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Some may view regulators signalling their willingness to impose significant fines for poor customer service as a positive step; it certainly indicates how serious service breaches will be taken, which is a good thing given the importance of service to the UK economy and society at large. Like any effective legislation or regulation, it should be a powerful deterrent and a signal of intent.

However, to my mind, fines are something that we should never have to resort to. In fact, they should be seen as a serious indication of failure. To address the current service issues, we need a long-term focus on the whole service journey based on true understanding of what a good outcome looks like for the customer. It’s about driving a service culture across all stakeholders, not league tables or just the service recovery elements.

This week’s announcement from Ofwat, that it will fine companies that do not deliver on their customer service promises, should be taken seriously.

The warning reflects the challenging reality that the water sector has consistently been among the lowest-ranking sectors for customer satisfaction in recent years – as shown by us in the UK Customer Satisfaction Index.

There are however some good examples within the water sector, and there are a lot of able people working hard to turn this situation around. I know from talking to many of our members – including my recent Head to Head interview with Mike Gauterin of Untied Utilities – the energies and efforts they are putting into their service agendas.

Ofwat clearly hopes that the announcement – and the threat of meaningful financial penalties that boards and shareholders are unlikely to tolerate – will motivate poor-performing water companies to address the root causes of any service failings. This will need a long-term approach and plan, with the service agenda being firmly in the board room and with a balanced approach and commitment from investors, customers and employees. We need to face into the need to invest in our infrastructure, and as customers – and investors through our pensions – understand the costs and benefits of this. We need full transparency of where funds are spent, and the outcomes should be effectively measured and publicly shared.

There are complex systemic challenges for this sector – even before you throw in climate change, crumbling infrastructure and a rising population. From a service perspective, reducing the number of complaints, getting things right first time, combined with effective communication and customer engagement, reduces unnecessary contact, which improves productivity and reduces costs. It will also help to strengthen trust and understanding. An enfranchised and less cynical customer base is essential, and companies should use the service agenda to rebuild this trust.

Looking to other sectors

Ofwat’s signalling should serve as a wake-up call to all organisations – not just water – that raising service standards needs to be a priority.

Regulators have been taking steps to monitor and enforce businesses’ commitments to their customers and service propositions for a while. Consumer Duty, which the FCA introduced to cover those in financial services last July, is a prime example.

When I spoke on the BBC’s Wake Up to Money earlier this week, I highlighted that banks and building societies were among the better performers for service and satisfaction recently. The sector ranked third overall in the UKCSI this January and saw only a 0.9-point decrease in satisfaction year-on-year. While this was a fall, it was the smallest decline of any sector.

What is more, banking scored highest in every complaint handling measure, scoring at least 0.5 points above the all-sector average in each. Banks are recognising that there are customers to be won and money to be made by taking the customer-focused, outcomes-driven approach to their service that the FCA is espousing.

And that’s the crucial point. Regardless of regulation, organisations need to wake up to the fact that good service means better business performance and ultimately better returns.

A learning for both businesses and regulators

There are further valuable lessons for both businesses and regulators following this week’s announcement. Another intervention from regulators confirms to me that cooperation and collaboration within and across sectors will be crucial.

If we can share insights on what’s working and what is not working when it comes to improving service, we will reverse the worrying decline in customer satisfaction.

But the most important thing for getting customer service back on track is… the customer.

Putting the customer at the heart of any business or regulatory decision will ensure that organisations can consistently meet their needs and expectations. By considering the impact and outcome of these decisions on the customer, businesses, regulators, and sectors will be well-positioned to make the cultural shifts needed to enhance service standards over the long term.

Jo Causon

Jo joined The Institute as its CEO in 2009. She has driven membership growth by 150 percent and established the UK Customer Satisfaction Index as the country’s premier indicator of consumer satisfaction, providing organisations with an indicator of the return on their service strategy investment.

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