Service Incentive Mechanism an incentive to make customer interactions more meaningful and profitable

Transcription

1 Service Incentive Mechanism an incentive to make customer interactions more meaningful and profitable Ofwat is regulating the customer experience on a new, more challenging basis: to gain real financial reward and avoid discounting their customer bills, water companies must improve insight from customer data and create better customer relationships. Service Incentive Mechanism Improving insight from customer data to create better customer relationships Andrew Marsh, On behalf of Pitney Bowes Software Every connection is a new opportunity TM

2 Summary SIM provides an opportunity to make every single customer interaction count; getting the best out of the SIM regime will have a positive impact on your business s bottom line and make your customers feel valued, further securing long-term customer relationships. These reputational and financial benefits could be a far greater spur for effective improvement in the long term than the regulatory upsides and downsides of SIM (averaging around 50m on the upside and 25m on the downside). Investing in customer relationships now will have a benefit in itself, but the financial impetus is becoming stronger all the time. Business customers could look at the scores when deciding to switch (as the narrow margins available mean that service is a stronger motive to switch than price), before you even get as far as considering the impact of retail separation. Crucial to success will be the ability to respond to any kind of request in real time in a REAL DIALOGUE with the customer that conforms to the company s brand, tone and voice. Water companies are trying to build empathy into their contact handling it is easier to achieve that when the operator can view customer communications in real-time and can then relate these communications to the customer query. Ofwat is regulating the customer experience qualitatively, for the first time, so successful investment in this aspect will pay dividends later. If you see SIM as a wave washing over you rather than an opportunity to put your business on a new footing, you re presenting a financial risk to company profitability and ultimately, to its success as a business in the future. Start now and you can enable lifetime customer relationships.

3 PBS s solutions contribute to us having 98% first time resolution on 1.2 million customer billing contacts annually. This helps us to meet the requirements of Ofwat s Service Incentive Mechanism, which monitors how many customers have to make more than one form of contact for a specific query Yorkshire Water Principles The Regulatory Sands Have Shifted The Service Incentive Mechanism (SIM) is potentially a game-changer in the quality of customer service and customer relationships achieved by water and sewerage companies in England and Wales, which now fall under the new regime for assessing service and performance standards. The shadow year of 2010/11 during which SIM results were gathered by Ofwat (for publication in Autumn 2011) is now complete, and the current financial year is the first in which companies have a financial incentive to obtain good scores - low scores being the best, when it comes to SIM. However, how much SIM transforms the way the industry delivers its service and secures customer trust depends very much on what water and sewerage companies make of it. That is to say, how well they use the opportunity to improve their interactions using data, analytics, and communication as the building blocks. On the face of it, the allowed 1 per cent increase in customer bills for the company with the best customer service standards under SIM is a sizeable change incentive in itself. However, the potential long term rewards from successfully implementing major improvements in customer interactions and reaping the operational efficiency savings that these increased standards would bring could be several times greater. In addition, the resulting business would become more attractive to its investors, as well as its customers and the regulator, yielding further financial benefits over the years ahead. If nothing else, SIM provides the opportunity for the water industry and its regulator to end the obsessive league table mentality that dominated the old Overall Performance Assessment (OPA) regime, used to measure customer service standards until 2009/10. The OPA resulted in most companies aspiring to become masters of mediocrity, straining to achieve 100% against a low standard relative to their counterparts in other sectors. Now these businesses have a chance to differentiate themselves from their peers and position themselves more effectively in a possible future, more competitive environment. 1. SIM - an opportunity to make every customer interaction count SIM was one of the most significant initiatives launched by Ofwat towards the end of the 2009 regulatory price review, and plays its part in the regulator s innovative Delivering Sustainable Water package (March 2010) which will shape the current five-year regulatory period (or AMP5, ). In short, it provides financial and reputational incentives for companies that improve customer service and satisfaction. At the heart of SIM is improved analysis of company performance in terms of the customer experience, which is being regulated properly for the first time. The SIM analysis falls into two categories, measuring companies ability to resolve complaints early and effectively : 1. Quantitative based on the number of complaints and further unwanted contacts that the water company receives, and scored very punitively when these contacts are not resolved at the first stage. Whereas an initial written complaint will score five points on the SIM scale, it will attract 1,000 points if the same contact remains unresolved through the second stage and makes it all the way to the Consumer Council for Water s complaint investigation process. 2. Qualitative based on a satisfaction survey of those customers who have been in direct contact with the water company (the survey being based on a simple 1 to 5 rating method). Inevitably, this survey includes a subjective aspect of how the customer felt about the service supplied, and does not take into account those customers who had no contact with their water company. Consumer bodies have argued, with some justification, that the upside and downside (of how well or badly a company fares under SIM) do not represent a substantial enough hit against a water company s bottom line to stimulate them to finish at or near the top of the ratings. Tony Smith, Chief Executive of the Consumer Council for Water, has suggested that company reputation should contribute to the overall score as well as the pure quantitative and qualitative measures on which Ofwat s analysis is based. This comment links to the longer term benefits of succeeding in the SIM challenge the perception of the company as being capable 3

4 Service Incentive Mechanism an incentive to make customer interactions more meaningful and profitable of meeting and exceeding the expectations of customers (and by extension, earning the respect of other significant groups such as investors and regulatory/political decision-makers). Key to succeeding in the quantitative arena is effective, efficient processes. This is the area where water companies should be able to make headway in ways which are familiar to the industry, working at continuous and sustainable improvement of processes in such a way that the service becomes more and more tailored to resolving the customer s contact rapidly and effectively. For example, this could involve breaking down the sequence of events that is triggered by a customer call on metered billing, analysing each intervention and stripping out any waste which presents a delay to resolving the problem and issuing the correct bill together together with any redress to the customer in terms of apology or discount. Accordingly much good work has taken place across the water industry in the past three years, partly in preparation for SIM, in particular around improving end-to-end processes rather than concentrating purely on single-point failures. In a way similar to the improvements in water quality that have come about through looking at whole river catchments rather than point-source pollution, the evidence suggests that water companies have looked at what they do in the round and are becoming better at discovering root causes of service failure and refining their processes as a result. In 2011, it would be hard to find a water company that does not have an aspiration and a plan to get customer service right first time : yet the companies are at very different stages on the journey. The published written complaint numbers support the notion that water companies have been quite successful in this process aspect over the past three years since 2007/08, at least when it comes to reducing total numbers of complaints: but there is no room for complacency. Complaints under the billing and charges heading still account for two-thirds of the written complaints received from customers each year (2009/10 figures, the last full year covered by the annual Complaint Handling in the Water Industry in England and Wales report). This proportion varied widely from company to company, with only 29.1% of Yorkshire Water s complaints falling into the billing and charges category, as against an 81.2% share of United Utilities written complaints. This would suggest a sizeable opportunity for a number of companies to improve their customer data and interactions and achieve healthy cost savings as well as a better SIM performance. In total, written complaints about the water industry had decreased from a peak of 273,463 in 2007/08, down to 232,854 in 2008/09 and then 193,824 a reduction of 29 per cent over two financial years. Yet the share put down to billing and charges has edged stubbornly upwards. At this point, customer relations professionals also need to reflect just how dissatisfied and annoyed a customer has to get before submitting a written complaint (how many written complaints have you written to different organisations this year?) as opposed to telephone contact, and whether 200,000 of these complaints annually is a satisfactory level as we approach an era in which the quality of customer relationships will become more important. In particular, there is still understandable concern within the Consumer Council for Water about the position of metered customers, who will continue to be a growing proportion of the customer base as optional and selective compulsory metering programmes take effect. In 2009/10, around 38% of customers in England and Wales paid for water based on metered charges, but 57% of the total billing and charges complaints came from metered customers. Worryingly in terms of customer data and analytics, the Consumer Council for Water report said: Some company systems could not pick out whether the general billing and charges complaints on issues such as price increases and revenue collection were from metered customers. This situation will have to change if these same companies wish to score well in either the quantitative or qualitative aspects of SIM. 4

5 Displaying exact billing on screen has made a difference to our high customer service satisfaction scores. The value of a product like this is immense, it offers us incredible stability and reliability. Yorkshire Water Yorkshire Water Case Study Customer Profile Part of the Kelda Group, one of the world s top 10 largest providers of water and sewerage services Provides services to over 2.3 million households Manages the collection, treatment and distribution of water in Yorkshire, supplying around 1.24 billion litres of drinking water each day Executive Summary Yorkshire Water, one of the world s largest providers of water and sewage services, wanted to more accurately respond to and resolve customer billing enquiries at the first point of contact with the company Customer Communication Management solutions from Pitney Bowes Software enable contact centre agents to instantly view an exact replica of bills, which has contributed towards the company s 98% first time resolution rate on 1.2 million calls annually Business Challenge Yorkshire Water is one of the world s top 10 largest providers of water and sewage services, serving over 2.3 million households. This means that it produces and despatches a huge volume of bills and customer communications such as payment reminders, final notices and information on metering conversions. It also handles over 1.4 million customer billing enquiry calls each year. The company wanted its call centre staff to be able to respond more accurately to these enquiries when making on the spot calculations of charges, payments and balances. In addition, Yorkshire Water was looking to enhance the quality of its customer service, enabling agents to focus on the fundamental principles of call handling such as listening to the customer, building customer rapport, effectively managing the call and achieving first time resolution. Technology used DOC1 Series 5, a personalised Customer Communication solution for creating, managing and generating transpromotional documents such as bills, letters, statements and invoices E2 Suite, an advanced document archive and retrieval solution enabling access to vast volumes of information in real-time Solution Yorkshire Water selected Pitney Bowes Software s DOC1 for its customer billing composition requirements, plus the E2 Suite for the storage and instant retrieval of all customer communication documents. By instantly viewing an exact replica of a customer s bill or correspondence, call centre staff can resolve billing issues with increased efficiency and speed. Carl Davison, senior IT professional at Yorkshire Water, says: Using DOC1, vast amounts of information can be processed and compiled in a batch environment within half an hour, making it an extremely powerful and reliable tool. Each bill is then instantly archived and can be immediately retrieved by staff on customer calls to look at details of the bill exactly as the customer is seeing it. We store millions of bills and customer communications within E2 and the images are rendered back to the agents within a second of the request. Making sure that our call centre agents have the right support and the right tools for the job is vital, adds Judith Carr, Yorkshire Water contact centre project manager. For many years advisors could not view bills and it was always high on the list of how we could help them do their job more efficiently. Implementing PBS s solutions enable our advisors to instantly see an exact representation of customer s bills and deliver a more personalised customer experience. 5

6 Service Incentive Mechanism an incentive to make customer interactions more meaningful and profitable Results and Benefits Call centre agents have constructive and effective conversations with customers, taking them through their bills step by step. This contributes towards the call centre s 98% first time resolution rate on 1.2 million calls annually. Yorkshire Water places great importance on customer service and is consistently in the top two performing water and sewerage companies in Ofwat s SIM qualitative measure on customer satisfaction. Between 2010 and 2011, its billing score was 4.55 compared to an industry average of Displaying exact billing on screen has made a difference to Yorkshire Water s high satisfaction scores and being able to deliver this quality of service has motivated the staff. 2. SIM and the benefits of investing in customer relationships The building blocks of improving qualitative measures under SIM are perhaps less obvious, but still boil down to making each customer interaction as meaningful, efficient (and therefore profitable) as possible. This means investing in the improvement and maintenance of customer relationships, based on improved customer data, analysis and providing the all-important next best action to the customer. The net result of such an approach is to defend the business under the SIM regime to avoid failure demand, in the terms of Andrew Dunn, who constructed the foundations for SIM as Director of Consumer Protection at Ofwat from 2007 to Failure demand describes the unplanned process of setting off further and costly interventions when an initial mistake in handling the contact fails to satisfy the customer and triggers more enquiries and complaints. Such an error need not be material or substantial, but could even originate in the tone of voice or attitude of the agent handling the contact. Frequently, the failure to apologise - sometimes due to a mistaken fear of admitting company liability extends the life of a complaint way behind its natural span. Even good intentions can stoke up failure demand currently, for example, an admirable attempt to inform customers about the coming transfer of private drains and sewers to water companies could simply stimulate extra complaints (for example about bills rising as a result) and queries where they would not have arisen otherwise. Some well-intentioned customer interaction can yield a perverse reaction, unless it is carefully worded. Water companies have adopted a cautious approach through the summer in their communications to all households about the transfer (including those already using public sewers), while still fulfilling their obligation to reach all wastewater customers. Enriching customer data in such a way that it is possible to provide the agent with real-time insights into the customer s situation and guidance on the next best action is critical here. Indeed, the principle of providing the next best action should prevail across all channels; systematically avoiding initial handling errors will pay dividends in a number of respects: 6

7 Companies who don t improve customer data, analysis, interaction and communication risk falling behind under the SIM regime and potentially could lose millions of pounds in customer revenue from Ofwat adjustments to price limits. Removing time and people costs from the process of handling enquiries and complaints. Delivery of a consistent service to customers, however they decide to get in touch with the company. Establishing better foundations for improving customer relationships over the longer term, in an increasingly competitive sector. Better, cleaner data on which to base customer analytics and future customer communications. Failure to get on top of this critical area of contact handling now that SIM is part of the regulatory framework means that failure demand could build up in a customer relations function and create huge multiples in the number of SIM points accumulated remember, five points incurred when receiving the first complaint mounts up to 1,000 points should the Consumer Council for Water get involved in investigating the matter further down the line. In the longer term though, the implications of losing customer trust in a sector heading towards more competition are far more damaging than the short-term impact of a bad year in the SIM rankings: and even in the short-term, with smaller businesses becoming eligible for competition and more likely than large businesses to draw parallels with service quality provided to household customers, there could be painful financial consequences for companies who have not nipped the growth of failure demand in the bud. 3. Establishing a dialogue SIM: an opportunity to make the dialogue work for you For water companies, the Service Incentive Mechanism provides incentives to improve interaction with customers. This requires focus in a number of customer service disciplines to ensure that customer queries are handled right first time while still reducing operational costs. PBS solutions can help utilities to become more efficient and customer-centric through the use of four key technologies: Location intelligence: we enable utilities to geocode enterprise data and link customer enquiries to relevant infrastructure assets. Adding this location dimension enables faults to be pinpointed and asset-related enquiries to be resolved quickly. Data quality: we provide the utility with the capability to collate, de-duplicate and cleanse data from different internal and external sources to ensure that agents are always working with a single source of accurate data. Customer analytics: we enable predictive analysis of customer data to establish the best next action for agents to take during each and every customer interaction, ensuring that customers receive the informed, personalised service they expect from their supplier. Customer communication: we connect every customer communication into an ongoing dialogue. The resulting 360-degree view of each customer s contact history ensures that complaints are handled in context and that customers are treated consistently and appropriately. 7

8 Service Incentive Mechanism an incentive to make customer interactions more meaningful and profitable As a result of increased expectations by Ofwat using SIM, it follows that water and sewerage companies and their supply chain partners and contractors will have to work harder over the next five years to improve customer interaction. There is no better way to conduct a dialogue with customers than in real-time, with understanding of their history with the company, and in a way that conforms to the business s brand, tone and voice. To succeed in this aim, data must be coherent, from the field (both in-house and contractors) through to the operational contact centre and billing team, and must offer insight into what options are best for the customer. Most water companies have been hampered in the past by the need to weld together stand-alone systems which are too specialised to achieve the best results in the customer-centric world reflected by the SIM regime. Furthermore, SIM should drive further the trend for multichannel customer communications to become an essential business requirement, rather than merely an attractive service feature. Water companies are generally still on the journey to an effective Customer Communications Management strategy which could help them to respond to growing customer demand for multi-channel interaction. 4. Empathy not just a matter of training An important element of achieving success in the qualitative measures associated with the Service Incentive Mechanism is the development of empathy with the customer in short, making them feel good as well as providing a solid level of service with a sound process. Naturally, a good deal of success in this area will come from the quality of the people in the business and their willingness to engage, but improving the qualitative SIM scores are not primarily about the touchy feely aspects of customer service. It is also possible to design in CRM features which could improve qualitative scores considerably. Take an example. If a customer contacts the business with a complex metered bill complaint or enquiry which has yielded previous correspondence and contact, it is then very difficult to empathise properly unless the operator can see what the customer sees. The ability to link past customer enquiries, responses and other history to the current call, in real time, provides a basis for the operator to use their customer empathising skills more effectively. Take this good foundation a step further: if it is then possible, as an agent, to act upon the results provided by seamless customer analytics to establish the best next action to take during the interaction, the service to the customer becomes personalised as well as informed. Much can be achieved through sensible investment in solutions which can achieve these results, when aligned with developing the people providing the service. Finally, if the customer can then be addressed on the channel or device(or combination of both) that suits them, at the time they prefer, the service offering starts to perform very strongly against qualitative SIM criteria. 8

9 Improve customer relationships using data, analytics, interaction and communication as the building blocks. 5. Grasp the opportunity of SIM eyes on the prize The prize for driving through such service innovation and succeeding in SIM is not just about the recognition of finishing at or near the top of a league table: it covers a wide range of improved customer outcomes and bottom-line improvements. Yet we should not overlook the reputational benefits that come from a strong SIM performance. Companies with strong positive reputations attract better people, creating a happy cycle of better service performance, better relationships with customers and supplier, and even enhanced legitimacy in the eyes of society as a whole. Businesses which act promptly could see themselves enabling successful, lifetime customer relationships to stand them in good stead against any developments in competition, retail separation or simply the extension of competition to all business customers. Take private drains and sewers, which are to transfer across to water company ownership in the second half of 2011/12: for all the challenges the transfer presents, water and sewerage companies have not enjoyed such a great chance to develop new relationships with such a large new customer segment since privatisation. While the prospect of adding between 70 and 80 per cent to the sewerage asset base may be very daunting operationally, the consequences of getting the new relationships right, on the upside, are tremendous. Therefore, the reputational impact of a strong SIM performance has much more potential to aid the future health of a company than the immediate and direct financial incentive provided by Ofwat: and by the same token, a poor performance and a poor reputation could do much more damage than the immediate downside of taking the wooden spoon in the annual SIM assessments. The overall message then is to act now to improve customer relationships using data, analytics, interaction and communication as the building blocks, but NOT to see this as purely preparing for SIM. In customer service, virtue provides its own reward in terms of reducing reactive workload and failure demand : companies should plan what works best for the business rather than being driven purely by the regulatory imperative. Water companies do, however, need to be ready for the expansion of water competition for business customers. It is very possible that the latter group, still not seeing large enough financial savings to make it worth switching supplier purely on cost grounds, will concentrate on service quality. Although it is based on service to household customers, the SIM outcome - to be published this autumn by Ofwat - may start to play a significant part in any decisions these customers make. If a company s process for transfer works seamlessly right through the chain of activities required, from customer contact to agent to field to appropriate resolution, the cumulative effect for a sewerage company and its supply chain over the coming months and years will be a reputation for competence, care and (in the regulators and investors eyes) the ability to absorb a major operational challenge professionally and efficiently. This type of reputational value potentially represents upto 40% of a listed business s stock market value according to some recent studies (to see an extreme negative example of this effect, witness BP s Gulf of Mexico blow-out in 2010). 9

10 Service Incentive Mechanism an incentive to make customer interactions more meaningful and profitable How PBS can help - solutions Pitney Bowes Software (PBS) offers a wide range of solutions that enable water companies to plan to perform strongly against Service Incentive Mechanism criteria, improving their customer data, analysis, interaction and communication. We do this through our market-leading solutions for: Location intelligence Data quality and enrichment Customer interaction optimisation Customer self service Multi-channel communications To find out more about how PBS can help you succeed in SIM, visit 10

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