By Elisabeth Boone, CPCU
For as long as you've been in the independent agency business, you've undoubtedly heard just about every "sure-fire" idea ever hatched about improving customer retention--from cross selling to sending birthday cards, from "free insurance checkups" to free calendars.
You want to learn how to turn every promising prospect into a client, every client into a satisfied, loyal customer. You've read trade journal articles and books; you've exchanged ideas with other producers; and you may even have attended seminars or workshops--always in search of the breakthrough, the brainstorm, the key to the magic kingdom of customer retention. Many of the ideas you've picked up sound good, and some really are.
If you're like most agents, after returning home from a workshop on customer retention, you're all fired up with enthusiasm to put into practice what you've learned. You go into the office the next day loaded with your workshop materials, forms, handouts, and checklists. You call a staff meeting and share your newfound knowledge. You exhort everyone--receptionist, producers, CSRs, support staffers--to get on the customer retention bandwagon, and they do...for a while.
After a few days or a few weeks, the great new ideas begin to lose their glow. The buzzwords that had everyone so psyched start to sound stale and gradually fade from everyone's vocabulary. The workshop materials sit neglected on a corner of your desk, gradually becoming buried under paperwork. One day you're looking for something and you find the workshop binder on a high shelf in your office, dusty from disuse. You feel a pang of guilt, think uncomfortably about the money and time you spent on the workshop, and either toss the binder into the trash or stash it in a remote location where the sight of it won't prick your conscience.
A few months later you're looking through the mail and a colorful brochure catches your eye. "Build Customer Loyalty! Boost Retention! Experts Share Their Secrets! Success Guaranteed Or Your Money Back!" Hmmm, you say to yourself, this looks good...
Sure it looks good. All those books, seminars, workshops, videos, and audio programs look good. Plenty of them are good, presenting proven strategies for getting and keeping satisfied, profitable customers. What these methods don't offer, however, is what often proves to be the critical determinant of success: follow-up. You read the book, listen to the tape, watch the video, observe the presenter, learn the do's and don'ts of effective retention. But once you've closed the book, rewound the video, or left the workshop, you're on your own.
Putting good customer retention ideas into effect is undeniably your responsibility. But think how much easier it would be to implement new strategies if someone were following up with you afterward. You'd leave the workshop with action plans tailored to your agency's specific situation. Back in the office, you'd receive regular phone calls, checking on your progress, talking you through roadblocks, and helping you stay on track. With this kind of support you'd be motivated to put the ideas into practice, make the program work, and enjoy the results of your efforts in the form of increased retention and profits.
Sound like a dream? It's not. Pick up your duffel bag, because you're about the meet the "drill instructor" of a bold new concept: Customer Loyalty and Retention Boot Camp for Producers.
The Boot Camp brainstorm
The idea for Customer Loyalty and Retention Boot Camp originated with a management consultant and former tax attorney who's never served a day in the military. Lynn Thomas is president of 21st Century Management Consulting, based in Waltham, Massachusetts. Founded in 1989, 21st Century specializes in improving customer retention for a wide range of businesses and industries, including insurance.
Customer retention is a hot topic for the insurance industry, Thomas realized, because it's an issue that goes straight to the bottom line. It's also an area where both agents and companies could benefit from learning and implementing new strategies to identify, acquire, and retain desirable, profitable customers. Especially among the agency force, Thomas knew, not everyone has the time to attend a week-long seminar or workshop, even for something as important as customer retention. For others, the cost of individual consulting might be prohibitive. What's more, experience had taught her that only a very small percentage of workshop attendees actually put into practice what they've learned. Thomas asked herself: "What can we offer agents and companies that's somewhere between a seminar and individual consulting?"
Most people, she realized, could spare a couple of days if not a week--and most could afford a short session at a non-luxury resort. Why not offer a two-day customer retention training session with no frills--as Thomas puts it, "down and dirty"? Attendees would dress casually and have a lot of information thrown at them fast. Socializing would be minimal; the focus would be on exposure to radical new ways of thinking and acting. Sound like boot camp? That was the idea, Thomas says. When conducting her first boot camp, "I made it rigorous and intensive. I pushed people. Someone even said I should wear fatigues!"
What happens at Boot Camp?
Unless you've been in the military, you probably haven't had many life experiences that will prepare you for Thomas's Customer Retention and Loyalty Boot Camp. You may not have to hit the floor and do 50 pushups or scrub the hall with a toothbrush, but it won't take you long to realize that you're not attending an ordinary workshop.
Thomas's first insurance boot camp took place on two days in early June of this year, drawing attendees from both the agency and company ranks: agency owners, producers, and department heads, plus company heads of sales, claims, and customer service. Attendance represented "many different links in the distribution system," Thomas says, "each with his/her own challenges in meeting customer needs."
Dress at boot camp is casual ("I tell people to leave their suits at home"), and the program for each day is fast paced and hard hitting. The walls of the room are hung with colorful posters bearing inspirational quotes, and Thomas provides plenty of "executive toys" to use in brainstorming sessions. She encourages attendees to engage in right-brain creative thinking instead of relying on a linear, left-brain approach to problem solving. Every attendee receives a T-shirt inscribed with the slogan "Coloring inside the lines is your choice."
The paradigm shift
In the 1990s we've all heard a lot about shifting paradigms --sometimes to the point where we're inclined to dismiss it as a cliché. Not so fast, says Lynn Thomas. At Customer Loyalty and Retention Boot Camp, one of the things you have to check at the door is old paradigms--so you can make way for new ones. Because insurance is a long established, traditional, and conservative industry, Thomas says, changing paradigms tends to be more difficult than it is in newer industries, such as airlines and restaurant chains, that don't have such deeply rooted conventions.
"The longer you work in an industry, the more attached you get to its paradigms," Thomas observes. "For example, the insurance industry pays much more for new business than for renewals." This practice, she points out, sends a clear message about customer retention throughout the distribution system: it takes a back seat to new business. Other industries, in contrast, focus on building loyalty among their good customers, realizing that a stable, happy customer base is their greatest asset--and far more profitable than constantly pursuing new customers.
To help insurance people open up to new ideas about customer retention, Thomas draws on her experience as a consultant to a wide range of other industries: accounting, advertising, auto service, education, finance, high technology, hotels, law, oil and gas, real estate management, and restaurants. When a boot camp attendee brings up a customer-related problem in an agency or insurer, Thomas explains, "I say, 'I know you can fix this because here's what an accounting firm [or law practice or restaurant] did, and it worked.'" Instead of approaching customer retention challenges in traditional ways, boot campers are encouraged to look outside of their industry for solutions. "How would a hotel manager run an insurance agency? How would a theater owner run a restaurant?" With questions like that, Thomas prods boot campers to start thinking "outside the box" and break out of "but we've always done it that way" attitudes.
Basic training in customer retention
At insurance boot camp, agents and company people get a thorough grounding in the basics of customer retention: why it's so important and what impact it has on expenses and profits. To make her point, Thomas hits campers with eye-opening statistics. "For every 1% you spend on customer retention, your profits go up 10% to 15% a year," she declares. "A 5% increase in customer retention can generate a 50% to 85% increase in profits."
Another potential goldmine, she says, is former customers. "One third of customers who left say, 'I'd come back if you asked me.' More than two thirds of departing customers leave simply because of indifference on the part of the business." Thomas poses the question: Can agents and insurers afford to ignore a large market segment that left merely for lack of attention?
Thomas uses a three-pronged approach to show agents and insurers how to (1) attract, (2) retain, and (3) reclaim their most profitable customers, whom she identifies as "A" customers. "These 'A' customers are the 20% of your customer base that produce 80% of your revenues," she explains. They're valuable not only because they renew consistently, but also because they provide referrals--usually to other "A" customers.
Next are "B" customers, who represent 30% of the customer base and bring in 15% of the gross revenue, then "C" customers, who are 50% of the base and generate only 5% of gross revenue. As one might expect, "B" customers tend to make "B" referrals, and "C" customers to refer others like themselves.
Given this scenario, an agent attending boot camp learns that his/her first task is to find appropriate segmentation criteria for the agency's customers and markets. The most profitable "A" customers should be the primary focus of the marketing effort, Thomas says, commanding 50% of the agency's time. "B" and "C" customers should receive time and effort in proportion to their contribution to revenue. "Listen to your 'A's'," she advises. "Don't give so much weight to 'B' and 'C' customers--they'll drown the 'A's' out."
Here Thomas offers one of the radical, paradigm-shifting ideas for which she's renowned: Instead of compensating producers at a higher rate for all new business, structure compensation so that the highest commissions are paid for new "A" customers. When producers know which customers the agency values most and why, those are the customers they'll pursue.
Employee retention
equals customer retention
A key tenet of Thomas's philosophy is that to retain good customers, an agency has to retain good employees. "The messages management sends to its employees are the messages employees send to customers," she declares. "Happy employees become loyal employees who develop happy customers, who become loyal customers and stay with the agency." "Satisfy your employees," she exhorts boot camp attendees. "Hire the best, pay the best, expect the best. Learn how to wow your employees so they'll wow your customers. Encourage them to take pride in the way they wow customers.
"Why do anything less?" she continues. "Otherwise, you'll just keep churning--both employees and customers. Losing good employees and good customers is an expensive way to do business. Find out what they want and give it to them."
Ask for input
Another key to retaining profitable customers, Thomas stresses, is to talk to them. "What do they value most? Why do they come? Stay? Leave?" Here, she suggests, insurance professionals can learn from hotel managers. "One hotel conducted a survey to find out why its customers continued to come back. What did they find out? That people came back because three or five years later, the doorman still remembered their names. While customers are at the hotel, the management asks them how they like their room, their food, their service. If the meat is tough or the room service isn't up to par, the customer receives a credit on his/her bill. Management is constantly asking its customers to communicate what they like and don't like. Management listens and acts on what it hears. The customers keep coming back--and the employees love their jobs."
There's growing recognition today that customer communication is good for business, Thomas comments. "Companies that are becoming leaders are asking customers for ideas and input. Ask for the sale, ask for referrals, ask for ideas, ask what they want, ask them to come back."
Your first impression
may be your last
Everyone's familiar with the old cliché: "You never get a second chance to make a first impression." Like many other old saws, however, this one has the ring of truth. Thomas uses the example of an airline to make her point. "When you get on a plane and pull down the tray and see coffee stains, what's your gut reaction?" she asks. "If you're like most people, it's something like, 'I hope they maintain the engines better.'
"People tend to take a specific situation and generalize it to a whole organization," she continues. "First impressions are powerful. It may not be logical, but it's true. Insurance companies and agencies don't do the kind of market research that's routine in other industries. If they did, they'd most likely discover that by making just a few small changes, they'd dramatically improve their retention and their bottom line."
Profiling can be profitable
"The banking and payroll industries are five to ten years ahead of other industries in customer retention," Thomas asserts. "They construct profiles of customers who have the potential to defect, so they can take steps to keep them from leaving."
Insurance professionals likewise need to stay ahead of the game in customer retention, she says. "You need to identify the emerging needs of your customers--not just what they need today. That way, you can leapfrog ahead of your competitors to meet needs before the customer is even aware of them."
Next Action Plans
Throughout the two days of boot camp, attendees have the opportunity to consult Lynn Thomas one on one. She works with each attendee to develop five Next Action Plans--specific, concrete steps the attendee will put into place upon returning to the office. Each attendee is assigned a buddy to keep in touch with for the first month, and Thomas explains to attendees how to share their new ideas with bosses and colleagues, and how to achieve the buy-in that's essential to the success of a customer retention program. Thomas then calls each attendee every two months to check on progress, offer advice on dealing with obstacles, and provide the encouragement that motivates attendees to stick with the program.
What it's all about
Customer retention, Lynn Thomas emphasizes, isn't about making a sale: it's about creating a customer for life. "Today the competitive advantage has more to do with the depth and breadth of customer relationships than with products and services. Products and services are less important because others can duplicate them within a few years. The successful organizations are those that make the transition from product managers to customer relationship managers. They tailor products and services to wow their customers. Happy customers are much more likely to refer other good customers, buy additional products and services, and stay with the agency."
A high point for Thomas at her most recent boot camp, she says, came when an attendee told her, "I used to think I was in the product business--now I know I'm in the advice business." Here, she observes, is another major paradigm shift: "The focus is moving away from acquisition and toward retention. We're looking toward profit and the bottom line, not just generating sales."
21st Century Consulting's next Customer Loyalty and Retention Boot Camp for insurance professionals is scheduled for October 9 and 10 in Boston. For more information, call: (617)-899-4210. *
The author
Elisabeth Boone, CPCU, is a senior copywriter for a major health sciences publisher based in St. Louis. She is a former member of the editorial staffs of Best's Review and American Agent & Broker.
©COPYRIGHT: The Rough Notes Magazine, 1997