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Staying ahead of the curve – insights unlock value in the new Water Retail Market

The new water retail market is open for business; on the 1 April this year it became possible for businesses in England to choose which company they would like to supply their retail water services.

The move had been in the pipeline since 2011, when the government set plans for a new competitive market outlined in the Water for Life White Paper. With a focus on improving customer service, promoting protection of the environment and increasing competition in the industry, it is one of the most significant changes the industry has faced, bringing with it a range of new challenges.

The open retail water market will work much in the same way as other utility services, with wider utility markets now also being able to offer water services.  It is believed this will deliver around £200 million of overall benefit to customers and the UK economy by separating out retail services from wholesale activities.

What does this mean?

In simple terms it means that for an additional 1.2 million eligible businesses and non household customers they now have a choice – the customers are in the driving seat.

Customers can decide who they would like to provide their water, their wastewater services, or both. They can change at any time, for any reason, without penalty, and all this can happen in less than a month.

For licensed water retailers it means they are now competing against each other and have the freedom to tailor services and packages for customers to contend in the open market. The market will provide growth opportunities for existing regional water companies, and brand new companies. Initial investment will be required to set up independent retail businesses, ensuring fair competition, and once established driving a return on investment will be a key focus.

Insights will unlock value

The open retail market is a new market; with that comes limited transactional history or operational trading knowledge. There are no clear market leaders and the market is open to competition.

The good news is willingly engaging with and understanding customers’ and stakeholders’ needs and concerns could be a key differentiator in a new competitive market and will provide those forward thinking water retail companies with a competitive edge.

Staying ahead of the curve

The ability to benchmark, track and evaluate service through customer engagement will deliver a significant return on investment for water retailers.

For over two decades, our team at Explain Market Research have been innovating, developing and delivering research programmes in the utility sector, our main objective always being to deliver actionable insights for our clients. Read our case studies for some great examples of our work in the sector.

We have developed innovative methodologies to deliver insights in a competitive market. We specialise in engaging with customers including embedding behavioural research, trust and confidence, and the engagement of vulnerable and hard to reach customers into our utility sector research projects.

Research and engagement will enable water retail businesses to get closer to their customers to identify the issues they are experiencing at any given time and co-creating to find solutions that improve their experience.

Research will also be important to understand the ideal balance between price and service to enable retailers to shape their service offering. Measuring and tracking customer experience as well as customer advocacy will allow retailers to measure performance as well as areas for service improvement, enabling continuous improvement over time and high levels of customer retention for getting it right.

Contact us at Explain Market Research today to find out more about the solutions we offer. Take a look at our accompanying infographic below.

Water Retail Market Infographic V3


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The importance of ‘in the moment’

We live in a society of instant gratification. Gone are the days when we were willing to wait for almost anything. We are actually serving ourselves in supermarkets to avoid queues, checking ourselves into flights and paying for same day delivery from online retailers. Amazon is even developing drones to enable one hour delivery. The drone will literally collect your product from the warehouse and fly it to your home without the need for any human intervention; this is space age stuff!

The need for speed extends to the marketing world too, with marketers realising that although TV advertising can raise awareness and build brand affinity, it doesn’t necessarily drive sales and thus an entirely different approach is required.

Leaders in the industry are therefore investing in near field technology, enabling the transmission of marketing messages as and when a customer passes a small transmitter. Linger for five minutes in the TV section of Argos with the relevant app installed on your smartphone and you may receive a 10% discount to give you the nudge you need to make your purchase – very powerful in driving sales!

Immediacy in the research industry is another challenge. We all know the sooner we speak to a customer about their experience the more accurate their recall will be. Think about the last time you visited the supermarket; unless you slipped on a banana skin in the fruit and veg aisle or conversely were wowed by the girl on the checkout who took the time to organise your shopping by food type for you, there is probably very little you can remember. Capturing in the moment feedback is therefore increasing in importance as our lives become busier and our landscapes more cluttered with information overload.

There have been some efforts to capture in the moment feedback, traditionally this has been via exit surveying. I was in The Carphone Warehouse last week and there was a lovely lady standing at the door completing surveys with customers as they left. Unfortunately she had been stood there all day and only a handful of customers had walked through the door and thus the store’s investment in placing her there seemed altogether a waste of time. This was coupled with the fact the store’s staff, who were being evaluated, were in earshot of where she was stood meaning honest and open feedback around areas for improvement could have been very much inhibited!

You will also notice now that whenever you close a transaction a survey will be triggered and sent to you immediately. I completed a remortgage last week and instantly received an online satisfaction survey from my old mortgage provider, my new mortgage provider and the solicitor involved in the transaction! I didn’t complete any of them. They were all too long and I felt bombarded when they arrived in my inbox at the same time.

All of this indicates that there is a clear need to get much smarter about collecting in the moment feedback in the research industry. This is something we have been working on and will be making an announcement very soon outlining how new technology can overcome these challenges…

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Cav faster than Tesco

There are exceptions, like Usain Bolt and Mark Cavendish, but usually size prohibits speed and so it isn’t such a big surprise that the juggernaut that is Tesco, increasingly looks slow and unable to turn round.

I can recall, in a similar forecast 3 years ago before their market share dipped and they found a huge black hole in their profits, saying that Terry Leahy was passing a poisoned chalice to the new CE and so it has proved.

Now today, in a well reasoned argument, the boss of Waitrose states that the ‘Big Four’ supermarkets are living in the past and will continue to lose market share. Everyone else has of course been saying that for months but Mark Price is the first person who has accurately summed up the reasons why.

Aldi and Lidl are a small part of the issue but you only have to look at changes in consumer behaviour, some of it brought on by the recession, and the portfolio of shops the big four own to see there are other more fundamental reasons. Just look at the size and contents of the average shopping trolley. It is different and we eat in a different way to 10 years ago.

Big often means arrogant and for some reason big guys stop listening and watching. It happened at M&S, it is happening to the ‘Big Four’ and it will happen again unless there is a fundamental change in the way a big business like Tesco is run. Top teams become driven by sales and profit, stop listening to customers and cease to respond to what is happening on their doorstep.

The biggest problem for Tesco, apart from their inability to count, is their property portfolio and the sheer size of out of town stores will be a drag on sales per square foot for years to come unless they divide it up differently. I called into my local Tesco today and the first 15 metres of the number one aisle in the shop was merchandised from top to bottom in Halloween. If that doesn’t scare the markets into selling Tesco shares, nothing will.

The growth of Aldi and Lidl will slow down in 2015/16 but Waitrose will continue to forge ahead and expect to see real growth in community supermarkets again, even convenience stores. I could be wrong but customer insight is everything and because we are used to listening if I do get it wrong I’ll know before the outcome is terminal. There lies the problem with size, others just keep getting faster, better and passing you.