News and Comment

Ofwat confirm continuous customer engagement is key to enhanced status

Thursday 16 June 2016

Working regularly with water companies, we were pleased to see the industry regulator Ofwat publish its updated policy statement and expectations for PR19.

Like us, they welcome the step-change in quality and quantity of consultation and engagement that companies achieved with the 2014 price review. For 2019 they are confirming that ‘excellent customer engagement’ and how well it is reflected in a company’s business plan is likely to be needed to gain ‘enhanced’ status from the regulator.

The May policy statement is the clearest indication yet that the regulator is directly linking engagement to pricing.

So what does this mean for water companies? We think there are five main points that water companies need to address:

Engagement culture
Ofwat are very clear that ‘customer engagement is not a one-off exercise restricted to a specific time period in the run-up to a price review’. Companies will need to embed engagement into their daily culture across all staff and departments from board level down. In our experience even organisations that are achieving great one-off engagement work can struggle to achieve consistency across the piece. For those water companies that excelled at PR14 this period is going to be about consolidating good practice and spreading the word internally.

Collaboration not consultation
Ofwat are also clear that they expect a two-way process of engagement, not just soliciting customer feedback or reviewing data, but also informing and involving participants in co-creation and co-delivery of priorities and solutions. We think using online community platforms could be a really useful technique alongside more traditional methods as they provide a more flexible way to engage with customers over time.

A central role for stakeholders
Customer Challenge Groups (CCG) will play an even more important role this time round, both judging the quality of the company’s engagement and significantly how the results have been incorporated into the business plan. Clearly CCGs should be established (if they aren’t already) and involved alongside staff in strategy development from the offset. Ofwat want CCGs and by extension customers involved in setting the terms for PR19, for many companies this will mean going to CCGs earlier in the process.

It’s also good to see encouragement of innovative processes that recognise the constraints of trialling out new techniques. This is a supportive atmosphere in which to be trying out new ways to track revealed customer preferences, rather than using the stated preference methods of PR14. This is music to our ears as practitioners who want to push the boundaries. Too often, we get demands for innovation without any acceptance of the inevitable risk of trying something new, so kudos to Ofwat for taking a strong stance on both.

New audiences
We also like that they suggest involving a younger audience in longer-term issues, as the bill-payers of the future! When we look across all our engagement work we see young people consistently under-represented. Hopefully PR19 can provide some insights that will benefit other sectors on this front.

And speaking of the bigger picture; in the long term, with the prospect of competition in the residential market looming, delivering customer engagement can’t just be about meeting Ofwat’s expectations. Building a culture of strong customer engagement now is the best way to prepare for a competitive world.

If you’re looking for someone to talk to about PR19, or to discuss a tailored approach to engaging your customers and stakeholders, give our Principal Lucy Farrow a call on 0207 042 8011.