This Month's Experts
Director, Direct Market Sales Blue Cross Blue Shield of Florida, Jacksonville, FL
MICHAEL J. BERNASKI
Partner, Accenture, Insurance Industry Group, New York
Senior Vice President and General Manager, Financial Services Business Unit, Inforte, Chicago
Global Industry Strategist for Insurance, SAS, Cary, NC
Q: What types of CRM initiatives make the most sense for insurers working with tight budgets? How high are CRM initiatives on the priority lists of CIOs?
A: Al Pratico, Blue Cross Blue Shield of Florida (BCBSFL): CRM initiatives are very high on the priority list of CIOs. The type of initiative depends on the percentage of market share a company has. If they have a large market share, the CRM initiatives should be focused on existing customers if they've got a tight budget. If they've got a small market share they are going to have to split their CRM dollars between growth and service but that's up to the individual company. At BCBSFL we are doing both.
A: Michael J. Bernaski, Accenture: Customer retention initiatives generally offer the highest returns with the lowest investments. These typically involve all three components of CRM: analytics to identify customers at risk of defection and determine the appropriate retention tactic; interaction with the customer to present a more compelling value proposition; and measurement and refinement of the retention program.
A: Tom Madison, Inforte: Right now, the most sensible small-budget CRM initiatives are focused on customer relationship strategy rather than technology implementation. The cost of simply understanding customer relationships and designing processes to leverage and support them is usually small relative to a scaled technology implementation, yet oftentimes it's the step with the most immediate ROI.
A: Ritu Jain, SAS: Analytic CRM solutions provide insurers with the capability to understand their customers so that they can take appropriate marketing actions. CRM initiatives are top strategic priorities of CIOs as they understand that customer-centricity is crucial to their survival and success. CIOs realize that if they do not invest adequately in distribution networks and meeting the service needs of customers, they are likely to face increasing customer attrition.
Q: What are some of the obstacles to achieving real value/return on CRM-related initiatives in a reasonable amount of time? What can be done during a project's roll out to manage risk?
A: Pratico, BCBSFL: First they would need to make some decisions around the existing processes. A lot of companies design their CRM pieces to match existing processes when the processes aren't necessarily the best. The selection of processes needs to be consistent across all of the enterprise. It also needs to be designed from the consumer perspective; not from the inside out but the outside in. In order to manage risk during a project's roll out, you have to have the involvement of senior-levelmanagement.
A: Bernaski, Accenture: For starters, many customer relationship management programs begin without a realistic and shared understanding of the expected outcome. Simple but difficult-to-answer questions need to be addressed up-front. For example, before building a warehouse, what types of insight do we expect to derive (with specific examples) and what actions will we take? The answers to these questions and others help insurance companies "right size" their investments-spending the right amount of money on the right capabilities.
A: Madison, Inforte: Probably the most prevalent reason for failing to meet CRM objectives on-time is failing to set them in the first place. Many firms embark on large-scale CRM initiatives without any concrete ROI expectation, thereby dooming themselves to endless internal debate about the success or failure of the program.
A: Jain, SAS: Most of the time it is forgotten that CRM is a strategy. Technology itself plays a very small role in ensuring project success; it is people and processes that decide the success of a CRM project. To expedite the return on their investment and ensure success of these projects, insurers must put the appropriate people and processes in place and secure executive sponsorship.
Q: Because CRM initiatives often improve the customer experience, the soft benefits of these projects must be taken into consideration. How should soft benefits be weighed in the ROI equation?
A: Pratico, BCBSFL: Soft benefits can be determined through customer satisfaction surveys. The customer, to me, is anyone who interacts with the company. That could be a provider or an agent and the ultimate goal would be to improve the ease of doing business with us. That is what keeps everyone's administrative expenses down and that is what will keep rates down to the ultimate consumer.
A: Bernaski, Accenture: Soft benefits need to be translated into better acquisition, development and retention of customer relationships that ultimately lead to incremental revenue at consistent or improved profitability. At times, CRM initiatives are defensive plays based on competitor activity. Or, they are bold moves to grow the business. Based on the context, a better customer experience should translate into top- and bottom-line results. A technique that has worked well is the development of aggressive, conservative and realistic models of soft benefits to address their contribution to the business case.
A: Madison, Inforte: Actually, I would debate this leading statement. Even so-called improvements in the customer experience can and should be measured-in terms of a clear satisfaction metric, a referral rate, a traceable revenue increase, a repeat-buy rate or an isolatable behavior change. At the end of the day, "soft" metrics won't convince a CFO or the marketplace of anything.
A: Jain, SAS: Increased customer satisfaction usually results in increased loyalty as shown by a decrease in lapse rate, increased wallet share and fewer complaints. Tracking these and other similar metrics over time will enable insurers to realize their true return on investment.
Q: Can sizable returns be gained through the use of a CRM package alone or is an investment in broader solutions (e.g., those involving systems integration, security, analytics, e-commerce and data warehousing) necessary to achieve sizable returns on CRM investments?
A: Pratico, BCBSFL: Again, it depends on the size of a company. Obviously the biggest returns and soft benefits come from the implementation of a full spectrum that you designed, but it depends on where a company is on the e-commerce continuum. Companies will note some return on investment to cover or warrant the expense.
A: Bernaski, Accenture: Our experience has been that achieving benefits requires a more comprehensive approach than simply implementing a stand-alone CRM package. Customer insight is typically required to determine what actions to take on which customers in specific situations-either proactively or as part of customer-initiated contacts. Tracking and measuring also requires integration and reporting to monitor the success of campaigns and tactics. Customer contact users often resist the tool if it is not cleanly integrated into their current environment, other channels, and business processes.
A: Madison, Inforte: In fact, the stand alone implementation of a CRM application has proven more often than not to destroy value. Real return begins with strategy-with an untainted understanding of the customer and the corresponding components of profitable, sustainable relationships. Once the right activities and processes have been mapped to serve that customer and deliver that kind of relationship, it makes sense to consider how a CRM package might support them.
A: Jain, SAS: There are a number of CRM solutions available in the market to choose from. They address a range of different areas like front office applications such as sales and field force automation, e-mail response management, personalization and customer service. There are a number of choices available in each of the application areas, and the return depends upon the application chosen, as well as the area addressed.