Changing their approach to be competitive in the Chinese market
MAPFRE THREEFOLD SEGMENTATION
Having a low Cost per Acquisition (CPA) and a solid and customized Pricing have always been two of the biggest concerns of every Insurance Company worldwide. Especially the ones that are trying to enter in a new Market abroad without knowing in detail the rules of the game and the good (and bad) practices.
With this in mind, in MAPFRE we’ve asked ourselves what should we do to be competitive in the Chinese market? The temptation was to apply what we had done and learned across other markets but we soon realized that no matter how successful is your experience abroad, is not going to be enough to make it in China. China is SO different in both Technical and Commercial terms and we cannot think that what worked in Europe can work perfectly here. And it was indeed a good humbleness lesson.
So, if we can’t “copy and paste” our experience, then what? What we did is to change the angle and ask ourselves “what DOES work in China”? The answer is simple: Social media. QQ, Weibo and especially Weixin (WeChat for the western people) are a reference worldwide and western Social Media giants are looking (some would say “copying”…) at them to replicate the maturity, efficiency and ability to generate revenue streams.
WeChat is king and our Chinese and International team is working tirelessly to create a Social Community that attract and engage customers; we are now testing our concepts and looking forward to have success, early results are encouraging. Social Communities are generally managed by a Marketing team and their success measured by the sales they generate, the reach of their campaigns or the number of members they attract. But, why not go a step further? How about using this information to offer better prices to those who are more active in the community and therefore bring us more value and social media impact? And why we should have the same renewal strategy for the customers with a very high CPA and others with a much reduced one?
Based on this thoughts we’ve developed what we call the “Threefold Segmentation: Commercial, Technical and Social”.
The rationale behind that is very clear and it tries to provide to the Company a comprehensive Strategy to manage properly all the assets it has. If run properly, this threefold segmentation avoids, for example, Underwriters defining very strict rules for a customer that really added value to the Company through her Social Media activity but who had a claim last year. Or it avoids a Marketing Manager choosing as partner a vertical website specialized in a Customer segment that is not in our Target from a Technical point of view.
Commercial Segmentation: Marketing area has to upload to the Global Customer Value system, data of the real CPA of every prospect or customer taking into account agencies information, Campaigns cost, purchase of databases, etc. This has to be done periodically to have always a very clear picture of the real investment and effort the company has made to attract a specific Customer.
Technical segmentation: the Pricing Department has to identify clearly the technical value of the Customer; new customers are assessed based on risk factors and predictive models, whilst real technical behaviour based on their track record with us is used for existing customers. This analysis is done with two objectives in mind: 1) calibrate the tariff and obtain the best conversion/retention with the most adequate price; 2) feed the Global Customer Value system with this information to share with all three areas involved in the Segmentation process (Marketing, Pricing and Social Media). The base of this exercise is the analysis that compare the real risk premium of the Customer with the current internal price, to identify Subsidiser and Subsidised segments.
Social segmentation: the Head of Social Community has to be deeply involved in this threefold segmentation. Their work is to define in detail the most important KPIs to identify the real value a prospect or customer is bringing to the Company; in the Social Media we’re talking about: number of referred friends, information of the company shared in his personal area (i.e. Moments), active participation in our digital platform, help provided to other peers, etc. Once again, if we have a very good customer – or even prospect!! – from a Social point of view, why shouldn’t we reward him? Or why should we charge him a huge increase at the renewal stage just because of a reasonable claim? Depending on this analysis once again we can feed the Global Customer Value that now will be complete with this additional segmentation.
Nowadays an insurance company in our opinion must have this approach if it wants to be competitive and it represents a huge improvement in the global MAPFRE group Customer Segmentation Strategy that we’re implementing in different operations.
The key points to succeed with this Threefold Segmentation are:
– Cross-department activities and cooperation
– Solid methodologies and analytical capabilities
– Consistency in the Strategic choices
We really hope that this approach will benefit the market and push insurance companies to innovate continuously, with the aim to reach the target that every company in our sector should have: add a value to the Customers, offering them a personalized Customer experience and price for a very reliable product that covers their need.