AIA: Good behaviour, bad attitude?
We in the insurance industry have done a laudable job of promoting our brands to one another. However, taking brands to the end consumer seems to have been an unconquered hurdle, and one consequence is the sinister-sounding ‘consumer terrorist'. AIA New Zealand's Head of Distribution and Marketing Darrin Franks explains.
Sunday, May 1st 2011, 9:00AM
by Darrin Franks
When you dig deeper, the differences between attitudinal loyalty and behavioural loyalty emerge.
One adviser I know does over 90% of his business with one carrier, but every time I talk to him he slates them.
No one ever said it would be easy. Getting the brand to the consumer remains one of the biggest challenges in the financial services industry.
During a conference I attended at Melbourne University's Mt Eliza Business School last year there was much discussion about the strategic edge to marketing. We debated how businesses build loyalty, sustainability, profitability and a reputation for leadership.
A safe conclusion we in the insurance industry have reached is that repeat and retained purchases mean good, faithful and satisfied customers, and this is true - to a degree. But the tricky truth is that you can't judge the quality of a business by mere customer satisfaction or loyalty. When you dig deeper, the differences between attitudinal loyalty and behavioural loyalty emerge. These disparities can illuminate the dark corners of a business, those problems that can be unpleasant to look at and even harder to fix.
I would argue that these problems come about in part because every established industry, to some extent, gets into a comfort zone.
That zone, for financial services companies, has been the B2B space. In other words, we sell our value to distribution companies and distributor companies sell their value to us. Many have been avoiding venturing into the B2C arena, because it's challenging and because the status quo ante is working for us - by and large, we're successful and profitable, and aren't our customers sticking, or even coming back over and over again?
Fair enough - but think of what we're sacrificing. Two noted loyalty sceptics, Reinartz and Kumar, published their research into the customer loyalty and profitability relationship in the Harvard Business Review in 2002.
They found that attitudinally loyal customers (those who have a genuine belief in the value and integrity of the company with which they engage, and make an active choice to keep using that company's services or products) are 50% to 125% more profitable than behaviourally loyal customers. Again, this is our collective challenge. It is not only insurers that deal with churn issues.
The behaviourally loyal category defines those who may be long-term or repeat customers, but not because they love your company. Take ‘Joe', for example. He has a 20-year relationship with a major financial institution. It started out okay, but at this point he's only a customer because he perceives it too hard to switch to a new provider - he's ‘locked in' through multiple products and services and the terms and conditions surrounding them. Meanwhile, he's unhappy with the service and constantly bad-mouths the organisation.
But the organisation assumes that because Joe is still their customer, they're doing a good job. In fact, while Joe is behaviourally loyal, he has become a consumer terrorist within the business.
One adviser I know does over 90% of his business with one carrier, but every time I talk to him he slates them. He hates the service he's getting, but most of his customers are tied in to them.
Creating attitudinal loyalty is our task as an industry, and we could all be far more profitable if we did so. Marketing is one of the ways in which we can effect that change.
A good example of a B2C business that has fomented widespread attitudinal loyalty is Apple, which outperforms every competitor in its space. Apple's product is more expensive than others, but they have done a superlative job - through understanding their customers, and marketing and service - of creating consumer disciples. They have engaged customers to the extent that when they launch a product, they can have retail queues a block long - the ultimate example of attitudinal loyalty in action, and something you don't see among customers of Microsoft, BlackBerry or Nokia.
And while an advisable approach to building attitudinal loyalty is through the three steps (being relevant to your customers, simple in your approach and honest in your dealings) many companies complicate things with strategies like loyalty programmes, which are expensive and, to quote Carsten Beck, mostly "insanely boring and almost impossible to tell apart."
At Mt Eliza I heard from San Francisco-based Professor Peter Wilton, who due to his membership of a programme flew about 650,000 kilometres with one airline last year.
While he has to fly with them because of the routes they offer, the rewards they present (domestic flights) are useless to him, because nearly all his travel is international. They won't countenance any flexibility. As far as they are concerned, they have offered ‘rewards' - irrespective of their relevance - and their obligation is fulfilled. His engagement with the company now is in actively speaking out against them, putting him in the role of consumer terrorist.
The goal, Peter says, is to create ‘happy prisoners' rather than behavioural prisoners. Insurers and advisers alike should want the right attitudes, and to know that our customers are with us because they want to be, not because they have to be.
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