Simply attaching a marketing function to an existing business will not be enough; there needs to be:
- No barriers to customer goals, which should be reached more quickly, more effectively, and in a more engaged manner
- Customer experience improvements to reduce their negative views and improve on their feedback
- And, increased efficiencies to attain reduced operating cost
To do so each company will need to develop a distinct brand and proposition in the market and play on the strengths as supplier/generator or seller; or both. Some energy suppliers are now positioning themselves as ‘tech companies’ and it would be no surprise to see the emergence of companies - such as ‘utility banks’ from which you would be able to buy your bundle of telco, energy, water, banking and more. But that’s a story for next time…
How Positive can help you
We understand the utilities marketplace and can help organisations understand the threat new disruptors pose, then put in place a strategy for what they need to do to change in order to combat the threat.
Moving from the How to the Why, we can help develop your business vision in the following ways:
- By establishing what to do now – we’ll underscore the new competitive landscape and the longer term strategic view
- By understanding the challenges presented by disruptive competitors
- By preparing you to defend market share in this brave new world - we’ll help you defend against customer switching and assist in growth
- By determining the future landscape of the organisation based on consumer requirements
- By showing that the antidote to disruption doesn’t always lie in vast, all-encompassing digital transformation projects but instead that small yet effective changes to business processes that can make a huge difference to the bottom line
Please get in touch to discuss your requirements today.