Use customer insights for discretionary services

Organisations — across all industries, including beyond water — are increasingly adopting customer-centric approaches that emphasise service over purely product-centric, output-orientated ones.

But the two approaches are not in opposition to one another. The focus of customer-centricity is the emphasis on deeply understanding customers’ priorities, needs and values, soliciting and inviting feedback before output. This also results in a significant capacity to improve the ability of water utilities to receive funding and deliver products, including in particular, discretionary services.

Customer willingness surveys

In order to demonstrate customer willingness to pay for discretionary services, varying from addressing urban heat to improving waterway conditions, one significant avenue is well-designed customer willingness surveys. What makes them well-designed is the adoption of principles that underpin a customer-centric approach.

“Water utilities have to show that they’ve consulted with customers and customers have said yes, we want you to provide that and we’re willing to pay for it,” said Dr Jeremy Cheesman, Director at Marsden Jacob Associates.

Cheesman will be delving into this topic and sharing some of his own experiences on Day 3 of Ozwater’21 in his session "Demonstrating customer willingness to pay for discretionary services in Tasmania".

“One of the ways we do that is essentially a customer service based approach where we go out and survey customers. We essentially show them the proposition that water businesses are putting up in their pricing proposals and ask them about their willingness to pay for those goods and services,” he explained.

Defining good design

For water businesses to effectively persuade relevant economic regulators that customer willingness to pay is present, it’s important to think about how willingness is demonstrated in the context of survey design.

The design of a "bill check stage" — the opportunity for customers to concretely visualise costs and the option to revise declarations of willingness upon completion of the survey — is a crucial component.

Once survey participants are recruited — usually from a water utility’s customer database — they’re taken through a series of questions asking them if they’d be willing to support and pay for a particular service that will cost a certain amount.

At the end of the survey, a mock bill is populated with the data from the customer’s last water bill and what they’ve preliminarily indicated they’d be willing to pay for.

“Customers actually see a snapshot of what their water bill would look like in the future,” Cheesman said of this approach.

Customers are asked if they’d be willing to pay such a bill in the future. For any customers who respond no, they’re able to adjust until they arrive at a bill they agree with.

“That’s really important because willingness to pay needs to be considered in the context of the total bill impact,” he said.

It’s a layer of context that provides a missing piece of the puzzle.

“You get a very fundamental change sometimes, where people see the full bill impact,” explained Cheesman. “We probably see 10 to 20% of people go back and change their willingness to pay for these services after they see that bill impact.”

It’s a design feature that may soon become much more commonplace given its efficacy in accurately gauging the level of support customers have for discretionary services, with this surveying approach having been used in Tasmania, as well as with various other water utilities providers.

“Our mechanism allows them to adjust based on that. There is no other surveying approach that does that at the moment.”

Hear more from Dr Jeremy Cheesman and be led through screenshots of the survey itself on Day 3 of Ozwater’21 in his presentation "Demonstrating customer willingness to pay for discretionary services in Tasmania". The event is the largest water conference in the Southern Hemisphere and will be held in Adelaide and online from 4-6 May 2021. Click here to register.