Are Tap Water Managers Lazy Marketers?

Water is like air—a naturally occurring substance without which life is not possible. But unlike air, tap water is a commercial commodity that is only available at a price from water utilities.

In developed countries, tap water is provided through reticulated systems. Pipes in your street deliver water directly to your house, and you pay the price, depending on the amount of water used. Even though tap water pricing is a controversial topic, it is very cheap. With prices of less than one cent per litre, filling a bottle of water costs practically nothing. But, not all water is the same. Purveyors of bottled water charge hundreds of times the price people pay for tap water, even though the core product is the same.

Lazy Marketers?

In an episode of Australian comedy show Gruen Transfer, advertising executive Russel Howcroft facetiously explained this price difference by stating that water utilities are lazy marketers. Is Russel correct?

Marketing Tap Water

Most managers at water utility companies believe that there is no need for marketing because reticulated water is a natural monopoly. But marketing is more than selling and advertising. In the words of Phillip Kotler, marketing is “customer satisfaction engineering”. Marketing is the process of creating value for the customer. 1

Bottled water companies create brands that are built on images of pristine rivers and healthy happy people. Water utility companies mostly brand themselves with technology, proudly showing their latest treatment facilities, pumps and pipelines. Bottled water companies focus on emotional aspects of their brand, while water utilities follow a more rational technological approach.

Why are we willing to pay so much more for bottled water? Willingness to pay is, among other things, related to the level of involvement we have with the product. 2  Potable water is considered a low involvement product. We don’t care about the water, as long as it is available. Potable water derived from the tap cannot be differentiated from other potable water as all H2O is the same. Bottled water companies know this, so they increase the level of involvement and differentiate from the competition through effective branding. Bottled water companies create a brand personality by attaching images of naturalness and purity to their product. They never show the bottling plant, the pipes and pumps they use to create their product. Bottled water companies attach emotion to their brand, which increases our level of involvement and our willingness to pay.

NYC water does not suffer from marketing myopia
NYC water does not suffer from marketing myopia.

I am not arguing that through smart marketing water utilities can charge as much as bottled water companies—that would make having a bath a costly experience. Tap water is used for many purposes, including flushing it down the toilet, which limits the amount we are willing to pay. 3

Russell is, however, correct in saying that water utilities are lazy markers because they are pre-occupied with their internal technological perspective on the product. Why not focus more on the people who use the water? The above example from the New York City water company is an excellent case in point.

Footnotes

  1. Kotler, P., & Levy, S. J. (1969). Broadening the concept of marketing. Journal of Marketing, 33, 10–15.
  2. Cohen, M. (2000). Consumer involvement is driving up the cost. Consumer Policy Review, 10(4), 122–125.
  3. Levy, D. (1982). Diamonds, water, and Z goods: an account of the paradox of value. History of Political Economy, 14(3), 312–322.

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