THE BENCHMARK“Would you like fries with that?”
McDonald’s sells over 4,000 tonnes of fries a day by asking every customer in their restaurants whether they would like fries with their order.
In this article, we will explore how insurance companies can use the McDonald’s technique to cross-sell products to their customers, too. We’ll also see how the same techniques can be used to improve customer retention. And we’ll finish with a look at what the future holds in store.
THE CHALLENGELet’s start with the hypothesis that many organisations find it difficult to cross-sell.
In the insurance industry, cross-selling products such as breakdown cover to motor policies, or cyber to public liability policies, is a constant challenge. However, the economics make this a goal worth pursuing. The top CPC (cost per click) for insurance keywords (“compare vehicle insurance”) is $280. When the cost per acquisition is so high, it makes commercial sense to focus on selling more products to your existing customers, or at the very least making sure they stay with you.
When focusing on cross-selling, it is important to start with a customer-centric view. Focus your data models on the customer, derive what similar customers bought, and then make recommendations to your customer based on that.
For example, we worked with a large commercial insurance broker to help them cross-sell their range of insurance products to existing customers. We designed and built a mobile app for their brokers to look up a current customer and search for similar customers’ history. Such a similarity could include the geographical location, turnover, industry segment, or current insurance product portfolio. This then enables a broker to approach their colleagues to recommend additional portfolio items to the customer.
STRATEGIES AND SOLUTIONSIn personal lines, one of the most shocking quotes I remember hearing at an insurance event was from a car insurer who said, “We don’t email customers too much, or they’ll remember us and then leave.” What kind of value exchange is so weak that customers want to leave?
Some personal lines insurers are looking to see how other industries cross-sell their products. One technique we recommend is to think about your own shopping experiences, and every time you add another item into the online basket, question what encouraged you to do it.
- “77% of other customers bought this widget”?
- “Upgrade to the platinum version of your widget for only £17”?
- “xyz only costs £17 until midnight tonight”?
Notice that none of these techniques offer discounts or give anything away for free. What they offer instead are relevance, substitution, and urgency. According to Business Insider, across all industries, supermarkets have the most loyal customers, with Apple and Samsung in places 4 and 14, respectively. Their users simply very rarely switch between the companies once they are signed into one of the two ecosystems.
Why are there no financial services companies in the top 20 of that research? The average American keeps a checking (current) account for 16 years before switching, and people who are 65 and older have stuck with their checking accounts the longest at 26 years. This provides a great opportunity for insurers, who are absent from the loyalty league.
At Endava, we are looking to bring precisely those digital tools into the insurance industry which the industries with top loyalty ratings (retail and technology) are using. For example, there are next-best-action or predictive analytics tools that can make real-time decisions to encourage retention and cross-selling opportunities. These tools could be the future of upselling and cross-selling in the insurance industry.
There are other systems and processes that need to be considered for cross-selling products: renewals and billing should be synchronised to simplify the customer experience. The customer should be offered a single broker or insurer experience. In fact, receiving a variety of invoices could encourage the unwanted customer behaviour of them considering a combined policy elsewhere.
In addition, there are alternatives to cross-selling, such as bundling products. We worked with a large commercial insurer who looked at offering different tiers of insurance, where each tier would cover a business for various types of insurance (liability, professional indemnity, cyber, etc.) under a single umbrella, and where the tiers aligned to simple parameters such as the number of employees.
Another alternative is to make the customer feel that they are receiving value beyond the insurance product. In the UK, insurer More Than (RSA) provides drivers with a prepaid debit card through their Smart Wheels car insurance. Each quarter, Smart Wheels adds money to the card if the policy holder has good driving scores based on speed, smoothness, and usage statistics.
THE FUTUREEven though McDonald’s already asks every customer “Would you like fries with that?”, they are still investing in technology, such as artificial intelligence and machine learning, to further increase their cross-selling opportunities. For example, they use licence number plate recognition to track customer loyalty and purchasing and to recommend additional items in their drive-throughs.
Furthermore, we are witnessing the rise of subscription services over itemised or annual billing. Many businesses already purchase at least some of their IT services, such as cloud hosting or office suites, on the basis of an ongoing subscription – why aren’t they buying insurance in the same way?
Thus, now may be the perfect time to review your customer upselling and retention strategies and compare them not only to your traditional competitors in the insurance sector but to companies in other industries, too. Using them as benchmarks and models as well as leveraging technology to support your strategies can enable you to create more value with and for your customers.