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02:30 PM
Kathy Burger
Kathy Burger
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Responding to Demographic Trends Takes More Than Analytics and Market Research

As insurers invest in customer analytics and pricing optimization to improve targeted product development and speed to market, they must recognize that responding to demographic trends requires cultural insights beyond simply statistics.

What goes around comes around. Any executive who doesn't remind herself of this is setting herself (not to mention her organization) up for frustration, at least, and potentially big trouble. Yet another example of this fact of life occurred earlier this month in the New York area when CBS Radio announced that WCBS FM -- the erstwhile "oldies" station known for playing Elvis, the Beatles and doo-wop -- would return to the airwaves. In 2005, CBS replaced the station, or rather its traditional programming of '50s, '60s and '70s tunes, with what it called its "Jack" format, featuring a mix of music from the 1980s and '90s. The decision was all about appealing to presumably more profitable 20- and 30-year-old listeners, rather than the presumably nonspending baby boom (and older) audience.

The strategy was a disaster. Not only was CBS Radio slammed by the public, politicians and the press for its move, the reformatted station was a failure. Looking at significant declines in listener numbers -- and advertising dollars -- CBS literally faced the music and reinstated the oldies format (now covering the '60s through '80s), including some of the DJs who'd been fired two years ago.

Allow me to point out that I predicted all this in the pages of I&T in a January 2006 editorial. I described the unfolding debacle as an object lesson for insurers about the rewards and risks of customer research, noting that sometimes analytics cannot tell a business everything it really needs to know about attitudes and behaviors. On paper (or in an E-mail), the original decision to institute a format change must have seemed logical, objective and innovative. The Jack format had worked well in other metropolitan markets. But management obviously had not analyzed the numbers and research in the context of the local culture.

Long term, however, the real lesson perhaps should be less about how not to antagonize an existing clientele and more about what it takes to succeed in attracting a new set of customers, especially in today's YouTube world. As insurers focus on technology-driven disciplines such as speed to market, pricing and profit optimization, and regulatory simplification, they need to recognize that the "product" is only part of the picture. Reputation, communications, politics and sentiment might matter more than state-of-the-art systems. Bummer, man!

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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