4. 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 price
4. Board pushes for higher market share
5. Owners push for more profit
5. …..If we manage the first
three then we definitely help
on the last two.
So lets focus on the first
three…..
6. „ 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 insurance
products:
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 households
of our life insurance customers…..
7. ……..and in few months/years my competitor
can steal my life insurance customers…….
This sounds terrible, although there is
backfire on this:
If we have the best life insurance, then we
can penetrate to the autocasco base of the
competitor…….
9. First of all, a lot more people contract for
autocasco than for life-insurance
We can use our life-insurance product as a
penetration tool
if …..and only if…
somehow we now what is the next best
product to sell to the newly contracted life-
insurance customer.
10. So….the key is to know our customers as
- individuals and as
- households
(some insurance products are for households)….
…..to know what do they have….
……..and to know what would they need.
………….and to know how to contact them…..
11. ...and yes…that is
the key corporate capability to develop:
Handle customers as individuals
and households as well,
and get the full picture of them
13. There are some capability of „Knowing
customers individually and as a households”
at this moment … the only problem is, that
this capability
is currently at
our Dealers and Agents
therefore they are in a good position
to push for more commissions…..
and they do…they do it intensively.....
14. …..so developing the „Knowing customers..”
corporate capability …..
will help us on the second issue as well:
„2. Agents/Dealers are pushing for more
commission”
since they will not be
in the same
comfortable position anymore…….
X
15. …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 resource
to treat the increased number of customers
nice?
16. Especially customers generally
expecting higher and higher service level….
to fulfill these expectations…..
…..constantly increases…..
….our service cost…..
because we try to serve them the
same way,
with the same processes
…..equally
18. Some do not bring enough profit for the
current service level…
Some of them generate enough income for
nice service level, which they don’t want….
We have to make clear cut in this situation…
19. …..Therefore I wanted to see
how much profit we can expect
from an individual customer…..
….so we calculated
profit on customer level….
This is how we defined Customer Value….
20. What do we mean on customer profit (value) ?
Simply,
every customer generates
income and cost
for us
customer profit is calculated
for a given time period:
Income – Cost
Easy?
Absolutely not.
21. 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:
... ...
Customer Now Expiration of Churn of the
acquired current customer
contract
Existing
value
Actual
value
Committed
Value
Short Term
Potential
Long Term Potential
Existing value + Committed Value + Short Term Value + Long Term Value = Customer Lifetime Value
22. 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 customer
service, discounts
…..everything what we can
23. What did we get?
The most interesting is something called concentration curve
of the current profit by customers:
The first 20% of the
Profit Concentration%
customers brings 77% of
the total profit
The first 10% of the
customers brings 61% of
the total profit
What does it mean?
For example if we can
focus our retention effort
on these (top10%)
customers we secure
61% of our total margin
First All the customer ordered by Actual Value Last
5% 5%
24. So if we don’t have enough resource to
provide premium service to every customer,
whom would you choose?
Top5% - Our most 4500000 120,00%
profitable customers 4000000
100,00%
100,00%
3500000
3000000
80,00%
2500000
2000000 60,00%
1500000
40,00%
1000000
500000
20,00%
Next15% - They still 0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
make nice money -500000 0,00%
Érték (Eft) Koncentráció
Next30% - Average
Last50% - Minimum
profit
25. 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?
26. And what about customers with low actual value
but potentialy high value in the future?
We found this:
Calculation Issues Notes
Difficulty
Actual Value Easy Cost items
Organizational acceptance
Existing Value Medium Availability of historical data Strong correlation with
the history of Actual Value
Committed Value Easy-Medium Cost items Strong correlation with
Organizational acceptance the history of Actual Value
Short Term Potential Medium Short term predictions Medium correlation with
(service availability, affinity) Actual Value
Long Term Potential Difficult Long term predictions
(service, business line availability,
economic factors, industry changes)
27. Let me summarize the key corporate
capabilities 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 the
next-best-action for a given customer. This
is the base for every retention, cross and
upsell activity
3. To be able to calculate profitability on the
customer level ( so we can optimize our
resources according to our profit )
28. Want to hear more?
Contact:
Filip Nowicki
+48.660.404.007
filip.nowicki@tudasbanya.hu
Csaba Kiss
+36.30.914.0077
csaba.kiss@tudasbanya.hu
www.tudasbanya.hu
