Regulating for Excellent Customer Service

6th Jul 2016


Minutes of the meeting of All Party Parliamentary Group on Customer Service - 5-6pm, Wednesday 6 July 2016


Philip Davies MP (Chair)
Chris Evans MP
Jim Shannon MP
Mike Petrook – Institute for Customer Service 
Jonathan Davidson - Financial Conduct Authority
Stephanie Tobyn - Office of Rail and Road
Elisabeth Davies - Legal Services Board
Michael Grenfell - Competition and Markets Authority
Arthur Pretorius - South West Trains
Jonathan Berlusconi - Civil Aviation Authority
Tim Hawkins - Manchester Airports Group

Minutes by Simon Moorcroft – Cavendish Communications

Welcome and introduction

Philip Davies opened the meeting by outlining the main purpose of the APPG as bringing parliamentarians, businesses, third sector organisations and other stakeholders together to discuss and share best practice on delivering excellent customer service, something he made clear was absolutely essential. 

Mike Petrook outlined the work of the Institute of Customer Service in helping organisations gain tangible business benefits from the way they deliver customer service and improve customer experience.  He stated that sustainable relationships with customers are based entirely on trust – noting that people today are much more concerned about the transparency of organisations and the attitude displayed by their staff than price. The exception to this is the energy sector. 

Mike made clear that heavily regulated sectors do not perform as well as others in the Institute of Customer Service’s UK Customer Satisfaction Index (UKCSI). He noted that telecoms and utilities companies are typically at the bottom of the Index and that the next UKCSI is expected to show that banks and building societies have seen ratings fall again. 

In light of this Mike asked that the meeting consider questions around why heavily regulated sectors were not working well for customers; what lessons can be learnt from sectors with less regulation; and what the APPG can feed back to government on what regulators and government can do in this area.

Chris Evans made clear that for him being able to pick up the phone and speak to a real person at the other end was key to good customer service and that old, monolithic organisations were the worst at this. In his view though less regulation and box-ticking requirements meant poorer customer service.

Mike responded saying that increasingly consumers wanted personalised services and not simply a one-size-fits-all approach that they are expected to fit in with. 

Why do regulated sectors score more poorly on the UKCSI? It is the nature of the industry or linked to regulation?

Elisabeth Davies made the point that one of the problems in regulated areas was that there was less choice for consumers, making it more difficult for them to take custom elsewhere.  She cited the example of GP services. 

She also noted that there is a wider problem around access to information in certain sectors and suggested trying to map UKCSI statistics by those who were satisfied and those who are informed customers. 

Additionally, she stated that vulnerable customers are not a static definition based on one demographic and that is far more dynamic and shifting. In addition, some markets by their very nature make consumers more vulnerable. 

Chris Evans responded by making the point that some sectors naturally have lower customer service satisfaction levels, not because the service is poorer, but simply because the outcomes are naturally worse for people. He gave the example of courts or hospitals where outcomes are frequently negative by the very nature of the work being carried out.

Mike, in response to Philip’s question about what constitutes customer service, made clear that customer service is about quality, efficiency and ensuring consumers get the information they need which in turn make up the customer experience. He said that it is not simply a measure of how complaints are handled. 

Is there a contradiction between customer service and regulation?

The CAA said it has a huge range of customers and regulatory functions because of the range of its responsibilities. It noted that because the organisation is funded by the members and is required to provide services for them at the same time as regulating those members there is often tension. To answer this and boost its role as a service provider, the CAA created a Shared Service Centre.

ORR’s position is that it does not try to tell companies what to do and does not try to be experts and know more than the transport operators. Regulation though plays more of a part here as there is less competition than in other industries. 

South West Trains did not believe regulation helped to deliver customer service and instead it governs day-to-day operations and activity rather than influencing culture. Instead, the company writes clauses relating to customer service into staff contracts with obligations that must be achieved. 

One of the chief problems they identified was that franchise rail agreements too often don’t allow sufficient flexibility for operators to deliver the services customers want. SWT gave the example of a separate agreement that was negotiated to deliver extra services and facilities to improve the whole customer experience for the Glastonbury Festival - but it was noted that such arrangements would not be viable for normal rail operations. 

In less-regulated sectors isn’t regulation essential to deliver good customer service?

The CMA made clear that, in their view, competition was the single most important thing to ensure customer service is prioritised and improved. They stated that only if companies have to worry about competitors will this happen. They advocated that greater competition is needed in regulated sectors and that while regulation was definitely needed it should be minimal and designed to set basic standards that everyone conforms to. 

Isn’t the problem that in regulated sectors companies just meet the standards they are required to – in unregulated areas companies strive to always be better?

ORR made clear that regulation was essential to protect vulnerable customers despite the fact it is disliked and that competition won’t deliver this. However, the CMA countered that supermarkets and other food suppliers don’t need regulation to provide good services for people and ensure all their customers, of whatever age, are catered for and looked after. 

Manchester Airports Group pointed out some of the absurdities that regulation has led to, citing the example of a requirement to supply a certain number of air bridges at the airport even though they were not needed.  MAG noted that there is a penalty if these are not provided. It was pointed out these requirements can undermine businesses because of the extra costs they impose. 

The Legal Services Board countered that this was not a choice between ‘regulation or no regulation’ but rather ‘getting the right regulation’. They noted that there is a greater awareness of the need for more outcomes-based regulation that can take account of differences in different companies and sectors and the needs of vulnerable customers. 

The Solicitors Regulation Authority agreed with this point and said this was something they were trying to ensure so that the growth and development of legal firms was not inhibited. They also made the point that consumers of legal services found it difficult to access information, particularly around rankings for legal firms.

The FCA said there was plenty of competition in the financial services sector but there were questions around what areas companies compete on. Their priority is to ensure firms are as open and transparent as possible and that they provide sufficient information to customers that is accessible. 

The FCA commented that it does not set service levels but that they do assume a certain level of service will be provided by firms in financial service – as such a reasonableness test is used when assessing performance. They are also now focussing more on assessing the deals and offers that companies do to get themselves recognised at the top of Google results pages, particularly whether quotes that are provided are for the full service or package or whether many elements are simply added on later. 

Has the FCA’s work caused a fall in UKCSI ratings for banks and building societies?

Mike Petrook noted that high expectations consumers have because of their experiences in other sectors. He noted that if things work out customers are not necessarily any happier or more satisfied as they simply expect some elements of service to happen as ‘business as usual’. However, if things go wrong customer satisfaction can slip significantly. 

The FCA said this need not happen automatically as, in such cases, providing banks design their customer services in a way that demonstrates they care about the customer there is the possibility of creating an understanding of problems as they occur. 

Yet it was noted that the scandals in the sector in recent years have undermined people’s faith that this will happen. As the FCA reveal more bad practice, customer faith and satisfaction in the near term will fall and will make it harder to restore trust.

The FCA noted that they are keen to help customers get the information and tools they need to look after themselves as well as working to ensure firms prioritise the needs of their customers. 

Should less useful regulation be got rid of?

Attendees tended to agree that more outcome based regulation is essential and that regulators had to become more responsive to the sectors and businesses they are concerned with rather than simply taking a monolithic approach. In particular there is a need for regulators to be more anticipatory of changes in the sectors they cover. 

Download: Minutes - APPG Customer Service Meeting - 6 July 2016 - Regulation

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