Open .xls file (Microssoft Excel 19ko) : chart illustrating the level of satisfaction with customer
service aspects, broken down by company, amongst the municipal clientbase
Following over a hundred interviews with municipal water and wastewater treatment plant managers across Europe, Frost & Sullivan, the international marketing consulting company, has exposed a level of discontent among municipal customers, with customers' views and opinions indicating that equipment suppliers fail to satisfy. Deficient services, uncompetitive pricing and lengthy lead times are cited as the most alarming failings of current water and wastewater treatment equipment suppliers.
The study stresses the general air of frustration among Europe's water and wastewater treatment plant managers with poor after sales service, delivery and cost aspects of their equipment suppliers' performance. Some concerns revolving around product quality, reliability and skill base have also been voiced.
Saana Karki, Industry Analyst at Frost & Sullivan notes that the survey results serve as a sharp reminder for suppliers that customers will potentially exercise the power to defect to other equipment suppliers and seek out alternative ways to obtain water and effluent treatment solutions, including spare parts and necessary modifications.
"The criticality of quality expectations and associated level of supply performance have placed strategic priorities within premium products and engineering skills. In addition to such traditional prerequisites, value-added services (after-sales support, prompt response times) are increasingly used as a key measure of supplier differentiation," she explains.
Amid increasingly meticulous and selective purchasing patterns, tendering processes are becoming ever more vigorous. In a bid to woo discerning customers in the current challenging economic climate, companies must extend their competitive advantage and provide a compelling list of differentiators.
In order to combat the crippling effects of market saturation, the major challenge for a supplier in the municipal sector is to satisfy and at best exceed customer expectations and thus gain their target audience's loyalty. These objectives are currently taking precedence over efforts to attract new demand. Also, the municipal sector constitutes the core business for a number of suppliers, thus accentuating the pressures for retaining future market share and outperforming competitors.
Widening gaps are notably beginning to emerge between the more competitive suppliers and their less reputable counterparts. To ensure future success, it is clearly critical that companies seize the business opportunities and address the emerging priorities of the market or they may well face defeat.
Customer satisfaction is based on a blend of the key elements of the supply (product quality, reliability and technological skills) and the more value-added elements (customer service, price and delivery times). "However," Ms Karki notes, "the performance of individual companies varies dramatically across each factor, showing that while some are developing a competitive advantage, other incumbent suppliers need to rapidly address critical issues in order to build customer loyalty."
According to customer satisfaction ratings, each company has its own strengths and weaknesses. Ondeo-Degrémont, for example, performs adequately with its overall service and delivery times, but performs very poorly in the area of reliability. Meanwhile, both Passavant Roediger and Simon Hartley receive top honours for product quality, but both have been badly rated in the area of delivery times.
Companies such as Andritz, Paterson Candy and Enviro-Chemie record the highest marks in customer service excellence but are perceived as less competitive in their pricing. Still in comparison, ACWa and Brackett Group with some of the lowest overall scores in practically all factors show the least value for money, which does not augur well for the companies' future prospects.
According to customers' purchasing criteria and highest satisfaction levels, critical success factors for suppliers comprise product-related quality and reliability as well as technological expertise and industry experience.
Quality and security of supply are virtually taken for granted. Thus, technological capability and market credibility cannot be undermined or a supplier risks losing out to stronger-performing competitors. Sources of differentiation and competitive advantages lie in the rising importance of pricing and servicing, which the study identifies as the emerging strategic priorities.
Ms Karki remarks: "Perhaps most interestingly, serviceability and customer responsiveness have become close dictators of the ultimate rating customers give to a supplier while value for money is often the deciding factor when choosing or switching a supplier. Satisfactory service would include swift deliveries, specialisation and proactive after sales support."
"The lowest satisfaction levels with service are yet a far cry from the supply excellence experienced with the most supportive suppliers. Customers are increasingly able to differentiate suppliers on the basis of service, which at its best can act as a strong incentive for customer loyalty. However, increasingly, those that fail to deliver serviceability are likely to be traded off to more competitive offers. For most customers, appropriate after sales service is no longer an added benefit but a core part of an investment," Ms Karki explains.
Clearly, there are emerging opportunities for proactive suppliers to reap the benefits of a burgeoning service market. Despite tightening growth prospects, momentum behind demand is principally being sustained by widespread replacement and refurbishing activities, which will help sales of water and wastewater treatment equipment to the municipal sector hit the $3.70 billion mark in 2007. The dormant demand for the still under-exploited servicing and outsourcing will provide further impetus for market expansion.
"While demand for new installations is shifting into a chiefly replacement-related market, the quest for success necessitates strategic adjustments to ensure appropriate supply service and customer retention." explains Ms Karki. Customers are increasingly buying into improved after-sales service such as on-site availability for major overhaul maintenance as well as accurate delivery conditions for regular replacement orders for immediate remedial actions.
While interest in outsourcing is also on the rise, future contracts depend closely on a supplier's ability to convince customers of such supply forms. Most customers would still require greater belief in associated long-term cost benefits and greater trust in suppliers' expertise in order to involve a supplier contractually in maintenance and operations.
The municipal sector clearly presents a dynamic market where pressures for supplier excellence and customer specific service have never been greater than today. Frost & Sullivan have plotted customers' satisfaction against their expectations with various factors to evaluate both the total market trend and, more importantly, the performance of each individual supplier. Additional profiling of the investment trends, revenue forecasts and analysis of the outsourcing and service market developments has further revealed the nature of demand and competition.
Code: 6389 Price: ?5,000 Publication Date: February 2002
Background
Frost & Sullivan is an international marketing consulting company that monitors a comprehensive spectrum of high-tech markets for trends, market measurements and strategies. This ongoing research is utilised to complement a series of research publications to support industry participants with customised consulting needs. Interviews and free executive summaries are available to the press.
For more information contact:
Kristina Menzefricke, Public Relations Department
Tel. +44 (0) 20 7343 8376 or Fax. +44 (0) 20 7343 8380
(kristina.menzefricke@fs-europe.com)
