Customer Experience Management for Water Utilities

Marketing urban water supply

Peter Prevos

• Publisher: IWA Publishing
• Year: 2017
• ISBN:
  9781780408897
• Topic: Biological Sciences
• Subtopic: Environmental Science
• Index: Biological Sciences

Customer Experience Management for Water Utilities presents a practical framework for water utilities to become more focussed on their customers. This framework is founded on Service-Dominant Logic, a contemporary theory of marketing that explains value creation as a process of co-creation between the customer and the service provider.Standard models for marketing do not apply to monopolistic water utilities without modification. The first two chapters develop a marketing mix tailored to water utilities to assist them with providing customer-centric services. The water utility marketing mix includes the value proposition, internal marketing, service quality and customer relationships. he book discusses the four dimensions of the marketing mix. Chapter three presents a template for developing value propositions to assist water utilities in positioning their service. This model is based on the needs and wants of individual customer segments and the type of service. Chapter four discusses internal marketing, activities designed to improve the way utilities add value for customers. This chapter also analyses potential tensions between engineering and science-oriented employees and proposes methods to resolve these tensions. The final chapters describe customer relationships from both a theoretical and practical perspective. The customer experience is a complex phenomenon that is difficult to quantify. The book provides a method to measure the experience of the customer, based on service quality theory and psychometric statistics.Customer Experience Management for Water Utilities is one of the first books that discusses urban water supply from a marketing perspective. This perspective provides a unique insight into an industry which is often dominated by technological concerns. This book is a valuable resource for Water Utility Managers and Regulators, as well as for Marketing Consultants seeking to assist water utilities to become more customer focussed.

© IWA Publishing 2018. Customer Experience Management for Water Utilities:

Marketing Urban Water Supply

Peter Prevos

doi: 10.2166/9781780408675_001

Chapter 1

Introduction to water utility marketing

Water is one of the most essential, but often misunderstood, natural resources. The spectre of water shortages in many areas around the world has increased the attention for water at an international level (Fagan, 2011; Zetland, 2011). This attention is largely aimed at the future uncertainty of water supplies due to population growth and climate change. Whilst the availability of water is an urgent problem in need of solutions, regulators and society urge water utilities to become more focused on customers. This focus on customers goes beyond providing a reliable water supply through technological solutions. Recent societal developments have raised the expectations that customers have of all service providers, including water utilities.

Water utilities have repeatedly been criticised in economics and business literature for lacking customer focus (Ahmed, 2009; Auriol & Picard, 2009; Deichmann & Lall, 2007; Skellett, 1995). There is also societal pressure on water utilities to become more focused on the needs of their customers. Customer advocacy groups lobby the industry and government to ensure that water utilities improve the quality of their engagement with customers. Also, government regulators increasingly require detailed performance reports, including metrics on customer service (Ben-David, 2015; CUAC, 2013; Essential Services Commission, 2012; Falp & Le Masurier, 2009; Hall Partners & Open Mind, 2011).

This increased attention from regulators on how utilities relate to customers has changed the industry profoundly. Regulatory frameworks often require water utilities to initiate customer service programmes. These programmes, however, are often more motivated by the reporting requirements of the regulator rather than by imperatives emerging from within the utilities (Karbowiak, 2003). Economic regulation acts as a proxy for the intrinsic motivational mechanisms that are present in competitive markets to drive service providers to become more focused on maximising value for their customers. Regulators can motivate or enforce behaviours in water utilities that mimic the behaviour in competitive markets.

The criticism of lacking customer focus notwithstanding, water utilities are some of the most reliable service providers. Taxi company Uber is often lauded as an example of a market disrupter through their improvement of their industry’s value proposition. It is interesting to note that this successful company is in fact inspired by the high level of service provided by water utilities. The Uber website states that they aspire to become ‘just as reliable as running water’ (Ferenstein, 2015).

Tap water is provided directly into the houses of consumers and the service is so reliable that it is taken for granted and has become a symbol of a modern civilised life (Allon, 2006). In places with well-functioning water supplies, water services are normalised and reside in the background of daily life. Tap water is so reliable that customers don’t need to spare any thought about purchasing and consuming it. Consumers pay a very low time-price for their water, which renders it invisible to their daily lives. The time-price is the amount of time that customers use to enjoy their water service. This time-price includes time spent on billing, disruptions, complaints and so on. In tap water, the time-price is close to zero because customers only need to open their tap. In areas without improved water service, this time-price can amount to several hours per day. Given that value is a function of the total cost to a customer, the lower the time-price, the higher the level of service.

The dissertation on which this book is based develops the notion of the Invisible Water Utility (Prevos, 2016). This idea refers to the fact that the providers of tap water are invisible to consumers. Services provided by these organisations are neither differentiated nor branded and are enjoyed as a matter of course. Although this normalisation of water is one of the great achievements of the past century, it has also disconnected users from the source of water and from the organisations that provide this precious resource to their homes.

The invisibility of the process of service provision, combined with the fact that water utilities are monopolies has also rendered them invisible to business scholars, including the field of marketing (Kurland & Zell, 2010; Patsiaouras et al., 2015). The central theme of this book is that the invisibility of this industry in marketing scholarship and practice needs rectification.

The managerial objective of this book is to enhance the current discourse on service-centric provision of tap water by proposing a framework based on marketing theory. This framework has been developed specifically for this sector to assist managers with maximising the value they provide to customers. This book advocates that using marketing theory is of value in the same way that physics and biology is used to provide core services. It is not argued that social sciences should replace the physical sciences, or that they are superior. The social sciences and the physical sciences are both necessary to manage a successful water utility.

The word theory often has negative connotations. The phrase ‘It’s only a theory’ is often used to indicate that deep thinking has little value to the reality of business. Managers seek practical ideas by mimicking what is considered best practice. Following what is ostensibly best practice only results in what is best within the current context. To improve beyond what is current best practice, businesses need to go beyond what is commonly known. Generating new best practice can be achieved by developing a framework based on ‘first principles’. The framework presented in this book is based on marketing theory which describes the essence of delivering value.

The motto for this book is that ‘nothing is so practical as a good theory’, which was coined by Kurt Lewin (1951), a pioneer in organisational psychology. The essence of this statement is that a good grasp of theory, either sociology, psychology, biology or physics, assists managers to maximise the value of their decisions.

The framework presented in this book is based on Service-Dominant Logic (S-D Logic), a contemporary theory for the marketing of goods and services (Vargo & Lusch, 2004, 2008, 2016). This model for marketing emphasises that value is co-created between the service provider and the customer and that goods are mechanisms to provide intangible services.

S-D Logic has attracted a considerable amount of attention in marketing literature, but most contributions have been developed at a theoretical level. The dissertation on which this book is based enhances S-D Logic theory to render it more suitable for practical implementation, using water utilities as a case study (Prevos, 2016). This first chapter introduces marketing from a theoretical perspective, focusing on S-D Logic and illustrates how this relates to the management of water utilities.

This book is firmly grounded in managerial practice and seeks to bridge the gap between the natural science dominated discourse in water utilities and social science based marketing theories. The distance between the two disciplines might not be as large as it would seem. Marketing is after all, in the words of Kotler and Levy (1969) ‘customer satisfaction engineering’.

1.1 MARKETING THEORY AND PRACTICE

Analysing tap water from a marketing perspective might seem trivial because there is no competitive substitute product. However, detailed knowledge and understanding of the role of water in contemporary society can assist utility managers in improving the value provided to their customers. Contemporary theories of marketing are no longer focused on techniques to maximise sales, but on developing processes that maximise value as perceived by the customer. Contemporary marketing applies just as much to the public sector and non-profit organisations as it does to the traditional commercial markets.

The application of marketing theory within water utilities tends to be sparse as marketing is viewed to be irrelevant for monopolistic service providers and public services (Brown, 2010b; Laing, 2003). This perception prevails because practitioners tend to view marketing from its narrow definition of promotion and selling, rather than the broader context of creating value for customers (American Marketing Association, 2013; Harrison & Stamp, 1991). The uneasy status of marketing in water utilities was hinted at in episode 13 of The Gruen Transfer (2009), an Australian television show about marketing and society. When discussing why bottled water is much more expensive than tap water, panel member Russel Howcroft exclaimed that water utilities are ‘lazy marketers’. This hyperbolic accusation contains a kernel of truth as water utilities usual focus on technology and marketing is considered peripheral (Bell, 2012; Brown, 2010b). This book proposes a framework to overcome Howcroft’s critique by embedding marketing theory into the strategic direction of water utilities.

The core competencies of water utilities are grounded in science, technology, engineering, and mathematics (STEM). The provision of clean and reliable water services is a complex process that relies on physics and biology as a theoretical framework to choose the best course of action. The paradigms of these sciences are based on objective analysis of physical facts, which can lead to the social dimension of water being suppressed. The social sciences are the theoretical foundations of marketing, which acknowledge the subjectivity of the human experience.

Although applying the physical sciences is necessary to ensure that water utilities are able to deliver the high level of reliability praised by Uber, the STEM approach alone is not sufficient to maximise customer value. The social sciences are able to provide a human context to the activities of water utilities that a reliance on technology alone is unable to achieve.

1.1.1 Definitions of marketing

When most people use the word marketing they are referring to selling and advertising. Contemporary understanding of marketing is, however, much broader than this limited point of view. Marketing is the process of creating value and within the context of water utilities, this value flows from the catchments to the customer’s tap, their bills and beyond.

The term marketing is often also associated with negative connotations such as deceptive advertising, pressure selling and other unethical practises (Wickham, 2009). Marketing is a driving force behind consumerism and is often blamed for many of the ills of the modern world. This criticism aside, the field of marketing has, over the past few decades, developed into a discipline that is much broader than simply maximising the sales of good and services. The evolution from a sales-driven discipline to the study of how value is created is expressed in the various definitions of marketing. Early definitions of marketing describe it as the process of maximising sales while later versions shift the attention to maximising customer satisfaction. The most recent definition of marketing published by the American Marketing Association (2013) moves to a broader scope and defines the discipline as:

…the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

This definition is based on the societal marketing concept which places the organisation in a symbiotic relationship with its customers and community overall. This definition emphasises that marketing is a process where one party creates value for another, moving beyond simple dyadic customer-firm relationships. The idea that marketing is not only suitable to maximise sales but that it can also be applied to societal issues was first proposed by Kotler and Levy (1969). They positioned marketing as a form of social engineering which involves influencing social parameters to satisfy the needs of society as a whole.

Contemporary views of marketing have lessened the importance of customer satisfaction and moved their attention to maximising value. In this holistic view, marketing is not an activity undertaken by a specialised department but an approach that applies to the whole of the organisation. Management guru Peter Drucker (1954, emphasis added) said it best when he wrote:

Marketing is so basic that it cannot be considered to be a separate function. It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view.

1.1.2 Service-dominant logic

Just like engineering and science are guided by the ‘laws of nature’, marketing is based on the social sciences. The difference between these two ways of thinking is that engineering and science use mathematical models to explain and predict the physical reality, while the social sciences use concep...