Transformation Advisors, Inc.
B.I.G. Strategies for Business Excellence

Competitive Advantage – A Strategic Imperative

When we ask the question, “What is your competitive advantage?” or, “Why do customers do business with your agency instead of the one down the street – or on the Internet?” most agency owners fumble the answer. They have to think about it. When they do, it often comes back as vague references to “Good service,” or “Great relationships.” Some can talk about their mission and the things they do to add value for the customer, at least well enough so we know they really get the concept of value-added and how they think they are different. Only a very few can speak about their competitive advantage in terms the customer can relate to.

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Pamela A. Millard, CPCU

Pamela A. Millard, CPCU 530.295.1083

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Competitive advantage is a requirement – a strategic imperative.  To have a competitive advantage is necessary if you want to compete. To be able to use that competitive advantage, to attract new customers and to keep the ones you have, that’s the real imperative.

Looking for Competitive Advantage
Ernst & Young’s Global Consumer Insurance Survey 2012, as reported in the on line Claims Journal, surveyed 24,000 consumers of insurance products in 23 countries. The survey provides insights into consumer expectations that Ernst & Young suggests insurers “use to change how they sell, service and market to consumers across multiple product lines.”

Whether your carriers make these changes or not, there are some real opportunities for independent insurance agents to incorporate these findings into their thinking about competitive advantage.

What is your Competitive Advantage?

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“And while the law of competition may be sometimes hard for the individual, it is best for the race because it ensures the survival of the fittest in every department. ”
        ~ Andrew Carnegie

Three key findings

  1. Consumers have high expectations for rewards based on loyalty and good experience. In other words, “know me, reward me.”
  2. Consumers expect digital ease while looking for personal interactions. In other words, “know me, and talk to me.”
  3. Brand matters, and not just for older consumers. Millennials, those in the 18 to 29 age category, are willing to pay more for insurance if they have confidence in the company’s financial stability.

The “know me” part of the customers’ expectation is crystal clear. Even with all our concerns about privacy, consumers expect that the companies they do business with have significant intelligence about customers and potential customers.

Interestingly, another white paper published by Deloitte & Touche included the advice in the title, “Data is an insurer’s critical asset: Leverage analytics across your organization to gain competitive edge.”  Directed primarily to insurance companies, the paper quoted a recent Deloitte survey of 300 financial services professionals. Less than 20% of the respondents say their information strategy is complete. While 36% report a “piecemeal” approach to data management, over 10% admit their organizations have no information strategy at all.  Opportunity out there for someone.

Return on Data InvestmentDATA AS COMPETITIVE ADVANTAGE

In the insurance business, you and your carriers have more access to more detailed data about your customers than most other businesses. Whether or not the carriers you represent have plans or methods to leverage customer data to improve product, pricing or marketing, as the point-of-sale guardian of customer data you have an enormous opportunity to know your customers.

Customer data is like any raw material. If you don’t get it out of the ground and get it refined, it is not really so valuable.

Data ≠ information ≠ intelligence

There is a difference between data (a collection of facts from which conclusions may be drawn) and information (knowledge acquired through study or experience or instruction). Knowledge conveys some meaningful idea. In other words, data is not meaningful without context.

To get to the point where you can know your CUSTOMERS, you need intelligence -- information evaluated for relevance and relationship. Now it’s actionable, meaning you can see ways to use the information to identify other good customers or develop marketing and sales strategies to sell to good prospects.

Semantics aside, “what’s the point?” you ask. The point is that, although you have a good deal of data about your customers, you may lack the right kind of data or lack the ability to analyze that data in ways that would provide information meaningful to your individual sales or even your customer service efforts and intelligence to help you build and achieve your strategic goals.

If you can collect the right data and organize it into the right information and consolidate it into good intelligence, then you have a competitive advantage. Now, to use it.

Case Study

Jane called her insurance agent (CSR) to obtain a certificate of insurance for a new job.

“Hi, Jane. It’s been almost a year since we increased the liability limits on your policy. The renewal should be coming directly from the company in a week or so.  How can I help you today?.” 

Already Jane was impressed. The CSR provided answers to two questions Jane hadn’t even asked yet.

It’s not hard to figure out that the CSR was accessing Jane’s account record as she said hello. She was able to see the last and pending activity. It didn’t take a lot of work to make sure Jane knew that she was known. 

ROI: Lots of good will that can result in referrals as well as a happy customer.

After handling the request for the cert, the CSR offered, “You know, Jane, there have been some changes in the law that affect your business. Are you aware ….?” 

Okay, this took a little more work. When the agency learned of the changes in requirements for certain classes of business, they ran a report of all affected businesses and flagged each account.  If Jane hadn’t called that day, she would have received a call or a letter from the agency advising of the changes. 

ROI: Increases in coverage (and income to the agency), and more good will.

In addition to the informative letter (email) sent to all customers in the affected class, the agency sent out a letter to all affected business in their prospecting database.

ROI: increased coverage on 80% of applicable customers and a 5% response rate on the outbound “cold” solicitation. With the agency’s 76% hit ratio on quoted accounts, that amounted to noticeable new business revenue in this class.  And one more real, but immeasurable, result. By being pro-active with clients and prospects, they eliminated any exposure to errors and omissions relative to the regulatory changes. 

If you’re not getting this kind of return, you may need to talk with your  management system vendor. If you’re not getting the right answers, you may not be asking the right person, or the right questions.

The icing on the cake for Jane and her agent - the action that turns good customer service into competitive advantage?  At the end of the call, the CSR said, “Jane, here at ABC Agency, we focus on really understanding the needs of our customers. Would you be willing to take a short survey – it’s anonymous and it really won't take you very long at all. We’d like you to tell us what you expect from an insurance provider. And we’d like to know how well you think we do in helping you protect the things that are important to you.  For participating in the survey, and for being such a good customer, we’ll enter your name in a drawing for a gift certificate for dinner for two.”

ROI: Positive feedback from a happy customer – rewarding. Sales and marketing intelligence – priceless.

 

If you’re not sure how to define your competitive advantage, where do you start?  With your customers! You have a core of “good” customers.  You need to know why they are doing business with you and not someone else who sells insurance.

And what about them makes them “good” customers?  Is it only that they are customers? (Is there such a thing as a “bad” customer?)

The answers to those questions can provide real insight for creating – or selling – your competitive advantage. Your ability to know your customer and act on what the customer values may be your competitive advantage.

In your organization are all your customers “good” customers? Do you know why they buy from you and why they refer others to your business – or not? Are you managing data to create competitive advantage, or is data entry just a job no one thinks they should have to do. If you're not satisfied with the answers to these questions, call or email pam@transformationadvisors.com.

For a business that thrives, consider the strategic imperative. First, last and always, a strategic view to keep you focused on the important things and help you deal effectively with the urgent things. Then, accountability, competitive advantage, organizational excellence and a commitment to continuous improvement. With these you build business value as well as profit, and thrive. You keep the alligators from breeding and you sleep better at night.

If you need help with any or all of the strategic imperatives, let’s have a conversation. Call or email pam@transformationadvisors.com. Visit our website www.transformationadvisors.com.

In future articles we’ll talk about some of the general and specific issues that keep you up at night. In the meantime, visit our blogs and join the conversation. Tell us what’s keeping you up at night.
Strategic Management for Independent Insurance Agents & Brokers: http://www.transformationadvisors.blogspot.com
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