Acquisition & Retention Schemes

How to attract customers and keep them: Using reward schemes within your customer acquisition and retention strategy.

Developing a strong customer acquisition and retention strategy can be tough in any industry, especially the financial industry. With many consumers expecting more than the standard service, how do businesses within the financial sector attract new customers and keep them loyal?

At M&S FOR BUSINESS, we have noticed through our experience that the financial industry, particularly the insurance sector, can be a difficult market to implement a customer acquisition and retention strategy. We often get asked by people within the insurance sector what they can do to make their strategy a success and what the best approach would be.

While there is no ‘one size fits all’ solution, there are certain strategies which have proven to be successful in the past. We have carried out some research, including a consumer survey and discussions with industry experts, with the aim of discovering what makes a successful acquisition and retention strategy.

The results of our research indicated that implementing reward schemes is one way to stand out from the crowd, make your customers feel valued and strengthen relationships with them.

Benefit 1 – Acquiring new customers with an attractive offering

What do consumers want?

As the industry is such a competitive market, it is highly important for insurance providers to have a unique offering for their customers. With 95% of our consumer survey respondents stating that price was one of the most important factors to them when deciding which insurance provider to choose, it is essential that those companies who cannot match on price have added value to their policies and products.

Interestingly, despite the high number of respondents stating price as such an important factor, only 55% stated that the reason they chose their provider was because they offered the lowest price. This shows us that despite most consumers’ desire to get the best price, they will often choose a provider that offers them something extra of value. Other deciding factors indicated by our survey were whether the insurance provider offered the customer a personalised or unique service, how highly ranked the provider was and whether the provider offered a loyalty/reward scheme.

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Putting it into practice

Most of the companies we spoke to offered some sort of reward scheme with the purpose of acquiring new customers. Daniel Tamarjan, Online Marketing Manager of Freedom Health Insurance, told us that they use reward schemes such as shopping vouchers and cashback/cash discounts “To attract new customers and get referrals from existing customers”. Daniel went on to raise the point that some reward schemes were more successful at encouraging customer loyalty than others, therefore choosing the right scheme for your target audience is essential.

Reward schemes are used as a part of the total package offered by a company. They can also be used to encourage positive behaviour from the customer. Vitality Health & Life Insurance offer their customers two types of reward scheme, ‘Active’ and ‘Status’. The Active reward scheme allows customers to build up ‘points’ by being active and exercising. These points can then be exchanged for perks such as cinema tickets or a free cup of coffee. This works well for Vitality because by encouraging their customers to live a healthy lifestyle they decrease the amount of claims made. The ‘Status’ discounts are in place to appeal to less active people who still get some great benefits such as discounts on UK or Continental British Airways flights.

Key takeaway

Reward schemes work as part of the wider offering to customers. Most people have price on their mind when shopping for insurance, but when they are offered a better service or added benefits their decision can be influenced.

A reward scheme is an important part of acquiring new customers, however it is important to consider the type of reward scheme in order to attract high quality customers and reach the relevant audience.

Benefit 2 – Customer Retention

What do consumers want?

Once you have established an attractive offer and have won the business, the next step is to concentrate on retaining that business. With the insurance industry being such a highly competitive market, this is sometimes easier said than done. Insurance companies who are willing to go the extra mile for their customers and reward loyalty are more likely to succeed in the long run.

More importantly, in order to know how to retain customers, it is important to first realise why they leave in the first place. Our consumer survey revealed that 78% of customers switch insurance provider because they had been offered a better price by another provider. Other reasons suggested were that they were offered more extensive cover, were seeking better customer service or were offered an incentive (e.g. gift card/reward scheme) by the new provider.

Consumers within the financial industry can be quite fickle as they seek the best price, therefore to keep them interested you have to offer them what the competition offers and more.

With 81% of consumer survey respondents claiming they would feel more valued as a customer if their insurance provider surprised them with gift cards or e-gift cards for a third party company as a reward for loyalty, it is clear to see that gift cards are an effective strategy for customer acquisition and retention.

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Putting it into practice

Carrot Car Insurance use a variety of reward schemes for customer acquisition, retention and to encourage safer driving as they track driving behaviours using insurance box telematics. By using ‘Driver Style Rewards’, ‘Refer-a-Friend’ Rewards and ‘Retailer Cashback’, Ed Rochfort, Product Director of Carrot Car Insurance, informs us that Carrot Car Insurance has “Experienced a 62% renewal rate from existing customers, which is high when compared to other telematics-based insurance providers – ‘black box’ insurance is generally regarded as something only suited to brand new drivers in their first year on the roads”.

Andrew Johnson, Director General of the UK Gift Card & Voucher Association, states that “In a competitive marketplace where customers find it easy to switch supplier, loyalty schemes are an effective way to increase customer retention and improve profitability. Loyal customers buy more and are often willing to pay more for the service you provide. To increase loyalty from customers holding insurance policies, insurers need to recognise and reward their most valued customers. Loyalty schemes encourage not only customers to buy more insurance policies, but also make them more likely to recommend them to their friends”.

In a competitive marketplace where customers find it easy to switch supplier, loyalty schemes are an effective way to increase customer retention and improve profitability.
Andrew Johnson, UK Gift Card & Voucher Association

Key takeaway

Keeping your customers attention, making them feel appreciated and encouraging loyalty throughout your customer base should be a consistent part of your marketing strategy. The second your customer feels that they are not valued you can be sure that a competitor will be ready to take their business from you. Maintaining some sort of customer retention strategy will help you to keep your customers interested in the long term.

Benefit 3 – Creating brand advocates

What do consumers want?

For a customer to become a brand advocate, you really need to impress them. Derek Singleton of Software Advice, describes brand advocates as “Satisfied customers who enjoy spreading your brand’s message and helping current or potential customers”. He goes on to say “For business-to-consumer (B2C) businesses, loyalty programs can be an effective way to turn customers into brand advocates. People enjoy earning stars, points, medals, and badges as rewards.”

Putting it into practice

One of the most successful ways companies are creating brand advocates is by introducing ‘refer a friend’ schemes into their services. These schemes reward existing customers for becoming brand advocates, telling their peers about the company’s great services and getting them to sign up. Many companies have already adopted this strategy, for example, Simply Business offer existing customers a cash incentive of £25 for themselves and the person they refer. Rewarding both the new and existing customer helps to build relationships at both ends of the spectrum.

Carrot Car Insurance has their own specific ‘Refer-a-Friend Rewards Scheme’ to help them attract new customers. Ed Rochfort, Product Director of Carrot Car Insurance, told us that “Every Carrot Card holder that refers a friend via our unique Facebook app will get a £40 referral reward for every friend that goes on to buy an insurance policy from us for the first time. The number of friends drivers can refer and the amount of rewards they can earn is unlimited”.

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Key takeaway

An effective strategy is to make your customer feel like they are a part of the team. Refer a friend schemes essentially turn your customers into your sales team. They feel valued when they are rewarded and are therefore more likely to continue using your service and also bring in new business for your company.

Although you want people to naturally become brand advocates by providing an excellent service, it sometimes helps to offer an incentive. If nothing else, your customers will be brand advocates because they appreciate the rewards given to them.

Benefit 4 – Building long lasting relationships with your customers

What do consumers want?

An American study carried out by the Corporate Executive Board on 7,000 consumers concluded that of those consumers who stated they had a strong relationship with a brand, 64% said the reason they had that strong relationship was because it had the same values as they did. Building a relationship with your customer means having a strong identity as a brand. You need to think about what you stand for, how you communicate your message and the actions you take to prove yourself.

One of the best ways you can build relationships with your customers is to make them feel valued. In fact, 81% of our consumer survey respondents said they would feel more valued as a customer if their insurance provider were to surprise them with gift vouchers for a third party company as a reward for loyalty. This strengthens the relationship as you are giving the customer more than the standard service they have paid for.

Putting it into practice

Highly successful insurance company Aviva launched a campaign in 2012 in order to build on their relationships with customers. Aviva noticed that traditionally insurance companies only have contact with their customers during purchase, renewal and claim stages of the process. This is not a best practice for creating a relationship, so Aviva rolled out a three stage programme which involved building a better understanding of the customer through market research, refreshing their marketing strategy and communicating their new strategy to the public. Aviva improved their products and technologies used and added a unique added-value loyalty programme which rewarded existing customers, therefore creating a better relationship.

Derek Singleton of Software Advice states that “Rewarding customers for their activity and time is the focal point for building loyalty. If you take the time to recognise your loyal customers and thank them for their business, it creates a reciprocal relationship.” Customers want a two way, give and take relationship to know that they are appreciated.

Rewarding customers for their activity and time is the focal point for building loyalty. If you take the time to recognise your loyal customers and thank them for their business, it creates a reciprocal relationship
Derek Singleton, Software Advice

Key takeaway

To build on customer relationships it is important to know the customer first. That is why conducting in depth research is essential. Once you know what your customer wants, what they value and the best way to communicate to them, you can start implementing strategies to develop the relationship.

Benefit 5 – Repairing damaged relationships and winning back defected customers

What do consumers want?

Sometimes things can go wrong and customers can be left feeling dissatisfied and disgruntled. Our research suggests that customers can become particularly disgruntled when they get their insurance policy renewal quote, which is usually much higher than their original policy. Customers want honesty from their provider. They want to feel that they are getting the best deal without having to fight for it and they also want their provider to admit when they are wrong and resolve any issues or problems fully. Customers are most likely to defect from an insurance provider if the issue goes unresolved. According to Colin Shaw, CEO of ‘Beyond Philosophy’, “It takes 12 positive experiences to make up for one unresolved negative experience“. If an issue goes unresolved, it is unlikely you will repair the relationship with your customer.

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Putting it into practice

Daniel Tamarjan, Online Marketing Manager of Freedom Health Insurance, highlighted the importance of repairing relationships with disgruntled customers. When asked about using physical gifts as a customer reward, Daniel stated that “We only used them for claimants who had a difficult claims process”. Identifying when a customer is having a bad experience is the first step, ensuring they feel that you have recognised how they feel via gifts and rewards is a great way to start building on that relationship again.

And, this philosophy is important across all industries. Last year, almost 132,000 people switched their bank accounts from Barclays bank. Barclays recognised the need to repair their damaged relationships with customers and win back defecting customers, so they introduced a new rewards scheme to do this. A spokesperson for Barclays said, “We have recently launched Barclays Blue Rewards to give new customers a great reason to switch to us and existing customers a great reason to stay and we are delighted with the level of interest to date.”

Key takeaway

Investing time and money into keeping your existing customers happy is highly beneficial as it is much more cost effective to retain customers than it is to attract new ones. Customers want you to recognise when you have performed badly and make up for it. Rewards and gifts are a great way to do this but you also need to resolve the issues that led to the customer feeling disgruntled in the first place.

Benefit 6 – Staying one step ahead of the competition

What do consumers want?

Consumers want to be with the best insurance provider for their personal circumstances. Our consumer survey respondents indicate that price, reward schemes, customer service and brand name are some of the most important factors to them when deciding which provider to choose.

We also found that 75% of respondents would be persuaded to switch insurance providers if another provider offered them insurance cover at the same price but with the additional benefit of loyalty rewards. This shows us that customers are always on the lookout for the best overall offering and will go with the provider that benefits them most.

Putting it into practice

Not only is competition fierce in the financial services industry, but information on each company is so readily available online. Becky Roberts, representative of Carrot Car Insurance, told us that “Motor insurers are well aware that young drivers, and their parents, have access to many tools such as comparison sites, social media and blogs which provide them with up to date information on providers and the best deals available when it comes to insurance”. The availability of information and the abundance of noise online makes it difficult for insurers to stand out against the competition.

The Co-Operative insurance has set up a rewards program for their customers which allows them to choose from a wide variety of discounts on entertainment, home and garden, lifestyle and leisure, travel and motoring and much more. They have even set up an entire website dedicated to promoting these customer discounts. This gives them a real competitive edge as potential customers can visit this site before purchasing a product to find out what kind of rewards they will receive if they do so.

Key takeaway

To have a real competitive advantage, you not only need to offer added benefits with your products but you need to promote these benefits so that potential customers are fully aware of how outstanding your offering really is. From our consumer survey, 45% of respondents stated that they did not know whether their insurance provider offered a reward scheme or not. This lack of awareness puts the insurance provider at risk of losing these customers due to poor communication.

Benefit 7 – Measuring customer behaviour

What do consumers want?

Consumer’s expectations are constantly on the rise. They want the companies they deal with to automatically know what they like, dislike, need and want. According to a study published by Invensis Global Outsourcing Services, “Consumers want offers that are relevant to them. Irrelevant spam mail, telemarketing calls and online advertisements are an irritant for many consumers and can affect their perception of the insurance company.” Loyalty reward schemes are an excellent way to collect the data that ensures you make appropriate offerings to the customer.

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Putting it into practice

Many companies are using the data they have collected from various customer interactions to personalise and improve their service. Knowing your customer allows you to predict what they want before they ask for it, tailor your communication methods to each individual’s preferences and identify customer pain points. When customers sign up to a reward scheme, you have the opportunity to ask them a number of questions, gathering vital data and information about that person so that you can target them with personalised offers.

It is also important to effectively measure your campaigns success. Andrew Johnson, Director General of the UK Gift Card & Voucher Association, told us that “The most important thing is to make sure that the business is receiving all of the data available and carefully monitoring the information they get to improve their reward schemes going forward.” Andrew goes on to say “It is good to offer rewards, but it is essential that they are based on development analytics. Above all, the best schemes are simple to use and the rewards are attractive and attainable”.

We found that successful measurement of a reward schemes effectiveness was a challenge that many insurance experts we spoke to had to overcome. Daniel Tamarjan, Online Marketing Manager of Freedom Health Insurance, mentions that “Internal confusion for people looking after how these (reward schemes) are implemented” and “The lack of a proper system to record how these rewards are applied” made the schemes hard to measure and implement, especially “When running different promotions at the same time (even if to different audiences)”.

Ed Rochfort, Product Director of Carrot Car Insurance, told us that one of the challenges he faced “Was to turn this extremely accurate measurement of driving performance into meaningful feedback that would enable us to reward our customers for maintaining a positive driving score”. Effective measurement and application of data are critical for internal return on investment analysis, but they are also important factors in driving the rewards strategy forward and ensuring the appropriate rewards are set according to customers’ needs and wants.

It is good to offer rewards, but it is essential that they are based on development analytics.
Andrew Johnson, UK Gift Card & Voucher Association

Key takeaway

Before implementing a reward scheme, it is essential to have proper data collection and campaign measurement tactics in place. A reward scheme provides you with the perfect opportunity to learn more about your customer and build a personalised offering that will resonate, but if you are not recording this information appropriately you risk wasting the opportunity.

Conclusion

In order to stand out from the competition in the insurance sector, companies need to work on their overall offering to the customer. While it is apparent many consumers look for the best priced policy, this is not the final deciding factor in their decision making process. Most insurance companies are able to match the prices of their competitors which means there has to be something else influencing the consumer’s decision.

Implementing a reward scheme for loyalty, referrals or signing up to an insurance policy is a great way to increase customer acquisition, retention and satisfaction. However, it is important that the offering is relevant to the individual and offered at the right time. Allowing customers to earn points and rewards makes them feel involved with your brand and gives them the feeling that your service is worth more than that of the competition.

As with any relationship in life, the one between business and consumer needs to be nurtured and approached delicately. That is why research and planning are imperative to the success of a reward scheme. If you get it right, you can build relationships and create brand advocates who will stay with you for a lifetime.

At M&S FOR BUSINESS, we have developed an innovative new offering specifically for the insurance industry, called ‘Insurance Replacement’. Insurance Replacement allows insurance providers to offer gift cards to claimants in order to settle their claim. This unique offering can speed up the claims process and provides extra value to the claimant. For more information on Insurance Replacement, please feel free to get in touch with us.

Are you looking to build a strategy around attracting new customers or wanting to build on the relationships already in place with existing customers? Speak to our dedicated team today to see how M&S can help drive customer acquisition, retention and loyalty within your business.

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