Time to be transparent

I recently got a renewal through for my car insurance, which had gone up about £300 since last year for no apparent reason. I had a look on a couple of price comparison sites, realised I could get the policy for significantly less elsewhere (in line with what I’d paid last year) and called my insurer to see whether they could match the prices I’d been quoted online. They offered me £100 off straight away but then refused to drop the price any further so I cancelled the policy.

I actually managed to find a specialist insurer in the end and the service experience couldn’t have been more different – the phone was answered immediately (it didn’t even ring – well it must have done at his end!), I had a named contact, he was very helpful, giving me different options and generally talking to me as an individual rather than just another customer ringing up to hassle the call centre (the impression I’d got with the renewal company). This insurer quoted me a great price and I actually ended up paying £200 LESS than last year, or about £500 less than my renewal quote. It also includes a couple of track days in the car, so as well as getting a better price, with better service, I actually got a much better product – and maybe I can spend the savings on some new tyres for the track day :-)

So, why am I blogging about this? Well, because my views of both companies have been formed to a large extent (in fact, almost wholly) by these two contact events. As a low involvement purchase (like many other financial products), my experience of these insurers is completely formed by what happens when I get a quote or renew (fortunately I’ve not had to test their claims system as this would of course be another one!). It also shows that calling a company to ask for a discount often works – I’ve heard of people doing this with TV/broadband packages, mobile phones and I know of people who’ve had similar experiences with insurance (I’ve also just done the same thing and saved 20% on my annual breakdown cover). So what is the consumer supposed to think about this? That companies are deliberately trying to over-charge them in the hope that no-one will notice?

Consumers have significantly more purchasing power than they did even 5 years ago (as highlighted in the ‘My Price’ trend in our Comley report) and I wouldn’t be surprised if some companies who employ the tactic of ‘let’s try to get a bit more out of customers but knock the price down if they notice/complain’ see greater outflows of customers over the next couple of years, particularly given the state of the economy at the moment and the resulting impact on how price sensitive people are.

Some of my thoughts of what companies should be doing:

• Insurance (and other) companies need to think about how their strategy for customer retention. While there is a balance to be struck between keeping existing customers happy and maintaining profit margins, if it’s common knowledge that you can call up at renewal time and get a discount, what message is this giving to customers? Certainly not one of them being valued or that the company wants to keep their business. Consider some kind of loyalty scheme, discount or exclusive ‘existing customer’ offer – give existing customers a reason to stay, and a reason to be positive about a brand which is rewarding their loyalty.
• Be transparent – if price increases are unavoidable, consider giving the brand a more human face and explain this to customers. While this won’t always work in retaining a customer, it might at least allay concerns that they are being ‘had’ (which will impact negatively on the brand. Especially if their insurance has gone up by a couple of hundred pounds without any explanation!).
• Call centre staff helpfulness, attitude and ability to resolve issues and answer queries are key to informing customer opinions of a brand – especially a direct brand with no branches – but I still don’t think many companies realise this or invest enough in staff empathy training or in training around giving adequate answers and retaining customers. Look to brands like Zappos, Apple and Southwest Airlines for inspiration and to see the good will and buzz about the brand they’ve generated amongst customers.

What do you think companies should be doing to retain existing customers?