Spiral Marketing: The More You Know, The More You Can Know

September 7, 2009

Sticky Note: Optimize, Optimize, Optimize

What’s a sticky note – it’s a brief reminder. That’s what my Sticky Notes will be – a tidbit, a concept, a brief reminder to think about something. This is the first.

I just saw an Allstate commercial, that pointed out that they “understand” how it can be difficult to change insurance companies, so they would “help you” work with your current insurance company to change to Allstate. Come on – you’ve made the decision to change to Allstate, and you know you’re going to have to call your current insurance provider to cancel your coverage to switch to Allstate. The difficulty exists whether Allstate helps you or not.

I don’t have the facts to know this, but I know for a fact that what Allstate has done is to look at “abandon rates” – people who have decided to switch to Allstate, call their current providers, and are talked into staying through a combination of buyer’s remorse, counter offers and the FUD factor (Fear, Uncertainty, Doubt). This conversation happens outside of Allstate’s hearing or control. So how does Allstate decrease the “abandon rate” for new policy sales? They insert themselves into the conversation with your existing insurance company, under the guise of “helping you” (reinforcing their brand message – “You’re in good hands with Allstate”). By inserting themselves into the conversation, they to a great extent nullify the advantage your current provider has in a one to one conversation with you.

I saw another concrete example of this when I switched my brokerage accounts from one company to another. I had grown dissatisfied with the “nickel and diming” of my online brokerage, and could get a similar service from a company with which I had significant other dealings; the culminating event was the imposition of a $40 account service fee because I had not made the minimum required trades in a given period of time. So I told the person I was talking to at my previous online brokerage that I would switch rather than pay that fee again; he politely said “tough luck.”

So I called the new company, told them what I was trying to do in order to get bank routing numbers to do a wire transfer; the woman I spoke to volunteered to get my then current online brokerage on the line to facilitate the transfer – she inserted herself into the conversation. And while I spoke to my then current brokerage, they became very apologetic, explained their policy yet again, and tried to suss out why I was leaving. The woman at the new brokerage interrupted this call center employee, informed him I had made my decision, and asked for the bank routing information – she shut the customer retention conversation down cold. And this increased my confidence in my decision, and the woman ensured that the funds were moved as appropriate and the trades I required were made as soon as the funds were available. I have not regretted my decision in the slightest. It also bears noting that since I left, my previous online brokerage has made hundreds of dollars worth of offers to try and reclaim me as a customer. They should have just waived the original $40 tax they put on me for using their service – it is easier and more profitable to keep an existing customer than to gain a new one; it is far easier and more profitable to keep an existing customer than to lose, then try to reclaim one.

This “Sticky Note” is titled “Optimize, Optimize, Optimize” for a reason. What I am making is a very educated guess about what Allstate has done – contradict me with facts if you have them – they looked at their sales cycle, and analyzed customer drop-outs. They looked not just at existing customers that leave, but also at sold prospects that, in the 11th hour, decide to stay put with their current insurance providers. And they built a strategy to minimize those drop-outs – by inserting themselves into the transition conversation.

It’s really quite insightful and outstanding strategy on Allstate’s part, and serves as a good lesson for any business: understand to the greatest extent possible every aspect of your business, and determine where improvements can be made to maximize your revenues or minimize your costs. Then think outside of the box and develop strategies for how you can improve those areas. And once you have addressed one area of potential optimization, move to the next, and the next, and the next.

As a related aside: if you want to get an easy to follow introduction to continuous process improvement, and how improvements can interrelate so that it is theoretically possible to optimize sub-processes while sub-optimizing overall processes (the Theory of Constraints), I recommend The Goal by Goldratt and Cox. And no, I don’t make anything for recommending their book.

Kev

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