What Are Your Customers Worth?
How much time do you spend nurturing the relationships you have with your customers? A phone call, a birthday card, a friendly reminder to renew their policy—it takes work to maintain a relationship. It’s common knowledge that a customer saved is a customer earned. So you are doing well to keep current customers smiling.
However, every customer was not created equal, so it follows you should treat them differently. Obviously, some bring you more business—referrals, multiple plans, and heftier policies. Are you spending as much on those clients as they are spending with you?
Conducting a customer assessment is a way to determine the value of your customers so that you can further develop your relationships with them.
Step one: Decide what attributes to use in your ranking.
- customer proximity
- number of policies
- variety of products purchased
- cumulative money spent
- number of referrals
- duration of the relationship
Step two: Establish a time period to track the aforementioned attributes.
Step three: Determine the perceived value of each attribute and assign points to each.
Step four: Develop a weighting scheme. Not all transactions should be weighted equally; they are weighted in direct proportion to their perceived value. The points a customer receives for upgrading his or her policy this month should be weighted more heavily than the points a customer receives for upgrading six months ago. Think: what have you done for me lately.
Step five: Develop an algorithm, or formula, to combine all the elements into a final score. Apply this formula to each of your customers and rank them accordingly.
Step six: Update this information regularly. It’s only helpful to track and rank your customers in this way if you maintain a score history, and watch to see if their business remains consistent or if it begins to fall off.
Step seven: Use it. Develop a communication plan based on the information you’ve gathered. You are now able to determine who your best customers are. Keep them loyal by rewarding them with a gift card or a chance to win a spa getaway weekend.
And you are able to pinpoint the customers who don’t do as much business. Entice them to do more with a mailer the next time insurance rates drop in their area to remind them that you are just a phone call away.
It takes some time, and the stomach for data analysis. But if you are able to take your transactional information and compile into useful statistics, you can gain insights into your customers’ insurance needs, buying patterns, and their loyalty. And use this information to your advantage.
Comments
Great post, Maribeth. This is particularly important if you believe in the Pareto principle (as applied to business): 80 percent of your sales comes from 20 percent of your clients.
Posted by: Jeb | October 9, 2007 07:50 AM
why is it called Pareto?
Posted by: Anonymous | October 13, 2007 10:32 PM
The term was coined after Italian economist Vilfredo Pareto observed that 80% of Italy's income went to 20% of the population. You can read more about it here. :)
Posted by: Megan Mahan | October 15, 2007 09:10 AM