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Customer Service-What Could You Do With an Extra Half-a-Million Dollars?

Guest post by: Stephen Blakesley

Article Overview: Could customer service trump sales as a growth strategy of your company. There are many good companies but few superior, when it comes to customer retention. Here is a plan that will double your growth.

Customer Service-What Could You Do With an Extra Half-a-Million Dollars?

Much attention is paid to sales and selling in the insurance industry, yet as much or more money is made, each year, through the enhancement of customer service. Ultimately, customer retention becomes as important as new business sales. I know some of you are skeptical so I am going to walk you through a hypothetical case.

Your agency is composed of 1000 personal lines accounts (I know it is small but it is for illustration purposes only). Each account is comprised of 2 autos and a home (3 pol/ account). Total annualized premium per policy is $1000 (all very conservative numbers). You add about 200 policies a year and your lapse ratio is about 8 percent a year (again very conservative). Average commission on new business is 15% and renewals 10%.

HYPOTHETICAL RESULTS:

New Business Commissions = 0.15 X 200pol/yr X $1000/pol = $30,000

Renewal Commissions = 0.10 X 3,000 pol X $1000 premium= $300,000

Total Income = $330,000

Lost Policies @ 8 % lapse (0.08 X 3200 policies) = 256

Lost Income = 256 X 1000 X 10% = $25,600

20 years of lost income = $512,000

WOW! Half-a-million dollars and some change. What could you do with that?

Point! Saving policies and policyholders is as valuable as getting new ones. The question is; how can you minimize lapses or maximize customer retention?

The GMS 5 Step “Take Your Breath Away” superior customer service model:

1. Know what superior service would look like and know why your customers would consider it superior. Remember there are many GOOD Agents/Agencies. You have to be better that them to make a difference.

2. Know what attributes among people would likely characterize superior service people. Not everyone is capable of delivering superior customer service. Get this book on Hiring, it will help, Strategic Hiring

3. Develop a system that delivers “Take Your Breath Away” customer service. Have everyone follow it.

4. Give your service people what they need to deliver superior customer service. Empower them with expected authority to solve the customer’s problem

5. Give them Lagniappe. Give them something extra. They believe they deserve something for their trouble, give it to them.

Finally, remember customer retention brings advantages to your company in more ways than one. Here are three additional ways your company might benefit from “Take Your Breath Away” customer service:

• Increased cross-selling success and a larger share of the customer
• More agency "apostles" - more people telling more people about you
• Reduced marketing costs-selling to someone you have already sold is the easiest sale

By making a few small changes, you can increase profits by 25 percent or more. TAKE THEIR BREATH AWAY!

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Article Tags: customer retention, customer service, growth, growth strategy



Related Forum Posts
Re: Two Useful Books To Help You Focus On The CLIENT - Hi David, To add to your thread, I'd like to recommend Jonathan Tisch's "Chocolates On The Pillow Aren't Enough: Reinventing The Customer Experience". Tisch's book includes content on "Welcoming Customers", "The New Art of Customization", "The Challenges of Customer Diversity" and "Offering Something Extra to Your Customers" to name a few.
$1,000,000 - Hi Evan, Are you talking about US Dollars? If so, that would be approx £500,000 in the UK. The Canadian Dollars differs also from the Australian Dollar. In any case, one needs to solve problems to help people to get money. The more solutions are given to people's needs to solve their problems, the closer one gets. Finally, are we talking about 'Income' or can we talk about 'Asset'? Kindest Regards Beat "Unlock People's Potentials!"
Re: Paypal process $315 million in payments per day. - I agree with you David, their Customer relations suck. This mean other payment systems like 2CO and WORLDPAY should work on their customers relations to take more slice of the market.
Re: Where do you buy cheap airplane tickets? - Hi Evan, I have bought from Cheapflights.com, I guess and had good experiences. ASDA is an UK superstorr and part of Walmart. Recently I discovered that I can get good rates. Also, if I have a desire to fly from A to B in the US, I can also order a ticket. At least, it shows all the details of a possible flight and a order page. The only thing, it shows it in English Pounds, but it may be easily changed to Dollars when using a debitg card. Regards Beat
Re: Welcome to Entrepreneur University! - Hi Evan and GT, Can you clarify? If you join the "Preferred Customer" you are not entitled to commission? Why? This is the the $79.95/month account, I don't understand why you are not getting commission from it?


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