CMeX is live – to promote better customer outcomes and innovation, providing extra incentives for top performers. Are you ready for it?
Water is now open for business in England, and with innovation opportunities springing up everywhere
as the sector advances to tackle long-term pressing challenges from population growth and changing climate all the way through to ongoing affordability.
Starting in 2017, business customers have been enabled to choose which retailer they would like to buy water and wastewater services from, or if eligible even ‘self-supply’. The former monolithic source-to-tap and sink-to-sea companies servicing this customer segment are now split between asset owning wholesalers and the newly created customer-focused retailers.
A little over 30 years after privatisation of the sector, there is intense competition with partnerships, joint ventures and challengers arriving, as well as some substantial customer benefits materialising. Residential customers are coming soon, and in preparation, a new incentive mechanism has been introduced: the Customer Measure of Experience (C-MeX).
As a single score combining both reputational and financial incentives, C-MeX is designed to encourage companies to equally optimise customer satisfaction and experience. It replaces the former Service Incentive Mechanism (SIM), triggers performance financial implications intentionally biased towards penalties over payments, and awards
top performance with a premium for those running an extra mile. It should motivate faster performance improvement, accelerate the digital footprint, and encourage innovation to drive complaints down by avoiding negative impacts to customers in the first place.
C-MeX is now running in shadow mode - enabling service performance management but with no financial implications at this point, so companies get a chance to learn and get ready for next year. It will become fully operational effective from 1st April 2020.
Figure 2 C-MeX scores will be calculated quarterly and companies will either receive payments or pay penalties depending on how far they are from average performance (calculated by means of standard deviations, SDs); there is an intentional bias towards penalisation over payments.
Despite all the groundwork, a combination of friction and mindset issues between wholesalers and retailers have been causing unprecedented frustration to business retail customers – e.g. inefficient wholesaler- retailer interactions and a history of focusing around the engineering perspective instead of actively balancing
it with the customer perspective. Essentially, retail customers are yet to be seen as customers by the companies that exited the retail market. With the level of complaints rising sharply since the market opening – there were 18,000 written complaints in 2017/18 – the sector is still to get the service basics right.
Coming from a past of narrow transactional relationships with customers and rarely having explored further beyond customer services and complaints handling, this is no simple challenge to water companies, particularly in the new competitive scenario.
Similar modern age retailers have been disrupting a wide range of sectors, ignoring all known wisdom. These insurgents own no asset, make no product, are subject to no public health regulations; they are nimble, built with the latest innovative technology embedded deeply at the very core of their businesses, and respond and scale fast to ever changing customer needs. They typically offer the best structure for growth in the future and the sector is yet to see some heavy-weight challengers joining the water retail competition.
It is high time the water sector scaled up the customer satisfaction ladder towards levels of performance observed in most other sectors – they have been consistently holding a position among the poorest performers in the UK.
There is a premium opportunity for water incumbents to hold and build upon their competitive advantages (e.g. established customer base and strong operational capabilities) and wisely act to prevent an otherwise predictable C-MeX leakage. They can end up benefiting from the improved reputation that results from better understanding and serving customers, and the financial incentives reserved to both good and top performers – a far more promising future than essentially targeting to comply with regulations and dealing with an endless sea of customer complaints, reputational damages and financial penalties.
How can a water company make good use of this C-MeX shadow year to accelerate the journey to getting it right for customers, bidding for top performance payments sooner, and building digital sustainability in the process?
It all starts with making service-oriented culture a priority at the top level, with leadership setting the tone of how services are delivered and how relationships with stakeholders involved in the service provision chain at all levels are built and nurtured. Add to it a genuine realisation that employee engagement, attitude and proper enablement are key to consistently delivering informed service interactions and therefore excellence. And last but not least, articulate a vision of how customers interact with and experience the brand, ensuring it is consistent across channels, products and services.
Water companies need to reshape the way they engage with customers and establish a capability to continuously understand customers and employees and redesign the service offer wisely to create better balanced outcomes. Customers interact with employees, and when properly enabled, drive informed and meaningful interactions, directly impacting the service experience and therefore the company’s reputation and very sustainability. C-MeX can ultimately instrumentalise and inform the continuous development of this capability, by offering:
- key satisfaction gaps, coming from customers who have engaged with the company
- key reputational themes driving the perception of customers who may have been impacted by the company’s operations
- a league table, so companies know how they are performing against their peers during the year, and get a chance to make it right, avoid penalties and eventually cash in performance payments
By actively listening to needs and expectations, and encouraging the whole organisation to tap into and use this knowledge to inform decisions at all levels, it is possible to create not only a sustainable way towards customer-centricity but essentially the key competences necessary to drive successful resilient businesses in a contemporary competitive market.
This will certainly impact the C-MeX score, eventually unlocking performance payments as the company scales up the league table – and ultimately not only prevent a C-MeX leakage, but more importantly, enable reputational benefits as companies get fit for purpose in a digital world.