Relationships, Retention, and Profit

April 17, 2020

Last week we talked about how to provide great customer service during a crisis. One of the seven points we listed was to Continue to Focus on the Customers You Already Have . Of course, that makes sense on several levels. Let’s look a little deeper.

Customers have many options when it comes to meeting their insurance needs. Your customers chose you! They are your customers, your friends, some may even be family. You feel close to some degree with those you don’t even know so well.

Why? Because you have a common bond of trust and confidence. Customers entrust you with their personal financial information. You protect their home, their cars, their business, their family. You have a professional and a personal obligation to each other. They have trusted you with their assets, their livelihood. Beyond your professional obligation you have a relationship on a human level with the people you call your customers. More often than not; it’s an emotional connection as much as a business relationship.

” Ask a policyholder who they are insured with and the majority will say the name of their Agent or even their CSR at your Agency; not the insurance company! This is as it should be.”

Consider that there’s something more to customer relationships. The how and why they translate to your long-term profitability and add value to your insurance agency. Logically we can state:

Customer Relationships Focus = Improved Retention
Improved Retention = Profit
Customer Relationships Focus = Growth & Profitability

“Acquiring a new customer can cost five times more than retaining an existing customer.”

Increasing customer retention by 5% can increase profits from 25-95%.

The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.

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What is good customer retention?

Generally, a customer retention rate above 85% is acceptable while 90% is financially healthy and stable. More is better!

How do you calculate customer retention? Let’s do some basic math.

Retention Rate = ((C E -C N )/C S )) X 100
C E = number of customers at end of period
C N = number of new customers acquired during period
C S = number of customers at start of period

You start the (week/month/year/other period you choose) with 200 customers. You lose 20 customers, but you gain 40 customers. At the end of the period you have 220 customers.

Use the highlighted equation:

220-40 = 180; 180/200 = .9; .9 x 100 = 90.

Your customer retention rate for the period was 90 percent.

Improving your customer retention, some thoughts to consider…

  • Treat every renewal like new business.
  • Live by the “Golden Rule” as in treat others as you wish to be treated. NOT he who has the gold rules.
  • Higher the right people. You can teach insurance. It’s much harder to teach attitude & values.
  • Overall employee loyalty & happiness translates to better customer service.
  • Communicate often but listen more (to staff & customers).
  • Be accessible to your staff and to your customers. Did we say to listen!
  • Set your own agency’s service standards, promote them and stick to them.
  • Resolve issues quickly.
  • Say Thank You for their business every opportunity you get.
  • Turn difficult situations into an opportunity to earn customer trust.

Not every outcome is favorable to a customer. However, if you’ve invested the time and energy to help as much as possible often your customer will at least appreciate you did your best on their behalf.

Measure your overall customer retention. Measure it by line of business. Measure it by Company, Measure it by producer or CSR. Measure your personal customer retention as an Agency principal. Measure, Measure, Measure!

You will gain new knowledge and insights into how to manage your agency for improved profitability for the long term.

Be Well & Stay Safe!

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