CRM in intermediated financial services markets: Geodemographic analysis

Geodemographic overlays, in this case DEFINE, provide postcode-based summaries using a combination of the variables used above (or proxy variables) such as occupation, affluence and home ownership. Here, group 0, ‘affluent, professional families’, group 8, ‘rural dwellers’, and group 9, ‘residential homes/ institutional accommodation’ correlate with the higher value deciles, while group 4, ‘younger rented council’, group 6, ‘younger mixed tenure’ and group 5, ‘older rented council’ are more likely to be lower value.

This simple analysis is quite interesting and does shed a little light on who customers are, how they behave and how valuable they are. However, by itself it is a risky basis for either predicting customer behaviour or planning activity (eg pricing, customer targeting). The next stage is to combine the variables and undertake modelling. This was done, but the results are considered too confidential for publication.

Customer characteristics vary from one insurance product to another and between partner portfolios. For example, the determinants of profitability in personal accident insurance customers are very different from those for household insurance customers. This can be explained partly by the fact that household insurance is almost universally required and in many cases (for mortgaged homes) mandatory, whereas personal accident is usually a discretionary product.

One bank’s customers may behave quite differently from another’s despite the basic similarities of the insurance product. This may be explained by the relative importance of a particular channel, say the branch network, which may dominate one bank’s activities but play little part in the other. The sociodemographic character of partners’ customer portfolios can also differ markedly.

Making use of the analysis

It is in the call centre that the Insurer found greatest initial application for these findings, by deriving cross-sell and up-sell rules (ie to whom to sell, based on their profiles). However, much more could be achieved. The key issue is how the supplier and partner can work together to maximise joint profits.

This could only be applied where the Insurer had the participation and cooperation of the partner. This is particularly difficult in the case of a bank, say, employing a panel of insurers. Also, the partner’s principal activity may not support CRM applied to the insurance proposition. For example, the partner may be more interested in developing credit or loan business with certain customers than in offering them insurance services. As a consequence, the partner may prefer to communicate offers of loans to the customer and restrict mailing of insurance propositions. In most insurer-client partnerships, the partner ‘owns’ the customer and as a consequence the Insurer’s dealings with customers must be consistent with the partner’s overall contact strategy. The level of collaboration depends greatly on the strength of the supplier-partner relationship. For example, if there is a profit-sharing arrangement, both parties have much to gain from exploiting CRM. If the partner makes commission on every sale, irrespective of its profitability, and uses several suppliers, then it is less likely to agree to in-depth CRM with one. In some cases, the partner may not be committed to CRM; or it may not have the capabilities that enable it to play its part in joint CRM.

Of course, all the normal insurance CRM principles apply. Customer knowledge helps the Insurer achieve better results in terms of getting profitable customers to renew their policy, buy additional cover or recommend the company to a friend. The ability to target customers with a propensity to lapse or cancel allows the company to undertake profitable retention campaigns. Differentiating customers and prospects in terms of their value helps the company to focus its acquisition and retention activity on the most profitable segments, those really worth recruiting and keeping. An indiscriminate retention programme could result in an increase in the proportion of unprofitable customers. Further, by identifying and analysing groups of customers currently not well served by the company’s product range or unprofitable to insure it can highlight the opportunity for product development.

Representative APR 391%

Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

Calculate APR