Think of all the time, money and effort it takes to win with all your current customers. Now think about all the customers you lose each year and the potential profits that walk out the door with them. In many cases, those customers and the profits they represent could have been retained through a few simple approaches, including interviews with lost or lapsed customers, an assessment of customer reviews and ratings on social media, analysis of the top “attrition events” that cause customers to leave and creating propensity models to determine which specific customers might leave. Each of these approaches—from the simple interviews to the more sophisticated modeling—can identify opportunities to significantly reduce customer churn. And, since each approach is built on a deeper understanding of the current customer experience, each could uncover additional valuable customer insights as well.
One major “attrition event” in the car insurance industry is the oftentimes awful experience of adding a teen driver to a car insurance policy for the first time. The fact that teens learning to drive cause a significant number of accidents – three times as many accidents as those aged twenty or older according to the Insurance Institute for Highway Safety – and that rates go up as a result probably comes as a surprise to exactly no one. And yet, many car insurers make adding a teen driver to the policy a very unpleasant surprise for the parents of those teens instead of finding ways to ease the burden of adding a high-risk driver to their policy.
The first reaction among customers adding a teen driver is to assume that the big jump in car insurance premiums is some sort of mistake. After being told that the increase in premiums is correct, most of these consumers feel their insurer tried to sneak the premium hike by them. As a result, many feel they can no longer trust their current insurer and shop for a new insurer—with many customers successfully switching to a new provider.
It certainly doesn’t need to be this way. Many of these customers could have been retained throughout this key “attrition event” with a more carefully crafted customer experience. After all, few things are more predictable than the fact that a customer with a teenager at home will probably have a new driver on their policy soon. Car insurers could begin proactively preparing the parents of teen drivers for the premium hike ahead with targeted communications starting months in advance. At the same time, they could help identify ways to offset the premium increases with discounts such as good student discounts, discounts for adding telematics devices that record driving statistics such as miles driven, average speeds and driving locations, or by bundling auto and home policies, among others.
While these programs may not help retain every customer, their likely impact on retention can be assessed by segment of customer to determine which programs have the greatest impact with which customers. At a minimum, insurers should identify which offers have the greatest impact on retaining their most attractive customers. Going deeper with customers to assess the customer experience in greater detail might also help identify innovative new customer retention approaches to leverage going forward.
Most businesses have their own teen driver “attrition event” that causes once loyal customers to leave, but these events can and should be addressed well before it gets to that point. A great place to start examining potential “attrition events” is with the frontline employees who interact with customers every day. What have the frontlines observed about customer pain points and attrition drivers? What can they tell you about how to retain customers who already have one foot out the door? Do customer reviews, ratings and posts on social media confirm or add more information about these front line observations?
Managers can dig even deeper by interviewing lost or lapsed customers to find out what went wrong and how they can potentially be won back. A qualitative map of the customer experience and the attrition events within it can be developed to identify the biggest issues to address. If the data is available, that customer experience map can be quantified to determine how many customers are lost at each event, how often those events happen and how costly each event is to the business. Going a step further, propensity models can be built to identify those individual customers who are most likely to defect so appropriate measures can be taken to retain them.
All this customer experience data, whether qualitative or quantitative in nature, can be used as input for creating effective communications plans and incentives to help retain key customers. Even conducting a relatively simple set of interviews with lost customers can highlight significant opportunities to retain customers and improve profits. In many cases, the solutions required to retain customers already exist, your business just needs to be more effective in making at-risk customers aware of these offers. Even simple initiatives to improve the customers experience can pay significant dividends in terms of retention. As the customer team at the car insurance firm likes to say, “Building a better experience to drive customer retention is no accident.”