What is about to happen?
The water market in England is changing! It will be opening to competition on 1st April 2017. What does this mean? It simply means that small business customers will be able to get the lowest possible price for their water. It will be the first time that the customer can choose their supplier.
It’s the biggest shake-up in the water industry in nearly 30 years
Under the current water supply program, businesses, along with domestic consumers, can only buy water from a local supplier, for example Thames Water.
Water market deregulation in England will create a competitive market place in which regional monopolies no longer exist for business customers. This will bring good opportunities for businesses to improve their water efficiency, reduce and manage costs. From April, the water supplier will also become a retailer.
We will see a competitive market place in which regional monopolies no longer exist
Is this something new?
The privatisation of markets started with Margaret Thatcher and the government’s decision in 1986 to sell off The British Gas Corporation. It was the biggest privatisation of a state-company in British history. The Electricity Boards were then privatised in 1990. 1996 saw the gas markets opening, and consumers were given options of gas provider for the first time. By 1998, the electricity markets were opened in turn.
The Water Act 2014 came into force in the May, setting the ball rolling for the opening of the water markets in England.
Where is this happening?
In 2008, Scotland was the first country in the world to open its market for water and sewerage services for all public sector, non-profit and business organisations. On 1st April 2017, non-domestic water markets will open for the first time in England.
Can we learn anything from other utility arenas?
Research shows that small business consumers are making educated choices towards the end of their contracts, and that there were a greater number of new contracts taken out with a wider variety of energy retailers this year. Competition between suppliers has stimulated improvements in quality of service and there is yet more opportunity for innovation by the water companies here. As of March 2016, there were 65 active retailers in the non-domestic energy marketplace.
There are concerns as to whether water companies are ready to offer a competitively priced service, but with careful planning and looking at the Scottish de-regulation, it is indeed possible for suppliers to prepare, and make the most of the opportunities that arise.
Will this be profitable for you?
The initiative has already had a huge impact on the industry. Deregulation is claimed to be worth £2.9bn over 30 years. Britain maintains an extremely competitive energy market which has provided us with among the lowest energy prices in Europe.
Deregulation of the water market will be worth £2.9bn over 30 years.
There are positive implications that come with increased competition as business owners select their water supplier for the first time. Water companies that are first to invest in improvements to services and innovating their communications, can hope to attract brand new customers that would previously have been unattainable.
What do you need to look out for?
As customers will be working with new suppliers, new billing practices and methods will emerge. For example, Thames Water and Portsmouth Water have for now given their retail portfolios to Castle Water, and United Utilities have merged with Severn Trent to form Water Plus.
As a result of this, customers will be dealing with different Account Managers and customer service individuals. Payment terms will change, and for any technical problems, retailers may need to act as middle men.
There are also domestic water firms that have set up new trading units to sell their services to business-only customers. 14 water companies have already applied to become licensed retailers.
How can water companies keep and attract customers?
Consumers will be needing good communications from suppliers in order to find information about their energy provisions, helping inform choice about switching. Turquoise has seen motivations and influences differ among consumer groups and also predict the role of the broker to be much more key in this new competitive arena.
Price is still the broadest motivator for consumers to switch, with 91% of domestic consumers stating they switched in order to save money.
With business consumer engagement, smaller businesses have the same problems that limit engagement amongst domestic customers. Energy TPIs will be crucial in moving forward with these customers relying on trust and detailed knowledge of their business. With better prompts, the increasing role of intermediaries and faster switching will help assist engagement.
Faster switching will help assist engagement.
What is our experience?
- 30 years of working with water industry clients – domestic and commercial
- Working with utilities customers during the de-regulation of the gas market
- Partnering with our client Scottish Water who are already operating in a deregulated water market
We are aware that service costs have been cut by £10 million since 2008 as suppliers in Scotland compete in the market. Research from Turquoise shows that total transparency to internal and external stakeholders is the new market trend.
How you will be affected?
Turquoise understand that competitive markets need engaged consumers who can access and act on offers in the marketplace. We know that within the current water marketplace, there are large numbers of consumers who are still disengaged. Price comparison energy and utility switching will therefore become a crucial point for future engagement.
How can Turquoise help you gain an advantage?
Consumer behaviour will drive water market development. Therefore, understanding of consumer behaviour will be a critical component in how this market will evolve. By using a market research company that is firmly established and experienced in this sector, you will position yourself and establish who your customers are, what they want, and how to communicate with them. The quicker you address these points, the better your chances are of getting ahead of competitors as the market opens up.
Turquoise can help you understand your consumer which is crucial to your success as the water market opens up for competition.
With our experience across Water and Utility sectors, our research can be implemented to drive your water company forward in finding ways to incentivise businesses to change suppliers.
Only one third of businesses were cognisant that deregulation was shortly being implemented.
By partnering with Turquoise, you can make sure your business is a step ahead of the competition by using our innovative market research methodologies to understand what will make a business switch to your service and how to keep hold of your valuable customers.
If you’d like to know more, we would be delighted to hear from you.