Customer Behavioural Segmentation: The Next Level in Insurance Marketing

By Cathy Lone-Dawson

(For more background on the value of segmentation, read Customer Profitability Initiatives Feed Organic Growth and a High Rate of Return, also by Cathy Lone-Dawson.)

Know thy customer. This critical reality will determine insurance industry winners from losers in a maturing market where intense competition, declining customer loyalty and high lapse rates continue to erode profit margins. Segmenting customers according to their likely behavior and potential profitability is an integral part of gaining a complete understanding. Our last article dealt with customer profitability segmentation. This article addresses customer behavioural segmentation, and taking customer marketing, sales and service to the next level.

Current and potential profitability rankings enable a company to determine its customer objectives, and design agent or contact center treatments based on value. Companies often focus on retention of their most profitable clients and on growing client groups with the greatest future potential, but profitability rankings also enable firms to identify and manage high claim risks.

By segmenting customers behaviourally or attitudinally, a company�s marketing, agents, brokers and contact centre personnel can communicate relevant product features when reaching customers in person, in planned or preplanned inbound situations, our even outbound mass-customized phone scripts and email/direct mail copy. Behavioural and attitudinal segmentation is all about reaching out to your customers to understand them and then speaking to them in their language.

Attitudinal and behavioural segmentation starts with an analysis of the demographic, geographic, and behavioral data available from existing company sources. From there, analytical applications parse information into more meaningful household subgroups. This information is then used in focus groups, customer surveys, etc. to define attitudes or values characteristic for each customer group — everything from the group�s typical insurance goals, to why they defect from a specific provider or prefer certain distribution channels. The market study also reveals attitudes toward the company and the competition, and what the company could do to serve each group better.

Categorizing customers into distinct profitability and attitudinal groupings with similar characteristics enables companies to:

  • Create manageable groups for targeted activities such as underwriting and marketing campaigns

  • Develop products that appeal to customers that drive value growth

  • Compare the characteristics of different segments to determine segment-specific actions

  • Set effective measurable goals for each segment based on customer satisfaction and segment performance

  • Engage the customer in personalized conversations that competitors can not duplicate. Customers walk away from each encounter feeling smarter, more in control and experiencing better value

Far more than simply a marketing tool, customer segmentation is a driver of company�s bottom line growth. Companies which analyze the buying preferences of their core target markets are consistently able to provide superior customer experience. A superior customer experience means more repeat business and higher profitability.

The banks have seen a marked boost in the timeliness and relevance of marketing and client service campaigns based on attitudinal data. Response rates have reached as high as 40% and acceptance rates have been two to three times higher. Insurance companies are lagging the rest of the financial services sector in this space. However, as all insurers continue to feel the profit squeeze of a maturing marketplace, there is no question that the companies who thrive will leverage the organic growth and cost reduction potential of customer segmentation.

Cathy Lone-Dawson is the President of CRM Matters which specializes in CRM process change management in the areas of marketing, sales and service. With her expertise in Insurance and intellectual capital from engagements in insurance and other industries, she is well positioned to support your CRM initiatives.
She can be reached at 416-526-4859 or via e-mail: [email protected].