In most industries, it is a widely known fact that it’s easier and more profitable to get a larger share of a current customer’s wallet than to acquire new ones. Your cell phone provider knows it. Your car dealer knows it. Your department store knows it. But your insurance company isn’t so sure about it. Up-selling and cross-selling have plagued the industry for years. Many dabble in it, but refuse to give it a high priority in the innovation pipeline.
A recent study from the Chief Marketing Officer council shows that 21% of insurance customers purchased or increased the value of their existing policies after receiving communications from their companies. Yet, only 7% of these insurance marketers said that up-sell and cross-sell tactics are critical for revenue.
And on the inside, battles ensue about whether or not cross-sell and up-sell activities actually yield anything substantive. Common mistakes include thinking that business is being double-counted or the attribution is in the wrong place.
Why do misconceptions prevail? The easy answer is that insurance is a non-demand (ie “sold not bought”) product. It’s understood that it requires face-to-face selling and not mailers, emails and other cross-sell or up-sell tactics. While that may be true, the reality is a bit more complex.
The Thrill of The Kill
Could it be that distribution centricity puts most of the innovation emphasis on finding new people to sell to? Maybe it’s the fact that commission structures and strict replacement rules promote the behavior of selling new policies to new customers, but not increasing coverage on in-force policies. Could it be that the pricing structures don’t always lend themselves well to mid-stream adjustments, thereby allowing current customers to enjoy price improvements without having to leave?
Perhaps the industry isn’t aware that today’s consumer has changed, and that they want education and information among other value-added services from their insurance carrier. And maybe consumers would be willing to pay more.
Let’s Hear It For Boring
While the word innovation has the connotation of excitement, we believe that there is a consistent, repeatable process that can predictably stack the deck in favor of success. We like predictable. Predictable is the new exciting. Especially when there is opportunity to be had.
Three Things To Do To Ensure That Sexy Doesn’t Trump Profitable Opportunity
- Make sure you really understand your CURRENT clients/customers. Insights, “big AHA’s” are key.
- Bring in outsiders from industries who have nailed the current customer drill. Ask them what they have learned.
- Consider developing an idea pipeline that is designed delight and retain your current clients above all else.
It’s not the whole story, but I can guarantee that doing all three well will put your company in a place to capture innovation opportunities (i.e. “whitespace”) that will give you a competitive advantage.