Editors' Cuts

Securing Support for Customer Experience Investment

Justin Stephani
Insurance Experts' Forum, September 24, 2013

Customer experience is increasingly becoming a crux of good business for insurers, yet, investing money in shoring up customer service operations can still be a tough sell – where’s the ROI?

“Everyone gives lip service to customer service, but when you get down to brass tacks, it’s cost,” said John Goodman, vice chairman, CCMC LLC, a customer experience consulting firm, while at the PCI Technology Conference in San Antonio on Monday. “A lot of CIOs get it, but it comes down to how you show the potential for improvement, how do you quantify it?”

Throughout his hour-long presentation, Goodman made the argument seem clear.

With his most convincing, direct data, he pointed out that the customers most at risk of being lost to competitors are those who experience problems but don't complain.

First, he explained, “you build the business case by getting data from going to a sample of your customers, and saying did you have any problems, did you tell anybody at the company about it, if so, were you satisfied, mollified or dissatisfied after that?”

By asking customers this, Goodman found that among the customers experiencing a problem or concern, only one quarter of them contacted the company. Then a data breakdown of the likelihood of renewing with or recommending a company among each set of respondents found that customers who experience a problem, seek help, and are subsequently disappointed with that help are only slightly less likely to renew/recommend than those who don’t seek help at all.

Also interesting from this set of data, customers who complain and are satisfied with the company’s response are the customers most likely to repurchase, even among those who don’t experience a problem at all. Goodman explained that helping a customer through a problem can help build a bond that adds to the customer’s loyalty, to the point that one of his client’s once proposed building a fixable problem into the process so that customer service could be there to help – the idea did not get seconded.

The most effective way to do this, according to Goodman, is to own up to common problems or concerns with the process and pre-empt them if possible. Otherwise, he explained, most customers don’t communicate the problems they experience due to a behavior called “trained hopelessness.” Goodman has a pet phrase for combating this behavior: “In this industry, you should be able to do psychic pizza a lot.”

Psychic pizza is a concept Goodman uses often with insurers. It’s derived from a hypothetical where a consumer mentally decides they want pizza, only to hear a pizza deliverer knock on their door moments later. Goodman believes insurers are in a position – with the necessary touch points and data capabilities – to address customer needs or problems before the customer has a chance to be hindered by them.

Goodman explained why providing great service is more cost-effective than just good service: “Proactively providing information on how to avoid problems or get more out of your product gets you a 32 percent lift on average for a repurchase or recommend, more than any other factor taken into account, including personal relationships developed over months and no unpleasant surprises.”

His suggestion? In a confirmation or welcome e-mail after a purchase is made, present the three pain points or problems most often suffered by customers, as well as the information required to avoid them; customers will not have had a chance to form a negative opinion, but will be willing to help themselves avoid the pitfalls.

He warned insurers that marketing will most likely disagree with this strategy. However, he said, “negative word of mouth can trump marketing: USAA gets more than 75 percent of all of its new customers from personal referrals.”

Goodman’s advice for beginning to improve word-of-mouth and build a business case is to find a couple quick wins. Seek out common frustrations until you find a couple that are caused simply by inefficient processes, which should result in saved time for internal staff and avoided strife for customers. Once momentum is going, buy-in for more thorough Voice of Customer (VOC) research and eventually a bigger customer experience investment should be easier.

At the end of the day, CFO buy-in is crucial. Goodman found that in a recent survey, “Where buy-in existed, 40 percent of VOC processes were very effective in getting things fixed, and 55 percent had significant increases in customer satisfaction.”

And in today’s increasingly consumer-centric market, every department, from underwriting to marketing, stands to gain from an improved customer satisfaction.

Justin Stephani is associate editor for Insurance Networking News.

Readers are encouraged to respond to Justin by using the “Add Your Comments” box below. Healso can be reached at justin.stephani@sourcemedia.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

Comments (4)

How did the 32% lift in renewal with proactive communication get proven? This supports our direction and learning but we struggle to get as factual as you have here. I Would like to be able to quote that information.

Posted by: Chris A | September 29, 2013 8:31 AM

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How did the 32% lift in renewal with proactive communication get proven? This supports our direction and learning but we struggle to get as factual as you have here. I Would like to be able to quote that information.

Posted by: Chris A | September 29, 2013 8:31 AM

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Couldn't agree more wholeheartedly with this analysis. However, using USAA here -- an outlier in the industry with a tight-wed niche, military families -- is largely a self-fulfilling prophecy rather than a conclusive argument about the efficacy of WOM. The argument here would be so much stronger if based on similar stats from a MetLife, Pru, or New York Life, where it certainly would not be 75% but would still be an impressive number.

Posted by: Kenneth H | September 27, 2013 12:48 PM

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I like your ideas. Are there any off the shelf software programs out there that can accomplish these efforts to be proactive and stay in touch with the client regarding the products the have purchased from you?

Posted by: Jean B | September 24, 2013 2:17 PM

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