It is an undisputed truism that service providers need to be customer-centric to be successful. This kernel of wisdom is more and more finding its way into the discourse on water utility management. While this statement is indisputable in a competitive environment, its application to public services such as water utilities is not beyond doubt.
Some contemporary marketing scholars are reconsidering the primacy of customer centricity and introduced the concept of Balanced Centricity. Total customer centricity is a limited foundation for service provision because full implementation risks the sustainability of the organisation.
Services are not created in a dyadic relationship between the customer and the service provider but through a network of activities involving a range of diverse stakeholders. Each stakeholder within the network is a beneficiary of the activities of another stakeholder. Value is co-created between the service provider and the beneficiary. Customers are not the end-point, but also maintain their value chain. Water has no intrinsic value in itself, and its value proposition is only realised when consumed. The value chain for water utilities thus extends far beyond the customer tap. Most customer taps are used by multiple people who use the water to achieve the 3Cs: Comfort, Cleanliness and Convenience.
As public service providers, many aspects of service provision are dominated by professional judgement, such as public health considerations, which cannot be considered the domain of consumer experience. Tap water is an undifferentiated service where natural monopoly provisions prevent utilities providing individualised services. Customer centricity in public utilities is thus limited to those aspects that consumers are capable of influencing.
Balanced centricity is a situation where all beneficiaries in the value creation network have the right to satisfaction of what customers need and want. Regulators are a principal beneficiary within the value creation network for utilities. Water utilities service them through information provision. The environment is also a significant beneficiary of water services, which in Australia is managed through environmental water allocations.
This brief outline shows that being customer-centric is not the sole focus of public service organisations. Public service has inherent limitations on the extent to which consumer judgement can be incorporated in service design. Also, the value creation network perspective shows that the consumer is only one of the many beneficiaries of the value creation process.
The concept that customer is always right is a controversial topic in service industries, including water utilities. There seems to be a paradox between how water professionals perceive the quality of a water service and the way customers see it. Providing safe drinking water is not the same as providing good water. For example, chlorine or fluoride are added to the water ensure to protect public health. In some communities, however, chlorine and fluoride are perceived as unwanted chemicals, leading to a reduction in the perception that customers have of the quality of service1.
Customers of two Australian and three American water utilities were surveyed to investigate possible moderators of service quality in water services. The preliminary conclusion of this pilot study is that service quality perception is not only influenced by the quality of the service, but also by external factors such as financial hardship and service involvement. This research has potential implications to how service quality is reported and interpreted and how utilities relate to customers.
- A sample of customers from two Australian water utilities reported their perceptions of tap water
- Customers with a higher level of financial hardship rated the level of service lower
- Customers with a higher level of involvement rated the level of service higher
- External factors influence service quality perception of water utility customers
This paper reports on a pilot of a research project investigating the relationship between organisational behaviour and customer perception. A sample of customers from two water utilities in Australia completed a survey about their perceptions of tap water. Customers were asked their views on the following concepts:
- Involvement with tap water
- Frequency of contacting their water utility
- Level of experienced financial hardship
- Service quality perception
- Technical quality of the services provided by their water utility
- Functional quality of the services provided by their water utility
Involvement with tap water was measured using the Personal Inventory Index. This ten-point scale is regularly used in marketing research to measure the level of involvement consumers have with products and services. Consumer involvement is a person’s perceived relevance of something based on their needs, values, and interests.2
The frequency of contacting the utility and the level of perceived hardship were determined with single items on a 1–7 Likert scale.
The level of technical service was assessed using five questions about the physical services, i.e. availability, pressure, taste, safety, visual appeal. The level of functional service was evaluated using a scale consisting of 13 items, such as billing accuracy, friendliness of staff, availability of information and so on.
Service Quality Perception in Tap Water Services
A total of 649 customers from six utilities in Australia and the United States completed the survey, with the standard error of responses at 0.9%. The distribution of replies is indicated along the diagonal of figure 1, correlations between variables are shown above the diagonal and scatter plots below the diagonal.
Analysis revealed statistically significant correlations between some of the constructs. Service quality perception is influenced by financial hardship and positively influenced by involvement.
Most salient was a high negative correlation between the level of financial hardship and perceptions of functional quality (r(649)=-0.16, p<0.001) and technical quality (r(649)=-0.19, p<0.001).
The level of involvement revealed a positive correlation with functional quality (r(649)=0.26, p<0.01) and with technical quality (r(649)=0.35, p<0.01).
The data thus shows that the more difficulty customers have with paying their bills, the lower their perceptions of the level of service provided by water utilities. The data also shows that customers with a high level of involvement in tap water rate the level of service provision higher than those with a low level of involvement.
The level of technical quality also shows a strong correlation with the degree of functional quality (r(649)=0.35, p<0.01). The reason for this healthy relationship is unknown and is most likely caused by confounding variables.
The idea that service quality is moderated by factors outside of the direct control of the service provider is a well known phenomenon in marketing theory. Research in food marketing shows that the taste of water can be influenced by the firmness of the cup it was consumed from.3 This pilot study indicates that these types of effects may also exist in the provision of urban water services.
Although the physical quality of water services can be manipulated by improving operational effectiveness, the perception that customers hold on the level of service is moderated by many other factors. The level of hardship can be controlled through pricing controls and rebates, but the socio-economic circumstances of customers can only be managed through empathy with their individual circumstances. Involvement with tap water can be influenced through customer engagement and communication. Involvement is important to water utilities as it has been found in other services to also be linked to a consumer’s willingness to pay for services.
This research into service quality perception is currently being extended to include further data from other water utilities to confirm the results of this pilot study.
The axiom that the customer is always right needs to be nuanced. The customer might not be right about the physical facts of a water service, however, they are always right about their own service quality perception. This demonstrates that in order to provide a high level of service to customers, a focus on excellent engineering will not necessarily lead to increased customer satisfaction. A deep understanding of customers is required to influence the moderating that moderate their perceptions.
Kot, M., Castleden, H., & Gagnon, G. A. (2011). Unintended consequences of regulating drinking water in rural Canadian communities: Examples from Atlantic Canada. Health & Place, 17(5), 1030–1037. doi:Health & Place. ↩
Zaichkowsky, J. L. (1994). The personal involvement inventory: Reduction, revision, and application to advertising. Journal of Advertising, 23(4), 59. ↩
Krishna, A., & Morrin, M. (2008). Does touch affect taste? The perceptual transfer of product container haptic cues. Journal of Consumer Research, 34(6), 807–818. ↩
In one of my earliest presentations on water utility marketing, I was asked by a spectator how the invisibility principle relates to the issue of branding for water utilities. My initial answer was that branding is not critical as a perfect water utility is invisible to the customers — other than the physical services they provide and the occasional bill. In the past two years, I have revisited this view and developed a more subtle approach to this question.
Branding a Water Utility
Where is the emotion?
The biggest problem with branding a water utility is that the average consumer only spends a few minutes in direct contact with utility staff. The number of touch points between utility and customer, beyond the bill and the physical service, are minimal.
A few years ago I lectured consumer behaviour for masters students at La Trobe University. After teaching students about brand personality, I asked students to view a website of a water utility and report back on the brand personality of these utilities. One student asked: “Where is the emotion?”. The website was filled with images of excavators laying pipe, treatment plants and even a diver swimming in sewage.
Water utilities can improve brand personality by emphasising the intangible aspects of the value they provide, as illustrated in the first image on this page. Water utilities are not technology companies, but they deliver a substance that mediates in emotional experiences, such as bathing your child.
Branding beyond the logo
A brand is so much more than a logo and extends into everything the utility does and communicates. An example of where branding meets core service delivery are the assets that are visible in public space. Engineers design most water utility assets with a utilitarian purpose. The design of these assets, beyond their functional use, influences the image that people have of the local utility. This idea does not mean that we just need to slap a logo on assets visible in public space — it requires a bit more thought.
The photograph shows a sewer manhole in the city of Wellington. The manhole is an excellent example of utility branding as it provides a talking point in the street. There is no logo, but this manhole goes beyond the typical dull lids. The artwork is created by a local Maori artist and has symbolic meaning.
Branding an Invisible Water Utility
The invisibility principle still holds but needs to be enhanced through using the theory of brand personality. Water utilities will be the person working in the background to make sure society runs smooth, without needing to take the credit.
Direct Potable Reuse is a hot topic in areas where alternative sources of water are becoming scarce.
There is a lot of fear in the industry because customers are not likely to accept this solution easily, due to our learnt attitude towards faecal matter, also known as the Yuck Factor.
Promoting Direct Potable Reuse
Water utilities have tried a wide range of strategies to convince communities to promote drinking recycled water. The general advice is to educate customers about the process. One of the rules of social marketing is, however, that rational appeals to change attitudes are not very effective. Clear examples of this practice are the many anti-smoking or anti-speeding ads that use emotional appeals to modify the viewer’s attitude towards smoking or speeding.
Some commentators recommend using euphemisms for recycled sewerage such as ‘impaired water’ instead of polluted water. Some of these are weasel words and should not be used as people see through the ruse.
Singapore is one country which effectively implemented Direct Potable Reuse (DPR). However, comparisons with Singapore are not easy since due to cultural differences between this country and Anglo-Saxon countries. Salient differences in culture can be identified using the system defined by Geert Hofstede:
- Power Distance: the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally.
- Individualism: the degree of interdependence a society maintains among its members
- Masculinity: the level of interdependence a society maintains among its members.
- Uncertainty Avoidance: The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these.
- Pragmatism: the extent to which people attach more importance to the future, fostering pragmatic values towards rewards, including saving and capacity for adaptation.
- Indulgence: the extent to which people try to control their desires and impulses.
The data shows that the cultural profile of Australia and the USA are very similar. There are, however, notable differences between the cultures of Singapore and Australia/USA that need to be taken into consideration when comparing DPR acceptance in these countries.
The Power Distance level for Singapore is almost double of that in the other countries. Power distance influences the acceptance of government initiatives, such as DPR. The higher the level of Power Distance, the more likely a proposal is accepted.
The level of Individualism in Singapore is much lower than in Western countries in general. A small degree of individualism would make acceptance of initiatives such as DPR easier to implement because of the perceived public benefits. In Western countries, the high level of individualism complicates social marketing due to a large number of segments that need to be targeted to obtain coverage over a whole population.
The Masculinity dimension is almost the same in all three countries, which has thus no impact on differences in acceptance.
The low level of Uncertainty Avoidance predicts that people in Singapore feel much less threatened by the novelty of DPR than in countries with a high level.
The high degree of pragmatism in Singaporean society points towards a future-oriented view of water resources that includes thrift and a sense of saving for the future. This dimension is much less in Australia and the USA.
Finally, the Indulgence dimension is not very different between the countries.
This comparison shows that firstly, understanding the value system of the consumers in the service area is essential to be able to craft an effective campaign for the acceptance of Direct Potable Reuse. Secondly, it shows that we cannot use an example used in one location and transpose that approach to another location.
I have submitted a formal dissertation proposal and commenced writing 80,000 words on my views of managing a customer focused water utility.
Click on the book to read the dissertation proposal (ten to twenty minutes reading time). This proposal deviates from the dissertation structure typical in business studies, which I hope will help to provide an innovative perspective on this industry.
The primary purpose of this dissertation is to contribute to the discussion on using private sector marketing concepts in managing public services, such as urban water utilities.
The managerial aim of this dissertation is to enhance the current discourse on customer-centric service provision reticulated water by developing marketing theory peculiar to this sector to assist managers with maximising customer value. This objective is realised through commercialisation of the outcomes of this research.
From an academic perspective, this dissertation seeks to enhance understanding of how market orientation relates to service quality in ‘service factories’, with particular reference to the role of engineers in technologically driven services. Service factories are services that require a low intensity of labour, rely on the incidental interaction between customers and the service provider and they only allow for a low level of customisation. Furthermore, this dissertation seeks to address a gap in knowledge regarding the measurement of quality in services dominated by tangible elements. Lastly, this dissertation assesses the influence of consumer involvement on perceptions of quality held by water utility customers.
The literature on managing water utilities is dominated by technical tomes on how to implement the latest engineering developments to improve services. Engineers often see marketing as peripheral to their quest to provide a reliable and safe water supply. It is, therefore, a delight to read a book on how to improve services in water utilities using marketing techniques common in other industries.
Communicating Water’s Value: Talking Points, Tips & Strategies by Melanie Goetz is based on a sound basis of years of experience, backed by the latest scientific findings in behavioural economics, neuromarketing and related disciplines. This book is by no means a nerdy academic treatise. The countless vividly written examples from Melanie’s experience in working with utilities will appeal to water utility professionals and place the theory in context.
The book delves into the non-rational (a term I prefer above ‘irrational’) aspects of human psychology and explains how the latest marketing techniques from the competitive commercial world can be applied to enhance the value proposition of water utilities.
Marketing has earned itself a bad name for being deceptive and manipulative, which is one of the reasons it is not often practised in public services. Melanie’s book shows, however, that good marketing can tap into the forces of psychology and be used for good instead of evil.
Melanie recognised in the book that her work is “preaching to the choir”. This book should be read by engineers, economists, accountants and all other professions that are usually at a distance from the customer interface. As pointed out in the latter part of the book, innovation can only arise from positive deviance. Daring to be different and break the shackles of tradition will not be easy in an industry dominated by traditional thinking.
The Value of Water
Reading this book, I latched on to one little phrase: “We do not sell water, we sell status—we sell a solution for thirst”. When a utility recognises that they do not sell water, but the benefits that water provides, they are on their way to maximise the value perception held by their customers. Thinking of water as simply the product they supply, instead of the benefits it provides is an example of marketing myopia, a form of short-sightedness that can only be fixed by using marketing glasses.
My version of this is: “We don’t sell water, we sell experiences“. We sell good ideas (in the shower), we sell initiate moments (having a bath with someone you love), we sell personal fulfilment (gardening) and so on. Status comes into play only with conspicuous purchases, such as a pool.
When looking at a water utility using marketing lenses we see the service as the customers perceive it. Not the way customers might consciously understand water, but subconsciously. In Communicating Water’s Value Melanie keeps reminding us of the psychological subtleties involved in managing the attitudes and behaviours of customers.
Communicating Water’s Value: Talking Points, Tips & Strategies
This book is a great read for every water utility professional that wants to practice some positive organisational deviance and start to think differently and increase the value proposition of customers. Not by investing millions in new gadgets, but by simply levering human psychology.
I presented a webinar for the WSAA research network on the applicability of social science to water utilities. In the engineering-dominated tap water industry, social sciences play a minor role. The perceived vagueness of the social science is often seen as problematic for engineers, biologists and so on. For a water utility to be customer-focussed, the social sciences have a lot to offer. As one interview respondent entrusted me: Water utilities used to be managed by engineers, now they are managed by economists. In the future, they should be managed by anthropologists.
These earlier articles and papers explain the concepts from the presentation:
- Balinese water management
- Incompleteness theorem of service quality measurement
- Safe Water versus Good Water: Water Quality Paradox?
- Towards a Service Quality Model for water utilities
- The Customer is Always Right: Customer Perception of Quality in Tap Water Services
Water utilities are natural monopolies and therefore operate in a highly regulated environment. One of the cornerstones of all regulatory frameworks is performance measurement. Most existing systems are, however, merely lists of performance measures. These measures are categorised, but there is no underlying theory on how these relate to each other. These existing systems also focus mainly on performance from the utility’s perspective, with limited focus on the customer’s view of performance.
I am currently working on two different aspects of service quality in water utilities. For my employer I have developed a Water System Performance Index to better communicate performance to boards and senior management. For my dissertation I am looking at how customers view service quality of utilities. These two projects started separately from each other, until it dawned to me that they form part of the same broader view of service quality in utilities.
Towards a Service Quality Model for Water Utilities
The quality of a service can be viewed from two sides from the utility’s and the customer’s perspective. In marketing terms, this is called intrinsic an extrinsic quality.
These two perspectives apply to the two types of services offered by water utilities: core services and supplementary services. Core service relates to the physical provision of water and supplementary services are all other activities that enable or enhance the core service, such as information provision and billing. The distinction between intrinsic and extrinsic quality for core services also relates to the distinction between safe and good water I wrote about earlier.
The model gives us four areas to measure quality: intrinsic and extrinsic technical quality and intrinsic and extrinsic functional quality.
Intrinsic quality in core services can be measured using the traditional methods in the monitoring of water systems. This gives us a view of how the water system intrinsically operates. Water quality parameters, pressure data and supply continuity are the most common parameters. The intrinsic quality of supplementary services is measured using a range of customer service metrics, such as the percentage of call answered within a certain time period.
In this service quality model, the perspective of the customer has equal weight to the perspective of the utility manager. The perspective of the customer usually comes to us via two channels, occasional surveys or complaints.
The Service Quality Model
This service quality model combines the views of the utility professional with the perspectives of the customers. Although they often seem incommensurable and even paradoxical, service quality in utilities cannot be adequately described by focusing on only one of these perspectives.
This is only a sketch of the system under development. I am currently collecting data to test some of the assumptions on which this model is based and aim to publish the completed version next year.
During a recent visit to Bali, I spent a day riding through the rice fields to learn more about the traditional irrigation system. I stumbled across an intriguing analysis of the Balinese way of managing water while working on a literature review.1
The Balinese irrigation system is managed through an intricate system of districts, the subaks. These are religious and social organisations that manage everything related to the cultivation of rice, including irrigation. The subak system developed over centuries, constantly evolving to deal with new circumstances. This system resulted in an intricate system, strongly interlinked with Bali’s natural and cultural environment, both at a material and at an esoteric level.
Water Temples in Bali
Religion plays a strong role in the management of Balinese water. Decisions on water allocations and timing of water supply are made by discussions between subak members, supported by rituals mediated by priests. The performance of these rituals is of critical importance in Balinese water management, not in the sense that the system functions through divine intervention, but in the sense that the performance ritual creates a strong sense of collective purpose. A ritual is not a useless repetitive activity, but rather a means to connect the sacred and the profane.2 The performance of ritual sacrilises the natural environment, lifting it beyond the status of a resource exploited to maximise return. The Balinese system works well through this interplay between practical irrigation knowledge and esoteric rituals. When in the 1970s the Indonesian government decided to implement a Green Revolution, reducing the role of the traditional water temples, the delicate balance was disturbed, causing problems for the local farmers. Nowadays, subaks are again an important aspect of Balinese culture, confirmed by the island’s abundance of rice terraces and intricate patterns of canals, water temples, weirs, offer and other water infrastructure.
The Balinese Subak system is a great example how a decentralised water management approach can be very useful in avoiding a Tragedy of the Commons, as described by Nobel Prize winner Elinor Ostrom.3 Whether such a system would work in Western culture is doubtful. Oriental cultures are more focused on society as a collective, while Occidental cultures seek to maximise benefits for the individual.4
Normal Habel, Michael O’Donoghue, and Marion Maddox, Myth, ritual and the sacred. Introducing the phenomena of religion, (Underdale: University of South Australia, 1993). ↩
Hofstede, G. (2001). Culture’s consequences: comparing values, behaviours, institutions, and organisations across nations. Thousand Oaks, CA: Sage. ↩