draft 7 - meet wojtek (pub)

8/3/2019 Draft 7 - Meet Wojtek (Pub)

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I work for

G I C

for the

General Insurance Company


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I am the

.. the chief marketing officer


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These days are hard on our market:

1. Competitors enter to the market every day

2. Agents/Dealers push for more commission 3. Customers expect premium service for economic price4. Board pushes for higher market share 5. Owners push for more profit !


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..If we manage the firstthree then we definitely helpon the last two.

So lets focus on the firstthree..


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Competitors enter to the market every day

Our products are generally very good on the market,

although we are not the best in every class of the insuranceproducts:

For example we are the best on our market in life insurance,but we are still improving in autocasco

So if our competitor develops a best-in- class autocasco

then our competitor can easily penetrate to the householdsof our life insurance customers..


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..and in few months/years my competitor

can steal my life insurance customers. This sounds terrible, although there isbackfire on this:

If we have the best life insurance, then wecan penetrate to the autocasco base of the

competitor.


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Unfortunately it is not so simple


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First of all, a lot more people contract forautocasco than for life-insurance

We can use our life-insurance product as apenetration tool

if ..and only if

somehow we now what is the next best

product to sell to the newly contracted life-insurance customer.


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So.the key is to know our customers as- individuals and as- households

(some insurance products are for households).

..to know what dothey have .

..and to knowwhat would they need.

.and to know how tocontact them..


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...and yesthat is

the key corporate capability to develop :

Handle customers as individualsand households as well,

and get the full picture of them


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Here's how it works:


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There are some capability of Knowingcustomers individually and as a households

at this moment the only problem is , thatthis capability

is currently atour Dealers and Agents

therefore they are in a good position

to push for more commissions.. and they dothey do it intensively.....


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..so developing the Knowing customers..corporate capability ..

will help us on the second issue as well:

2. Agents/Dealers are pushing for morecommission

since they will not bein the same

comfortable position anymore. X


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with the knowing customer capability

we can effectively upsell and cross-sell,generate value and bring new business

but how we will serve those customers?

will we have enough resourceto treat the increased number of customers

nice?


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.Although

..not all customers are equal.


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Some do not bring enough profit for thecurrent service level

Some of them generate enough income fornice service level, which they dont want.

We have to make clear cut in this situation


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..Therefore I wanted to see

how much profit we can expectfrom an individual customer..

.so we calculatedprofit on customer level .

This is how we defined Customer Value .


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What do we mean on customer profit (value) ?

Simply ,

every customer generates

income and cost

for us

customer profit is calculatedfor a given time period:

Income Cost

Easy?

Absolutely not.


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How did we calculate customer value?

First we made a solid line between the already generated and the expected value(potential)

Why? One is fact , the other is hope:

Time periods:

. . .

Customeracquired

Now Expiration ofcurrentcontract

Existingvalue

ActualvalueCommittedValueShort TermPotential

Long Term Potential

. . .

Churn of thecustomer

Existing value + Committed Value + Short Term Value + Long Term Value = Customer Lifetime Value


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What did we consider as revenue items ?Paid policy price, revenue from referral, etc

What did we consider as cost items ?

Dealer Commission, claims, cost of collection,

cost of retention, cost of billing, cost of customerservice, discounts..everything what we can


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What did we get?The most interesting is something called concentration curve of the current profit by customers:

All the customer ordered by Actual ValueFirst5%

Last5%

The first 20% of thecustomers brings 77% ofthe total profit

The first 10% of thecustomers brings 61% ofthe total profit

P r of i t

C on

c en t r a t i on

%

What does it mean?

For example if we canfocus our retention efforton these (top10%)customers we secure61% of our total margin


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So if we dont have enough resource toprovide premium service to every customer,

whom would you choose?

100,00%

-500000

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 200,00%

20,00%

40,00%

60,00%

80,00%

100,00%

120,00%

rtk (Eft) Koncentrci

Top5% - Our mostprofitable customers

Next15% - They stillmake nice money

Next30% - Average

Last50% - Minimumprofit


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This helps us to answer these questions , for example:

-Whom to route to the most experienced claim agents?

-Whom to schedule first when handling claims?

-Whom to provide 24hour road assistance service for free?


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And what about customers with low actual valuebut potentialy high value in the future?

We found this:CalculationDifficulty

Issues Notes

Actual Value Easy Cost itemsOrganizational acceptance

Existing Value Medium Availability of historical data Strong correlation withthe history of Actual Value

Committed Value Easy-Medium Cost items Organizational acceptance

Strong correlation withthe history of Actual Value

Short Term Potential Medium Short term predictions(service availability, affinity) Medium correlation withActual Value

Long Term Potential Difficult Long term predictions(service, business line availability,economic factors, industry changes)


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Let me summarize the key corporatecapabilities to develop:

1. To be able to get full (better) picture of the

customer (individually and as a household)

2. To be able to tell (based on 1.) what is thenext-best-action for a given customer. Thisis the base for every retention, cross andupsell activity

3. To be able to calculate profitability on thecustomer level ( so we can optimize ourresources according to our profit )


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Want to hear more?

Contact:

Filip Nowicki+48.660.404.007 [email protected]

Csaba [email protected]

www.tudasbanya.hu
mailto:[email protected]://www.tudasbanya.hu/http://www.tudasbanya.hu/mailto:[email protected]:[email protected]:[email protected]

draft 7 - meet wojtek (pub)

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