Towards Balanced Centricity: Moving Away from Customer Focus

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.

Balanced Centricity

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.

Balanced centricity: example of a value creation network for water utilities.

An example of a value creation network for water utilities.

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.

Towards a Service Quality Model for Water Utilities

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.

Water Utility Service Quality Model

The model gives us four areas to measure quality: intrinsic and extrinsic technical quality and intrinsic and extrinsic functional quality.

Intrinsic 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.

Extrinsic Quality

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.

Customer perception in water utilities

Smart Utilities 2013I have been asked to facilitate a roundtable discussion on customer perception of water utilities at the Smart Utilities Conference in Melbourne. These are some thoughts I gathered to help facilitating this discussion.

Water utilities don’t need to be customer focused

Engineers and scientists in water companies often believe that the level of service quality experienced by customers is only governed by legislation and technical standards. They  are subject matter experts and there is thus no need to ask the customer what they want. One engineer expressed this view succinctly on a LinkedIn forum (used with permission):

You have to deliver good quality services, but I don’t get the concept that the customer is best placed to decide what those services are. They know they need pressure and they know if they don’t have water out of their tap, but beyond that, they have only a small understanding of the what is required to run a safe and efficient water supply system.

Political correctness aside, are these professionals perhaps correct? Will customers be happy as long as clean water runs from their tap every single time they open the tap?

Water Utilities are like amusement parks

Water utilities are like amusement parks

Water Utilities are like amusement parks.

Water utilities are a low contact service provider with most services delivered at ‘arm’s length’ by technical staff. Water utilities are in some ways just like an amusement park: technical staff work in the background to ensure that the services can be delivered flawlessly while customer service teams meet face to face with customers. The actual service delivery occurs ‘backstage’ with supplementary service done ‘front stage’. The relationship between the technical and customer service staff—the engineering-marketing nexus. is very important to make it work. Preliminary results of my research shows that there are tension points between the two groups.

Another good reason to compare water utilities with amusement parks (Wet ‘n’ Wild) comes to mind) is that water utilities don’t sell products, they sell experiences. The experience of bathing your child, growing an abundant garden, cooking a great meal goes far beyond water as a physical product in as much the experience of an amusement park is not about the technical specifications of the water.

The water quality paradox

Even though customers are provided with perfectly safe water that meets all requirements, this does not guarantee satisfaction. More formally, water quality is not a sufficient condition for customer satisfaction. For example, chlorine is added to water to make it safe, but many customers complain about the gustatory properties of the water.

My own research shows that perception of water quality is influenced by the level of financial hardship they experience. This is in line with the Grönroos model for service quality which states that service quality is influenced by company image. Other research, for example shows that the taste of water is influenced by the material the cup it is consumed from. There are thus influences, outside of the chemical composition of tap water that influence customer experience.

Customers don’t care much about tap water

Enjoying tap water

Using water can be an emotional experience.

Tap water services are provided in a natural monopoly and customers don’t have any choice on service provider. In many publications water is considered to be a low involvement service. Involvement is a person’s perceived relevance of a service based on inherent needs, values and interests.

Following this definition, it should make tap water a high involvement product. Practical experience shows that customers don’t care much about tap water, as long as it is available without restrictions.

My own research shows a clear distinction between the level of cognitive (rational) and affective (emotional) involvement.

Trust is the major currency in tap water services

Perceptions of quality in tap water are related to more than just the chemical parameters of the water itself. It is influenced by many confounding variables. Most importantly, customers want to be able to enjoy they service without having to spend to much time dealing with issues.

As utilities are generally non-profit (or may be better non-loss) organisations, trust is the major currency to measure success.

Perception is Reality: Water Quality is more than chemical analysis

perception of water quality is not only a scientific question - it has a strong psychological dimensionManaging water quality is dominated by chemistry. Customers’ perception of water quality is, however, mostly a psychological dimension.

Water utilities spend a considerable amount of energy in ensuring that drinking water is safe to drink. Armies of scientists and engineers undertake sophisticated analysis to ensure that customers can safely enjoy their water.

In my research, I am collecting data from customers of water utilities in Australia and hopefully also from other countries. The question is related to customers’ perception of the quality of the supply, including aesthetics and taste. The questionnaire also contains an item associated with the difficulty people have paying their regular water bills as an indicator of the level of financial hardship experienced by customers.

The research is not yet complete, but the data is showing an interesting trend. All quality variables strongly negatively correlate with the level of financial hardship experienced by customers. In other words, the higher the level of hardship, the lower the customer will evaluate the quality of the supply of the water. It might be argued that this is caused by people with lower incomes mainly living in areas with a lower level of quality. The correlation does, however, also hold for quality perceptions that are not location-specific, such as promptness of service requests.

Financial hardship was found to be a significant predictor of grades. It appears that the level of financial hardship experienced by customers is related to their perception of the physical parameters of the water. Further research is required to confirm this relationship.

Relationship between financial hardship and perceived technical service quality (F(1, 107) = 8.948, p<.005).

The relationship between financial hardship and perceived technical service quality (F(1, 107) = 8.948, p<.005).

Taste experience has been researched in depth in perception psychology. One of my favourite pieces of work is a study that shows that the taste of water is influenced by the material of the cup it is consumed from.1 This research emphasises a thought I expressed in a previous idea: safe water is a necessary condition, but not a sufficient condition for good water.

Delivering water that meets every known technical specification and health regulation will not guarantee customer satisfaction. Supplying tap water can be viewed from a perspective of experiential marketing. This philosophy of marketing heavily relies on perception psychology to inform how a service is provided.

Follow this blog or my Twitter feed if you like to find out more about the results of my research as it unfolds.

  1. Krishna, A., & Morrin, M. (2008). Does touch affect the taste? The perceptual transfer of product container haptic cues. Journal of Consumer Research, 34(6), 807–818. 

Safe Water versus Good Water

Safe water in South Africa (Source: WRC).

Safe water in South Africa (Source: WRC).

Providing safe water is the most important task of engineers in a water utility. Operators of drinking water systems comply with local regulations to meet this objective. Meeting these requirements can, however, lead to a reduction in the perception of quality by the consumer. For example, adding chlorine is essential to ensure public health in that it destroys micro-organisms, but in some communities chlorine is perceived as an unwanted chemical.1 Providing safe water is a necessary condition. but not a sufficient condition to achieve customer satisfaction.

Service quality is the overall assessment of quality by the customer. In reticulated water, it can be defined from two perspectives: that of the customer and that of the service provider. The customer extrinsically assesses the experienced quality attributes concerning what is capable of being perceived. From the service provider’s perspective, quality resides intrinsically within the service itself. The service provider is interested in providing safe water by meeting the relevant regulations—the customer is interested in good water through a positive consumption experience.2

Service quality in tap water: the difference between safe water and good water.

Service quality in tap water: the difference between safe water and good water.

The intrinsic perspective of the water engineer is predictable and rational. Water safety can be expressed in e-Coli counts, electrical conductivity and other scientific parameters. However, the extrinsic perspective of the consumer’s individual perception is non-rational. This non-rationality does not imply that consumers are irrational. A non-rational perspective is one that includes emotional assessments that cannot be described in numbers. How users of water systems view their service (good water) only partially overlaps with how engineers and scientists see the service (safe water). Customers are interested in good water and take safe water for granted. This aspect of water quality is for marketers to assess.

In marketing jargon, good water is determined by experience qualities while safe water is determined by the credence qualities of water. Experience qualities are attributes such as taste, that can only be discerned after purchase or during consumption, and credence qualities are attributes which consumers find impossible to evaluate because they do not have the knowledge or skill to do so and because many aspects of safe water are not immediately perceivable.3 This idea implies that as customers cannot experience the safety aspects of water directly, trust is one of the most important parameters in the provision of water services.

To provide a complete picture of service quality in water, it is important not to focus only on the intrinsic scientific aspects of service provision. A complete measurement system will include the non-rational dimensions of human perception. Scientists and engineers responsible for water safety need to work together with marketers to provide a complete understanding of water quality.

The concept of intrinsic and extrinsic service quality in reticulated water has been described in detail in my recent paper on the topic, which was presented at the 2013 World Marketing Congress in Melbourne.

  1. 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:10.1016/j.healthplace.2011.06.012

  2. The concept of the distinction between safe and good water is from Dr Dharma Dharmabalan. 

  3. Rushton, A. M., & Carson, D. J. (1985). The marketing of services: Managing the intangibles. European Journal of Marketing, 19(3), 19–40. doi:10.1108/EUM0000000004748

Do water utilities need to have customer focus?

Customer focus is the prime purpose of all organisations, or so you would think. Many engineers in water companies believe that legislation and technical standards only govern the level of service quality experienced by customers. Engineers and scientists are the experts, and there is thus no need to ask the lay-customer what they want. One engineer expressed this view succinctly on LinkedIn:

You have to deliver good quality services, but I don’t get the concept that the customer is best placed to decide what those services are. They know they need pressure and they know if they don’t have water out of their tap, but beyond that, they have only a small understanding of the what is required to run a safe and efficient water supply system.

The many engineers and scientists in water utilities that hold this view are wrong. They make the assumption that if the technical quality of a service is sufficient, then customers will be happy. This assumption is not correct—the Grönroos model of service quality shows that technical quality is only one aspect of the total customer experience.1 To influence the total perceived quality, many non-technical parameters, such as public image and functional quality, need to be managed.

Customer focus: The Grönroos model of service quality

Grönroos (1990) model of service quality.

There is a significant paradigmatic difference between engineering and marketing. Engineering is based on predictable physical systems, while marketing builds on the inexact science of consumer behaviour and is predominately about managing perceptions. There are many examples where, even though technical quality is almost perfect, the understanding of consumers of the level of service is still small. This problem exists because the human dimension is not part of the equations that govern water systems.

water tasting

Tasting water.

One perfect example is the aesthetics of water. Although it makes no difference towards the actual safety of the water, consumer perception is that drinking water is colourless. Taste is another variable that is not easily controlled or measured through engineering. Research shows that the water itself does not only influence the taste of water but moderated by environmental variables, such as the material of the cup.2

Perception is everything in marketing. This is also important in monopolies because publicly owned business are controlled by politicians who want to keep the voters happy.3 It could also be argued that all customers in a publicly owned system are all shareholders, and their views should be taken into consideration—any other view could be considered arrogant.

water companies should be managed by marketers

In my recent interviews with customer stakeholders in reticulated water, the voice of the customer clearly indicates that they want to improve focus on their needs. A clear theme in the data is the occasional disconnect between engineering and service staff. One respondent told me (paraphrasing): “water companies used to be run by engineers, now they are managed by accountants. In the future, they should be controlled by marketers”. In other words, we should account for the non-rationality of consumer behaviour.

The concept of bringing engineers and marketers together was beautifully expressed by Philip Kotler and Sidney Levy who write that: “Marketing is customer satisfaction engineering”4.

  1. Grönroos, C. (1984). A service quality model and its marketing implications. European Journal of Marketing, 18(4), 36–44. doi:10.1108/EUM0000000004784 

  2. Krishna, A., & Morrin, M. (2008). Does touch affect the taste? The perceptual transfer of product container haptic cues. Journal of Consumer Research, 34(6), 807–818. 

  3. Having said this, a good friend of mine once stated that “voter satisfaction is not a good proxy for customer satisfaction”. 

  4. Kotler, P., & Levy, S. J. (1969). Broadening the concept of marketing. Journal of Marketing, 33, 10–15.