We have found that companies must effectively manage the process of customer satisfaction to gain and retain profitable customers. However, a company cannot manage customer satisfaction without being able to measure it.
In today's marketplace, the consumer is a moving target. To meet the needs of these changing consumers, certain questions must be answered:
- What improvements are most likely to encourage your customers to stay with you for the long term?
- How do you prioritize your changes? Most organizations can identify numerous improvement options, but can you determine which improvements will benefit your firm the most?
- If the customer is a moving target with increasing service expectations, how can organizations stay two steps ahead while remaining cost effective and focused on the necessary change initiatives?
- How do you align the organization around service improvements to ensure a consistently high level of service every time clients interact with your organization?
Measuring What's Important to Customers
Most executives know that change is necessary, but are uncertain what changes will enhance long-term profitability. The overwhelming structural changes taking place in the insurance industry can disrupt decisions involving customer service strategy. Because the quality of customer service and its impact on profitability is difficult to quantify in real terms, most executives have trouble evaluating their options for reforming their organization.
A process has just been developed to measure customer satisfaction and its effect on the bottom line. Originally developed for the packaged goods and high-tech industries where product life cycles averaged about 18 months, the Creating Lifetime Customers (CLC) program has been adapted to claims services.
CLC succeeds in measuring claims service because it follows these business tenets:
- Claims service is the primary reason consumers buy insurance.
- The effectiveness of your claims service helps determine renewals, new sales, and underwriting strategy.
- An effective process must measure the service of your brokers.
An Overview of CLC Research Design
While loyalty is only a feeling to the customer, it influences the company's bottom line.
This new approach to customer satisfaction research changes the service process by creating corporate strategies and best-practices job standards. Much of the service measurement research in the past has asked global questions, such as 'Were you satisfied with the claims settlement? Was the claims adjuster courteous?' This information is important, but its generalizations reduce the prospects for meaningful change initiatives. There is also no certainty that any changes will improve customer satisfaction. Therefore, getting a true measure of customer satisfaction must include the full claims service process as well as the professional skills of the front-line staff.
The goal was a program that gives executives enough information to benchmark their organization's current level of service as perceived by the consumer, identify corporate strengths and weaknesses, and correlate these measurements to a profitable bottom line. It had to be specific and actionable. Briefly put, insurance executives needed a method of gathering the data that was:
- Usable today
- Implemented economically
- Accomplished with no adverse impact on current operations
- Able to provide detailed demographic analysis
- Capable of meeting their business requirements
With these objectives, a select team of research, marketing, and customer-satisfaction specialists began the research design process. The final phase of the research resulted in a matrix that measured both the three key components of the claims-service process and the four critical levels of professional service skills. The final data measure these factors in a variety of ways and at different points in the claims-service process.
Customer Satisfaction Matrix
The customer satisfaction matrix contained measurements of more than 1,300 data points and countless combinations of statistics, such as:
- Current-customer satisfaction and loyalty measurements for the company
- Ideal customer satisfaction and loyalty, and gap analysis
- Key areas of service competence and major areas of customer dissatisfaction
Results included breakdowns by claim, adjuster, broker, client demographics, etc. which identify these segments:
- Norm
- High
- Low
- Average
- Deviation from segment norm
- Highest professional skill
- Highest service competence
- Other determining factors
The depth of detail and accuracy of this new research illuminates the four fundamental challenges introduced in the first part of this report. The fundamental concern in interpreting the data is how today's executive can make meaningful changes for the insured and have a positive impact on the agency's bottom line.
How CLC Research Can Assist Executives in Their Decision Making
CLC answers the question: What is the relationship between customer satisfaction and customer loyalty? Customer loyalty is directly proportional to customer satisfaction; therefore, increasing customer satisfaction increases customer loyalty. Companies that increase their loyalty to the customer in turn increase customer loyalty to the company. More loyal customers leads to higher profits.
Providing a Current Benchmark of Customer Satisfaction
It's impossible to set meaningful service-improvement goals and measure the success of your changes unless you have a benchmark for rating customer satisfaction. CLC gives organizations a benchmark measurement on their delivery of customer satisfaction and a model to identify areas to improve. The current benchmark of customer satisfaction helps establish organizational goals for continuous quality improvement. Today, these goals must include customer satisfaction to reflect how a company intends to address prospective changes and increase profitability.
Providing a Measure of the Current Customer Loyalty
Customer loyalty for a service provider is measured in months, not years, because today's customer demands excellent service, and if they aren't satisfied, they'll change providers with little delay. Successful businesses make it easy to transfer to their services, rewarding the customer who makes the switch.
CLC identifies both the current level (benchmark value) of customer loyalty and the current percentage of the customer base that is loyal. Understanding these characteristics of the customer base is critical to the insurance industry because:
- Loyal customers are the most profitable segment of an organization's market share.
- Loyal customers form the segment most easily reached, because they're your customers.
- Loyal customers are the segment most easily influenced by you, because they are already favorably predisposed to you.
Loyal customers serve as an early warning system, especially in areas of service. Because they have more invested in their relationship with you, this group of customers will react immediately to poor service. In other words, they will complain about poor service, whereas the non-loyal customers just leave.
Thus these actions of the loyal customers have a direct impact on the bottom line. Because the CLC matrix identifies those factors that have the most influence on customer loyalty, you can evaluate what improvements are necessary and their influence on customer loyalty. CLC also demonstrates how to cultivate more loyalty in customers.
Expanding Your Revenue Base by Increasing Customer Loyalty
Loyal customers provide these three benefits to agencies:
- They will continue to do business with you.
- They will buy additional products and services.
- They will spread positive comments about you to help you recruit new customers.
Loyal customers contribute more to a company's revenue base than any other market segment. It costs five times more to gain new customers than renewals (CSIO study).
Proportion of Loyal Customers to Revenue Base: Identifying Areas of Customer Dissatisfaction
Research should at least measure customer dissatisfaction. Fix any problems as soon as they are detected and your customers will have fewer reasons to join a competitor.
The first step in satisfying customers is to find the root of customer dissatisfaction. Next, the research can identify which areas of service distress the customers and erode their loyalty. Not all service problems drive customers away or harm their loyalty. Some service problems just irritate the customer, while others anger them. Poorly treated customers damage a company's reputation in the business community.
Identifying Areas of Service Competence
Excellent service is part of the daily activities that incrementally improve the work an agency performs for the customer.
A company's strengths are the areas of service that build customer satisfaction. Most organizations can list their strengths. Every company's list differs from the competition. Understanding what makes a company unique will propel it far in the marketplace.
Satisfying a customer will not necessarily produce loyalty, but it is an important ingredient leading to this objective.
Tracking the Effectiveness of Your Service Change Initiatives
Any change must be based on a palpable measurement of a deficiency. An organization must adjust to the customer's actions, not institute changes based on perceived shortcomings.
Tracking systems that measure the effectiveness of change initiatives are critical because all efforts will not succeed even if some exceed corporate goals. By keeping tabs on customer satisfaction, organizations can measure all future changes against a current customer satisfaction baseline and track the impact of change on customer satisfaction and loyalty. Unless an organization has specific information on what creates customer satisfaction and loyalty, it is vulnerable to implementing initiatives that diminish key profitability factors.
These measurements will also allow organizations to track the relative cost-effectiveness of service changes, especially as they affect service profitability. By measuring these factors regularly, your company will improve its decision-making capabilities in the areas of customer satisfaction and loyalty.
In Summary
Information is power. By knowing their client base, insurance agencies can expand profits, save money on change initiatives, and reduce organizational stress. Companies can be confident that their decisions meet their customers' needs-and cement customers for life.