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CCG Chair workshop
Future customer engagement in the water sector: how
regulation can inform, enable and encourage this.
7 October 2015
Trust in Water
1
Introductions
Image © mikecco
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Aim of the workshop
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1. To welcome and introduce the new CCG Chairs.
2. To highlight the crucial role that effective customer engagement must
play in PR19.
3. To provide Chairs with the opportunity to contribute to our policy
proposals on customer engagement – in particular on:
a) what the new frontier in customer engagement could look like;
b) how CCGs can challenge companies to get there; and
c) how Ofwat can appropriately support the CCG process in this
context.
4. To provide Chairs with some early signals about our high level
direction of travel for water 2020 in respect of customer engagement.
Agenda
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10.00
10.15
10.55
11.35
11.50
12.15
12.30
Welcome and introduction
Water 2020: what does good
customer engagement look like?
Water 2020: the role of the
CCGs and Ofwat
Break
An example of engaging
customers from the energy
sector
Round up and next steps
Close and lunch
David Black
Cathryn Ross
Georgina Mills
Julien Lancha,
Advizzo
David Black
Water 2020: what does good customer
engagement look like
Cathryn Ross, Chief Executive
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PR14: The biggest customer conversation the sector has seen
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Water 2020: using our regulatory tools to drive value creation and
allocation
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Creating value
“More for less”
Outcomes and customer
engagement
Well functioning markets
Effective monopoly regulation
7
Risk and reward package
Customers – lower bills, social tariffs
Investors –maintaining confidence
Environment –
addressing challenges
Allocating value
Water 2020: key questions for our future regulation of the sector
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KQ1 How do we regulate to encourage service providers to focus on their customers
over the longer term, rather than focusing their effort around periodic price reviews?
KQ2 How do we build on the customer-focused approach to the 2014 price review
(PR14) and promote and maintain genuine customer engagement that drives
companies’ businesses?
KQ3 How do we regulate to encourage service providers to discover new ways of
delivering outcomes to customers, which reduce cost and improve service?
KQ4 How do we encourage service providers to discover and reveal the efficient cost of
providing services?
KQ5 How can we best align the interests of investors, management and customers?
KQ6 How can we maintain investor and customer confidence through the transition to
any new arrangements?
Customer engagement – PR14 principles
9
Trust in water
Reference: Involving customers in price setting - Ofwat’s customer engagement policy statement, page 9 (Ofwat, August 2011)
http://www.ofwat.gov.uk/future/monopolies/fpl/customer/pap_pos20110811custengage.pdf
In 2011 we published seven principles to shape the engagement process:
1Water companies should deliver outcomes that customers and society value at a price they
are willing to pay
2Customer engagement is essential to achieve the right outcomes at the right time and at the right price
3
Engagement should not simply take place at price reviews
Engagement means understanding what customers want and responding to that in plans and ongoing delivery
4It is the companies’ responsibility to engage with customers and to demonstrate that they have done it well
5
Customers and their representatives must be able to challenge the companies throughout
the process. The engagement process should ensure this challenge happens. If this is not
done effectively, we must be able to challenge on customers’ behalf. In doing so, we will fulfil our duty to protect customers.
6Engagement is not a ‘one-size-fits-all’ process, but should reflect the particular circumstances of each company and its various household and non-household customers
7The final decision on price limits is entrusted to Ofwat. We will use a risk-based approach to challenge company plans if this is necessary to protect customers’ interests.
What do we think good customer engagement look like?
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Greater use of
wider
intelligence on
customer
priorities
More genuinely
interactive forms of
customer engagement
(beyond various types
of survey) from
companies
Greater weight on
interactions with
customers within
the control period
Companies viewing
their customers as
partners, working
with them to help
deliver services
efficiently
More customer
involvement in the inter-
generational issues
facing companies
Making comparative
information more
visible and better
understood
What do you think good customer engagement looks like?
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?
• We do not have the monopoly on good ideas and want to draw on
your experience and expertise.
• What do you think good customer engagement looks like?
• Practical examples?
Water 2020: the role of the CCGs and Ofwat
Georgina Mills, Director, Customer
Engagement and Outcomes
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Promoting and maintaining genuine customer engagement that
drives companies’ businesses: Role of CCGs
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CCG
collaboration?Scope of
CCG’s remit?
Role of
comparative
information?
CCG
membership?
Role of CCGs: assurance vs. representation?
CCG
independence?
Promoting and maintaining genuine customer engagement that
drives companies’ businesses : Role of Ofwat
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Guidance?Facilitating
collaboration?
Communication?Publishing
information?
Successor to
the Customer
Advisory Panel?
What it isn’t:
• No way that Ofwat is inserting itself between company and customer –
companies own the relationship with their customers;
• To provide detailed or prescriptive guidance to companies or CCGs.
What it could be:
• To facilitate the CCG process with the aim of strengthening the challenge
function, e.g. by facilitating collaboration between Chairs and/or sharing
information.
Customer engagement: Sharing experience
from other sectors
Richard Khaldi, Senior Director, Customers
and Casework
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Successfully Engaging Customers to Deliver Mutually Beneficial Outcomes
17| ADVIZZO ConfidentialADVIZZO Executive Summary
Water and Energy are not always the most gripping of
topics…
9 minper year
Accenture public information
18| ADVIZZO ConfidentialADVIZZO Executive Summary
Dealing with water service is not engaging…
and sometimes disappointing...
19| ADVIZZO ConfidentialADVIZZO Executive Summary
Most utilities don’t give people many reasons to think
otherwise
Signs up for service
Pays bills
& complainsEnds Service
Today’s experiences are typically basic,and not particularly informative
20| ADVIZZO ConfidentialADVIZZO Executive Summary
Applying Behavioural Sciences to the Water Industry
• “Providing a proactive and simple new experience to utility customers will make them
immediately happier so likely more open to Behavioral change and by fact more engaged”
• “We recommend to the Water Utilities to apply the MINDSPACE approach to their current
project challenges. In basic terms, MINDSPACE represents the tools for changing behaviour
and can be apply in such project to make customer more engaged and happier”
- Paul Dolan – London School of Economics
Messenger
Incentives
Norms
Defaults
Salience
Priming
Affect
Commitments
Ego
M
I
N
D
S
P
A
C
E
We are heavily influenced by who communicates information
Our responses to incentives are shapes by predictable mental shortcuts, such as stronglly avoiding losses
We are strongly influenced by what others do
We go with the flow of pre-set options
Our attention is drawn to what is novel and seems relevant to us
Our acts are often influenced by sub-conscious cues
Our emotional associations can powerfully shape our actions
We seek to be consistent with our public promises, and reciprocate acts
We act in ways that make us feel better about ourselves
21| ADVIZZO ConfidentialADVIZZO Executive Summary
Existing Similar Experiences in the Energy
22| ADVIZZO ConfidentialADVIZZO Executive Summary
Opower: Pioneer in Behavioral Customer Engagement
» Hundreds of field tests of different feature sets,
messaging approaches, and program designs
» Largest ongoing consumer survey of utility
customers in the world Only major Designer
Interface team dedicated to modifying energy
consumption
» Largest body of smart meter consumer data
studied by any vendor in the world
Behavioral science DNA Opower design principles
Opower public information
23| ADVIZZO ConfidentialADVIZZO Executive Summary
Applied Behavioral Sciences in the Energy
Conservation messages printed on door hangers and left on homes
£££
Turn off AC &
Turn on Fan
Environment
Turn off AC &
Turn on Fan
Citizenship
Turn off AC &
Turn on Fan
Zero Impact on Consumption
Neighbours
Turn off AC &
Turn on Fan
6% Drop in
Consumption Opower public information
24| ADVIZZO ConfidentialADVIZZO Executive Summary
Some example of Behavioral Sciences concept
Social norms• Descriptive and injunctive norms are leveraged to
motivate and reinforce positive behavior change
Commitments• Commitments to perform an action
make people more likely to act
Opower public information
25| ADVIZZO ConfidentialADVIZZO Executive Summary
Some example of Behavioral Sciences concept
Loss aversion• People perceive losses as larger, more impactful than
identically-sized gains
Social proof• When people are not familiar with a
situation, they are likely to do what everyone
else does
• Cialdini and Paul Dolan explores this
concept in depth, including its more negative
implications: groupthink and the bystander
effect
Opower public information
26| ADVIZZO ConfidentialADVIZZO Executive Summary
Other Similar Experiences in the United States
• WaterSmart Software focusing on Water Saving
• Simple Energy with a Point and Reward Approach
27| ADVIZZO ConfidentialADVIZZO Executive Summary
Behavioural Customer Engagement Produces Measurable
Results
Call center
volume
10-
15%
decrease in high bill
calls during months or
quarter with the
highest call volume
Digital
engagement
20-
40%
Of report recipients
go to the web portal
Customer
satisfacti
on
5-
8%
increase in customer
satisfaction
and brand recognition
Energy or
Water
Saving
2-5%decrease in Water
Consumption Market Benchmark
28| ADVIZZO ConfidentialADVIZZO Executive Summary
So, how do we engage people with their Water
Utilities ?
29| ADVIZZO ConfidentialADVIZZO Executive Summary
First, you have to get their attention...
30| ADVIZZO ConfidentialADVIZZO Executive Summary
…provide insights
Behavioral science Design
31| ADVIZZO ConfidentialADVIZZO Executive Summary
…provide insights
32| ADVIZZO ConfidentialADVIZZO Executive Summary
…and then, customers will take charge
33| ADVIZZO ConfidentialADVIZZO Executive Summary
…as a result…less complaints and better knowledge of
customers
34| ADVIZZO ConfidentialADVIZZO Executive Summary
…and help millions people Save Water, Energy and Money
“Providing a proactive and simple new experience to utility customer will make them
immediately happier so likely more open to Behavioral change”
- Paul Dolan – London School of Economics
35| ADVIZZO ConfidentialADVIZZO Executive Summary
Support “Customer engagement” through Behavioral Sciences
Active
Happy
Passive
Neutral
Understands water bills Trusts utility company Participates in utility programs Becomes Loyal Installs HEMs and Efficient Appliances
Saves Water, Save Money Decreases Call Complaints E-Bill, Others Water Conservation Pay on Time, Reduce Debt
Behavioral Software by Design
Utility Transformation through the
Disruptive Combination of Machine Learning and Behavioural Science
Round up and next steps
David Black, Senior Director, Water 2020
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Next steps
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2015 2016 2017 2018 2019
Issues challenges
and way ahead
discussion document
Design consultation
July Dec
Decision
on design
May
Retail
goes live
April
Method
consultation
June
Final PR19
method
Oct
BP submission
July
RBR
results
Dec
Draft
determin-
ations
May / June
Final
determin-
ations
Dec
Licence engagement
NHH retail review18 month period for price
review
Indicative Water 2020 timetable
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