By Antonio Madeira, Head of Water, Mozambique
Creating stronger service providers, a core strategic goal for WSUP’s 2020-2025 business plan, requires development of scalable business models that allow services to be provided to low-income customers at a profit.
There are two fundamental ways to make a business model more profitable: increasing revenue or reducing costs (and preferably both). Good customer service is critical for both.
Good customer service leads to greater customer satisfaction, timely payment of bills and customer advocacy, which in turn drives new customer growth via referrals. Poor customer service leads to customer complaints, which are resource-intensive to manage, defaults on bills, negative word of mouth, higher rates of customer churn, and even vandalism.
It can be tempting for public service organisations like utilities to assume customer service is less critical because they are the only provider in the market. However, an absence of direct competition does not mean, customers have no choice. Customers can choose an illegal water connection, they can choose to purchase bottled water, they can seek an alternative source.
Águas da Região de Maputo (AdeM), the primary water utility in Maputo, recognises the importance of good customer service and has been working with WSUP for several years to develop a model that allows them to be more present and available for their hardest-to-reach customers.
Consequences of undervaluing low-income customers
Like many of the utilities WSUP works with, maintaining a consistent, reliable, and financially sustainable engagement with low income communities had proved challenging for AdeM. A lack of trust had emerged between low income communities and the utility.
Firstly, there was a broadly held perception that water services in low income communities were not prioritised due to less water supply network coverage, fewer household connections and comparatively less water consumption making the market less attractive to the utility. This was exacerbated internally at AdeM, by weak bill collection efficiency in poorer areas of the city.
Secondly, there was a belief among customers that their service was substandard, particularly in relation to wealthier neighbourhoods assumed to receive a better supply experience. For example, in times of water shortage, low income communities believed their supply would be cut first.
The extent to which these perceptions were accurate was arguably less important than the need to change them. What AdeM needed was to shift their relationship with customers into a position of greater trust and cooperation.
Customers needed to feel valued by AdeM and equally deserving of quality service and attention awarded to higher income areas. In return, AdeM needed low-income communities to view their service as good value for money and worthy of timely and consistent bill payments.
The power of community-based organisations
AdeM currently contracts several community-based organisations (CBOs) across the city. The model operates on a performance-based contract whereby responsibility for local monitoring of bill payment, meter reading, delivery of invoices and reporting leakages are delegated to a community-based organisation. CBOs conduct their tasks by visiting low income customers at home, whilst maintaining daily communication with AdeM, through the zone manager.
The decision to hire CBOs was driven by the fact that the CBO staff would be working in their own neighbourhoods. They would therefore have better knowledge and appreciation of the problems and be likely to adopt a more authentic, understanding, and effective approach to engaging low income communities.
Once recruited, CBO staff undergo training delivered by WSUP and AdeM, covering technical aspects such as understanding the billing systems, through to softer skills such as community interaction techniques.
The difference between this model and use of traditional meter readers is that the local staff have more time to dedicate to building relationships with customers, making themselves available for any queries or feedback during their regular visits. This change has been positively received by residents.
“We now have someone to report to at the utility Águas da Região de Maputo as well as local young people who can read water meters in the neighbourhood,” says Carlota Zefanias, resident Aeroporto B, Maputo.
Benefits for AdeM
In areas managed by CBOs, AdeM has seen an increase in debt recovery values, billing rates, and reading rates of meters, which enable the utility to calculate bills more accurately. AdeM have also seen the CBOs deliver added value in managing dissatisfaction in times of crisis.
An increase in water tariff in 2018 unfortunately coincided with a review of AdeM’s billing cycle, which led to multiple bills in quick succession and unexpected invoices, understandably impacting the poorest communities most significantly.
Whilst better planning would have been preferable in mitigating customer dissatisfaction, the availability of CBO staff to assist with customer queries, explain the changes, be sympathetic to their frustrations and support customers in managing a debt repayment plan, meant that bill collection efficiency recovered quickly.
Deployment of the CBO model has also led to significant improvements in the tracking of error cases and account anomalies. While collecting readings, CBOs will sometimes encounter obstacles such as faulty meters, water damage obscuring visibility, or the customer simply being unreachable.
Thanks to the CBO staff capturing the most frequent and impactful error cases, AdeM has an up-to-date customer database and a better system for prioritising action to improve quality of service supply.
Approximately five years from the launch of the CBO approach, the model is delivering impressively and is a fantastic example of how customer-centric investment in simple human touchpoints can transform the service experience and have a meaningful impact on the bottom line. Bill collection efficiency increased from 50% in 2009 to 80% in 2016 in the newly served low-income areas. Additionally a customer survey found that 59% of households considered the water bill a ‘reasonable price’.
The model is currently being scaled up and implemented in 10 areas of the city, with the costs shared between AdeM and WSUP funders. A further five areas are planned to be included by September 2020. However, this is only the beginning. The CBO model was always planned to be developed in stages, culminating in fully delegated management of service areas whereby the CBOs will have complete responsibility for service delivery including billings, revenue collection, leakage management and customer liaison.
The delegated management contracts will be performance based with the CBO’s being paid an agreed percentage of the revenue collection. The principles of moving to this stage have been discussed and agreed with AdeM and the first pilot is expected this financial year with replication to several areas in 2021/2022.
Arsénio Mate, project manager at AdeM, describes the approach as part of the organisation’s plan to provide better quality service to customers, especially for those living on the periphery. “We welcome the initiative and we hope they will continue working with us to serve those in need with good quality service”, he says.
This work is part of WSUP’s strategy to support AdeM in improving operations and service delivery, through a wider utility improvement programme over the next three years. This strategic approach addresses AdeM’s water service delivery in a holistic framework to improve KPI’s for service delivery, commercial returns and to meet future demand including reducing NRW losses.