Retention Marketing In Insurance: The Key To Business Performance

Customer retention is at the heart of any relationship marketing effort. The efforts of the seller are directed towards creating new and sustained benefits on continuous basis, which ultimately leads to a deepening of the relationship. Customer Retention marketing is a process whereby marketers look at building a long term association with their customers. A retention or relationship marketing need to understand the needs of their customers at different stages, and provide products and services accordingly. Insurance is a price competitive arena, trust and customer service play huge roles in attracting and retaining customers. Excellent customer service is the key to gaining new customers and customer retention. India has a vast potential that is waiting to be tapped and this could be achieved with effective Customer Relationship Marketing. With the opening up of the market, a slew of changes are in the offing: reduced premium prices, increased product customization, focus on risk-based pricing and improved customer services. The introduction of any product or scheme involves a lot of research work and market feasibility studies. In India, a study of the consumers’ perception of a product and their expectations, the barriers to adoption and options in distribution. Insurers then come up with critical factors which may ensure the success of new scheme. It is important to retain employees and investors in order to retain customers. Disloyal employees are not motivated enough to build a base of loyal customers. Similarly, disloyal investors will not be interested in building long-term relationships. The team of customers, employees and investors must hence share a common vision of a long-term relationship. CRM technology can help improve customer service and customer contact. Private players are picking up market share from competitors. Most companies have information technology (IT) departments that are critical to the success of the business. It is important for the firm to understand the reasons that make customers switch. Some of the reasons could be price, inconvenience, and core service failure, failed employee responses to service failure, ethical problems, involuntary factors, competitive issues and service encounter failures. Understanding the causes of switching will help the firm develop barriers to prevent switching. All Insurance companies target is to increase revenue and achieve greater profitability while lowering process costs and still attracting more customers to the organization. To achieve this, insurance companies need to develop new sales channels, offer innovative products and improved existing customer service to ensure success in the long run.

1.    Introduction: Everyone wants to retain existing customers. Most companies have customer service departments. Customer retention should thus become a part of the strategic marketing planning process of any firm. It is important to define customer retention and also to understand how it can be measured. It has been found that customer retention has more impact on profits than market share, economies of scale and other variables that are considered to provide competitive advantage to a firm. In fact, it has been found that companies which reduced customer defections by five per cent could boost profits from 25 percent to 85 percent. Combinations of the marketing mix elements (product, price, place and promotion) to achieve market dominance through enhanced market share by acquiring new customers.

2.    Customer Relationship Marketing: The relationship marketing approach on the other hand, focuses on customer retention encouraging increased spends and on long-term relationships with customers. Customer retention is at the heart of any relationship marketing effort. The efforts of the seller are directed towards creating new and sustained benefits on a sustained basis, which ultimately leads to a deepening of the relationship. This basically means that a small improvement in customer retention results in a much higher improvement in profitability. Customer Retention marketing is a process whereby marketers look at building a long term association with their customers. Retention or relationship marketing need to understand the needs of their customers at different stages, and provide products and services accordingly. The goal of customer retention marketing is to convert first-time or occasional buyers into loyal, long term customers. And to accomplish this, a business needs to understand what it is that converts the occasional or first-time buyer into a loyal customer through customer retention marketing.

 
3.     Customer retention is about keeping the customers you’ve spent that money to acquire.
1. Delivering service that’s consistent with your value proposition and brand
2.  Cross-selling, up-selling and asking for referrals from existing customers.
3. Developing programs to increase customer loyalty and decrease turnover.
4. Knowing the lifetime value for different segments and using that data to improve your m    marketing
 5. Prioritizing retention as a major focus in your annual marketing plan.

Studies say it costs ten times more to generate a new customer than to maintain an existing one. If you have a small number of customers, losing a few could cripple your company. Even if you have a large number of customers, a small increase in your retention rate should dramatically increase your profits.

4.    Measurement of customer retention
It is important to measure customer retention since this helps set benchmarks and gauge performance against this benchmark. Without measuring customer retention it cannot be managed. The ‘lifetime value (LTV) is a useful concept in measuring customer retention. The LTV of a customer depicts the customer's net present value to the seller. Attracting and retaining profitable customers and turning potential customers into actual customers is a huge challenge.  By understanding the demographic characteristics, lifestyle behaviors and purchase preferences that drive your audience's decisions, you can successfully tailor your marketing strategies to reach those most likely to purchase your product or     service, increase your customer loyalty and improve customer profitability. Customer retention is     not only a cost effective and profitable. By setting up a customer database, some companies have been able to reestablish contact with their customers designed to build loyalty, referrals and repeat sales. In service Industries like Insurance customer retention has been conceptualized as resulting from customer perceptions of service quality and customer satisfaction. There are four steps as essential to retain customers:      
a) Define the market structure,
b) Segment the customer base and determine segment value.
c) Identify the segments' service needs, and
d) Implement a segmented service strategy.

It is important for the firm to understand the reasons that make customers switch. Some of the reasons could be price, inconvenience, and core service failure, failed employee responses to service failure, ethical problems, involuntary factors, competitive issues and service encounter failures. Understanding the causes of switching will help the firm develop barriers to prevent switching. The relationships between the core elements that create value in an organization can be depicted as shown in Figure 1. Customer value affects customer satisfaction, which in turn affects loyalty. Customer loyalty affects customer retention. Loyalty of the customer increases with customer satisfaction at an increasing rate. Segmentation of customers should be done by satisfaction levels, prior to the strategizing of retention activities.

5.    Beyond customer retention

While a growing business needs to constantly capture new customers and companies that fail to nurture and retain their customer base ultimately fail. Life Insurance is a price competitive arena, trust and customer service play huge roles in attracting and retaining customers. Excellent customer service is the key to gaining new customers and customer retention. India has a vast potential that is waiting to be tapped and this could be achieved when sufficient competition is generated. Insurance companies need to think beyond customer retention in order to ensure long run growth, profitability and survival in cut throat market competition.

6.    Customer Relationship Management:  CRM technology can help improve customer service and customer contact. Communication with customers and marketing often overlap since the same strategies for communicating effectively with customers also result in good marketing. Most companies have information technology (IT) departments that are critical to the success of the business. They provide services primarily to internal customers. The insurance industry has witnessed increased convergence and consolidation. Differentiation is difficult as products and services are becoming commoditized. With technology emerging as the key enabler and customer expectations increasing, the insurance sector has to rethink the way services are configured and delivered. Increasing revenue is especially possible by selling more policies and selling at lower risks. Insurance companies have to identify the right customer segments (high potential, low risk) and to address the right products. This also means reducing time-to-market for new products. At present, most people buy insurance products through an individual agent or a bank. Some of the Indian leading Life Insurance companies like LIC, ICICI Prudential, HDFC Standard, Bajaj Allianz and SBI Life etc are aiming to increase revenue and achieve greater profitability while lowering process costs and still attracting more customers to the organization. To achieve this, insurance companies need to develop new sales channels and offer innovative products.
7.    Strategies for Effective CRM:Innovative product line- Insurance companies are consistently working to improve existing policies and also looking for launching new products which can better cater the needs of diversified needs of the customers.
1.    Improved customer service- Companies giving better services to their customers are always enjoy extra benefits over the competitors. Private Insurance companies are better than LIC in terms of customer services like claim settlement, fast communication, innovate products with lucrative selling schemes.

Some of the services offered by Insurance Companies:-

1. Service at the branch: LIC has given little attention to improve services at its various branches. In order to improve its services at various branches, LIC has taken steps to train its staff to be more customer-friendly. Recently, it strengthened its services towards the customers by allowing them to deposit their premium at any of the branches.
2. Simplified policy documents: As per a survey conducted in 1993 by the Malhotra Committee, LIC is not just a national institution, but also a symbol of national integration and its emblem stands as a symbol of security and trust. Any policyholder will find the clauses mentioned in an insurance contract of LIC simple and easy to understand. In this regard LIC plays a predominant role in life insurance market.
3. Right insurance: Exhibit of product through proper channel is very important for the development of any industry. In this regard, little attention has been paid to the proponent's needs and risk profile while giving more preference to their personal interests which may be in any form like high commissions or achievement of high targets.
4. Trained agents: An agent acts as a middleman and a representative of LIC. He has to play an integrated role to satisfy the policyholders. Hence, the LIC should have trained and educated agents to build up the satisfaction level of the insurer and lead to higher retention ratio.
5. Informed customers: When any new policy is introduced in the market, LIC must ensure that it reaches the customer properly and he is able to understand its implications.
6. Improved & Diversified Distribution Channels: Companies try to capture information from a customer every time he comes in contact with any of its departments. The sheer magnitude of data available in large organizations serves as a strong base for companies desiring to be ahead of competition as well as for emerging organizations in adopting a customer centric approach. The concept of Customer Relationship Management involves use of knowledge and analyses about customers with a view to effectively sell them more and more goods and services, and facilitate enhanced customer satisfaction. It is the CRM function.
8.    Conclusion: In the organization that ushers in improvements in customer service to facilitate long term sustained customer satisfaction and paves the way for repeat purchase, improved customer loyalty, reduced customer switch over and off course greater profit and revenue for the firm. Virtually every company knows that 80% of its revenues are coming from 20% of its customers. In insurance industry, with high policy lapsation, it is to be found on an average over 45% of customers as unprofitable. Measuring customer profitability requires data that relate to both revenue generation as well as the costs of serving the product or service. In this business of insurance you understand that the cost of keeping existing customers around is significantly less than the cost of getting new customers, so you need to figure out a cost-effective way of managing this problem for ensuring win-win situation.