After weeks of studying customer service studies and talking with agents about their best practices, I stumbled upon an article in Sales & Marketing Management titled “Delighting Customers Doesn’t Pay”. The basic premise is that customer satisfaction doesn’t always correlate with customer loyalty, and as business people we can give the concept of delighting customer an inordinate amount of energy.
Anyone who has spent time in the sales and service business often live by the phrase the customer is always right, but is he? Is there a time you want to nix customer service? Is something else more important that trying to delight every person that comes in contact with your business.
It pays to know your customer and know yourself.
Think about Wal-Mart vs. Nordstrom. Stories abound about Nordstrom going above and beyond in the pursuit of delighting their customers. On the other hand, you have Wal-Mart, and rarely do you feel delight when leaving their stores. Yet both are extremely successful around what they do.
The difference is that they know their customer and know themselves. Wal-Mart’s goal is to bring products to consumers at the cheapest possible prices or in their words: “Saving people money so they can live better”. Having a good experience in their stores is defined by paying less than you would at other businesses.
Nordstorm’s goal is to bring high quality products to customers creating an experience of luxury and excellence.
The key to both these businesses is knowing who they are, and part of the way you know that is by defining your target market. We have discussed this before. This can be difficult to determine but it becomes part of what defines you as a business and a brand in your community.
Have you done this? Do you know what your ideal customer looks like?
If you are having trouble defining who that customer is, go negative.
Make a list of people you don’t like doing business with or who you don’t want to do business with. You will soon find that you are narrowing the scope of your customer really quickly, but will often find that there are people in that list that are making it into your business and frustrating you and your staff. It is time to put some stop signs in place against those you define as customer vampires draining the life from your agency.
Here’s a tool that I picked up from Michael Hyatt’s site:
This chart will begin to help you refine who your ideal customers are, allowing you to create action steps around each type, so that you can provide appropriate levels of delight and service.
Let’s take each one from the lowest priority to the highest.
Priority 4: Low Profit/High Maintenance. These are your dogs. In our world of insurance, these are the people who generate the least amount of revenue for you, but create an awful lot of work. They are never happy. They call with billing questions constantly. They are forever making changes to their policies, and in return offer very little back. In the trade for value, you give way more value than they do.
Priority 3: High Profit/High Maintenance. These may really be the vampires inside your business. They generate a higher amount of revenue for you, but they are hard to deal with, and drive your staff crazy. You secretly think about dumping them as a client, but the benefits they bring keep you holding on, suffering whatever abuse they continue to inflict upon you. You remember the friend with the bad girlfriend (or boyfriend) they kept around for the status and benefits, but everyone was screaming: “Dump them!”
This one is very hard, but it is worth making a list of these folks and the value they bring to your business. You may not let them all go, but force yourself to determine whether the abuse they offer is really worth the value you receive from them.
Priority 2: Low Profit/Low Maintenance. This customer doesn’t generate a lot of value for the agency, but they are so easy to work with and create very little friction in the office that you are willing to write this type of customer all day long. Even though they don’t pay much, a lot of them become valuable because they create so little work for you.
Priority 1: High Profit/Low Maintenance. This customer has a high return on investment. They generate a greater than average revenue per customer, are happy, pleasant, and create very little work with your staff. They send referrals and never get petty or bog the office down with weird policy or billing questions.
How Do Implement This in Your Business?
- Evaluate Current Book: You have already been doing this. As you have been reading through the list of priority customers, I guarantee that certain people have been coming to mind, and several you may have thought about dumping. I bet your staff could do the same thing very quickly.
Determine what your average revenue per customer is. Don’t get to complicated here. Your management system can tell you average premium per customer, just use that rather than trying to parse out the individual commission rates per client. If you can do that great, but it won’t dramatically impact your end list.
Who is below average and who is above it? Who is in the top quarter? Who is in the bottom?
Now you know the high and low profit customers. Go through each one and determine who are the high and low maintenance customers. This may be a job for your staff. They interact with them the most, and if there is abuse, they probably take it.
- Create a Customer profile: You will soon notice patterns and qualities. Start listing out the characteristics that fits those buckets in your agency. What does a Priority 1, 2, 3, & 4 look like in your agency.
- Create Pre-Qualifying Strategies: Now that you know what to look for, craft a list of pre-qualifying markers and questions to help you determine what bucket a customer fits into. If during your initial interview with the customer, you see they are 3’s or 4’s, you begin to pass and send them down the road.
- Align Your Sales & Marketing: Ultimately, this will help with sales and marketing. You have become really clear on the customers you want. Now you can target your marketing to them. You can learn what they like and don’t and where they are then intentionally begin building your agency with customers that fit you and your goals.
Songwriter Ed Sheeran said, “I can’t tell you the key to success, but the key to failure is trying to please everyone.”
Or simply, like your mama said, “You can’t please everybody all the time.”, BUT you can choose who you want to please and build your agency around that.