Habits, Hits, Tails & Tweets: Plus more! Understanding customer behaviour

Transcription

1 Habits, Hits, Tails & Tweets: Plus more! Understanding customer behaviour Presented By Colin Brigstock Finity Pricing Seminar 23 March 2010

2 Influences on Customer Behaviour New Premium Structure Experience By Product Product level Projections Sales Data Cost Build Up Expenses Cat Loadings Reinsurance GLM Modelling View of Quantum and Timing of Price Change View of true shape by rating factor View of Profitability by Segment Impact Testing Possible Changes to Pricing View of Sales Results by Segment View of competitor shape by rating factor View of Competitive Position by Segment Sales Analysis Quote Conversion Retention In Force Growth Penetration Demand Curves Competitor Quote Analysis Claims Experience By Segment Current Premium Structure Webbot Quote Data

3 Rational view of customer behaviour Buyer Behaviour Customers are aware of what they are doing Consumer Choice They know why they do what they do Customer Satisfaction They make conscious decisions

4 Customer satisfaction as a predictor of re-purchase behaviour Neutral or dissatisfied 20% Satisfaction Levels of Defectors Prior to Re-Purchase Source: Bain Study Satisfied 80%

5 Latest Brain Research You are of two minds (at least) Habitual Mind (Unconscious) Executive Mind (Conscious)

6 You are of two minds (at least) Habitual Mind (Unconscious) Executive Mind (Conscious) Habitual mind controls 95% of human behaviour

7 Predicting future purchase behaviour? Satisfaction not a particularly good predictor of customer behaviour Correlation with customer activity in 6 months after original survey Satisfaction Levels of Defectors Prior to Re-Purchase Neutral or dissatisfied 20% Likelihood to recommend Deserves my loyalty Continue to purchase Ranked #1 or #2 Set the standard Easy to deal with Would choose again Innovative Source: Bain Study Satisfied 80% Satisfaction Source: Bain / Satmetrix No of Companies

8 How likely are you to recommend XYZ to a friend? Probes both dimensions of loyalty Head Best features Best service Best price Heart They know me They value me They listen to me They share my values By recommending (or intending to do so), an individual is putting at risk some of their personal reputation and trust Therefore, it represents a much stronger personal commitment than Am I satisfied?

9 Net Promoter Scores How likely are you to recommend XYZ to a friend or colleague? Not at all Extremely Neutral Likely Likely Detractors Passives Promoters NPS (%) = % Promoters - % Detractors AAMI Allianz QBE RAC Source: M elbourne Business School St udy NPS Study 2006 ING NRMA SGIO CGU Insurer SGIC GIO Average APIA AAMI Source: Engaged M arketing P/L Study NPS Study 2009 RACV NRMA Suncorp CGU Insurer GIO Average

10 Behaviours: Promoters Vs Detractors Promoters tend to: Be stickier (higher retention) Buy more products (cross-sell) Be easier to service (lower servicing cost) Give positive WOM (generate referred sales) Provide constructive feedback (enable improvements) Detractors tend to: Shop around (lower retention) Be single product buyers Be harder to deal with (higher servicing cost) Give negative WOM (discourage potential sales) Provide insight into defects (enable improvements) Lifetime value exceeds (significantly) direct value of profit stream from product itself Lifetime value (significantly) less than direct value of profit stream from product itself (which in itself is lower)

11 Is NPS a predictor of desired behaviour? 10% Allianz Operating Entities Revenue Growth % p.a. 12% Progressive Direct (USA) Movement in NPS & Retention 9% 8% 10% 7% 6% 8% 5% 4% 6% 3% 2% 4% 1% 0% Below Market Average Above Market Average (excl Best in Class) Net Promoter Score Best In Class 2% 0% NPS Retention 07 to to 09

12 Interpreting Sales Behaviour An individual customer s behaviour is difficult to predict but will be shaped by: past experiences of you (& of competitors) level of engagement and commitment to you How you present yourself at the touchpoint in question Sales Performance comprise aggregation of multiple processes Behaviours in each likely to be quite different Overall Sales First time insurance purchasers Strength of Relationship Endorsement New Business Someone insured elsewhere Renewal Recent Experiences Mid term Cancellation Existing customer adding further policies Renewal Offer Instalments

13 Emerging Influences on Customer Behaviour

14 Motor Insurance New Business Typical Age Distribution 18% 16% 14% Quotes New Policies 12% 10% 8% 6% 4% 2% About 40% below Age 30 0% >66 Insured Age

15 Finity Staff Under 30 New Policy How Purchased Quote Online 11 (100%) No. of quotes obtained before purchasing 2/3/4/5 Purchase Online 9 via Call Centre 1 Related Bank Transaction 1

16 % Of Quotes Via Internet 50% 45% 40% 35% Clearly higher (& probably understated) 30% 25% 20% 15% 10% 5% 0% >66 Insured Age

17 Finity Staff Under 30 Renewals 100% renewed on line Re-quote experience If price not changed much, just pay Always get one quote. If within $15 just pay. Over $20 probably switch Check every few years

18 1 st Year Renewal Retention Deviation from Portfolio Average 8% 6% 4% 2% 0% -2% -4% Propensity to shop? -6% -8% >66 Insured Age

19 Online the natural choice of younger generations How pervasive will this channel become? What does this mean for your sales metrics?

20 As our world is transformed by the Internet and the near-infinite choice it offers consumers, so traditional business models are being overturned and new truths revealed about what consumers want and how they want to get it Back Cover The Long Tail

21 The Long Tail The tail of available variety is far longer than we realise It s now within reach economically All those niches, when aggregated, can make up a significant market Mainstream Niche

22 When I was a kid, buying a bottle of milk

23 A bit different today!

24 When I was a kid, buying a Holden.

25 Holden: 2009 Model Choices

26 Car Insurance - Many Online Choices Today Selection of Car Insurers Quoting in NSW Brand Underwriter GIO SUNCORP NRMA IAG AAMI SUNCORP Budget Direct Auto & General Insurance Allianz Allianz Youi Youi Pty Ltd ING QBE Pay As You Drive Car Insurance Hollard Insurance Company Real Insurance Hollard Insurance Company CommInsure Commonwealth Insurance Limited FASTR Fortron Insurance Group 1300 Insurance Auto & General Insurance e Car Insurance Calliden Group Limited Bingle SUNCORP Just Car Insurance SUNCORP Virgin Car Insurance Auto & General Insurance Apia SUNCORP 1st for Women Auto & General Insurance Australian Seniors Insurance Agency Hollard Insurance Company Beaurepaires Insurance Auto & General Insurance Australia Post Insurance Auto & General Insurance 1Cover Direct Insurance Allianz QBE QBE ANZ Insurance QBE Aussie Car Insurance Auto & General Insurance CGU Insurance IAG Ozicare Insurance Agency Auto & General Insurance HBA Mutual Community General Insurance The Buzz Car Insurance IAG Shannons SUNCORP

27 Which brands are registering interest? 55% 50% 45% 40% 35% 30% 25% 2005 Oct 2009 Share of Google Search Activity 20% 15% 10% Nil Result for % 0% NRMA AAMI GIO Allianz QBE CGU Real Budget Shannons YOUI APIA Just Car Bingle Comminsure PAYD Virgin AusPost 1Cover Source: Google Insights for Search NSW Car Insurance related searches in 2005 & October 2009

28 Young people Still a bias towards established brands? Finity Staff Under 30 Which insurers? Note biased sample all work in insurance and know brands Ones we ve heard of Advertising Word of mouth Less known must be much cheaper

29 Is personal lines becoming a long tail (!) business? How much will the real consideration set expand?

30 Brand & Reputation The role of Word of Mouth

31 Younger people Still a bias towards established brands? Finity Staff Under 30 Which insurers? Note biased sample all work in insurance and know brands Ones we ve heard of Advertising Word of mouth Less known must be much cheaper

32 Managing Your Brand Image Traditional World Promoting Brand advertising TV Radio Press Outward PR Defending Current affairs TV Talkback radio PR responses Word of mouth good service experiences Important but not really visible Word of Mouth poor service experiences Largely, an environment where you could control the messages about your brand and deflect most criticism

33

34

35

36

37 Twitter

38 Managing Your Brand Image Traditional World Promoting Brand advertising TV Radio Press PR Still very relevant. As effective? Defending Current affairs TV Talkback radio PR responses Word of mouth good service experiences A whole new world is emerging Word of Mouth poor service experiences

39 Social media is changing the brand & image management landscape Word of mouth becoming a one-to-many communication

40 The Web Forget it as a marketplace of products. Instead think of it as a marketplace of opinion Most products will continue to be sold offline. But in the years to come, more and more products will be marketed online Not all industries lend themselves to an infinite variety of products, but all industries have an infinite variety of customers Finally we can treat them like the individuals they are From Chris Anderson The Longer Long Tail

41 Final Comments Internet has already begun to affect the way personal lines is transacted Customer Behaviour New behaviours are being formed. Will they become habits? Expanding Choice Internet Brand (Reputation) Change will continue. How fast? How far? Future Business Model Are your people, planning and processes ready for the challenges?

42 This presentation has been prepared for the Finity Personal Lines Pricing Seminar held on 23 March Finity Consulting Pty Limited (ABN ) wishes it to be understood that opinions put forward herein are not necessarily those of Finity and Finity is not responsible for those opinions. The information presented at the seminar was of a general nature and a reader of this presentation must seek their own independent advice before using it for any purpose.