THEY MAY BE ON THE OTHER SIDE OF THE WORLD, but Liberty Group, a South African financial services company, faces a problem all too familiar to U.S. firms with sales driven by independent representatives.
Liberty Group — headquartered in Johannesburg — has 800,000 individual customers, most of whom purchase insurance and investment products through an intermediary sales force, including 2,000 representatives who sell only Liberty products and more than 4,000 others who sell products from several companies. The arrangement worked from a sales standpoint, but because sales were being driven through a middleman, Liberty itself had no relationship with the customer.
“We were looking to take the traditional life insurance sales business model, which is a product factory sitting behind intermediaries dealing with policyholders, and change the shape of that [so we] also get to see and understand the customer,” says David Gnodde, divisional director for Liberty Personal Benefits (LPB) finance and administration. “It also puts the intermediary in a position to do better business with the customer.”
“One of the major challenges we faced was gathering information from a customer point of view as opposed to the traditional product point of view,” notes Alistair Dry, head of client strategy and marketing development for LPB. “There were huge challenges for us. A lot of the information we needed to do some of the modeling we just didn't hold because we never needed it previously.”
To help build customer relationships — and an enterprisewide data warehouse enabling it to do sophisticated modeling analysis — Liberty utilized Lincoln, MA-based Unica Corp.'s Affinium tool. The company began its first test of Affinium to do campaign management from October 2001 through April 2002. The test, involving 50 agents running 25 campaigns, was more about “proving the concept than implementing the technology,” says Dry.
The concept not only needed to be proven to Liberty's management but to the intermediary sales force as well. There was concern from the intermediaries — who work entirely on commission — that they might lose their link with the customer if they shared data with Liberty. Before implementing the data warehouse program, the company worked with the sales force by first implementing a system to help them clean their own databases and through that generate extra sales.
“The success of that [effort] helped build trust so we could discuss sharing data,” says Gnodde. “And the thing that tipped the scale was that we signed confidentiality agreements stating their data would not be passed along to competing agents.”
“When you build trust, it's a fragile thing,” adds Dry. “You cannot let it slip once. We've kept our integrity — they've seen the data they've shared with us is only used to get them leads. It's never found its way to another agent or a call center.”
Carol Meyers, vice president of marketing for Unica, notes that insurers haven't been as quick to embrace campaign management as have other financial service sectors, much because of that intermediary salesperson who sits between corporate and the customer. “It's a challenge to build [intermediaries] in, less from a technical standpoint and more from a strategy and process standpoint,” she says.
Liberty Group has about an 18% share of South Africa's life insurance market. Two other companies, Old Mutual and Sanlam, each own about 30%, while another 10 to 15 companies account for the rest. Liberty's target customer is someone of “high net worth,” says Gnodde, noting that their main competitors play to a wider niche.
Before implementing the new system, intermediaries were doing database work on an individual, local level. But because all the information was so fragmented, it didn't help Liberty.
“If an intermediary left, we lost our continuing link with the policyholder, other than the policy we originally sold to them,” says Gnodde. “It's that relationship that we're trying to build on a more lasting basis. To do that, we needed to centralize the mission around the customer, but not limit access to that information. The intermediaries have full access to the data, and they work in partnership with us to develop value for the customer and therein value for [themselves].”
Gnodde admits that the company could have chosen to cut out the intermediaries, and instead build customer relationships via direct mail campaigns and other initiatives. “What we chose to do was put that intermediary in the best position to do business, to really capitalize on our distribution network,” he says.
This benefited Liberty, allowing it to make the most of the intermediaries' face-to-face relationships, and take advantage of how the sales force advised customers. Insurance is a “high advice” product, notes Dry. That's why the company doesn't do a lot of direct mail or marketing online.
“At best, we can put brochures [online]. But because of legislative requirements, and in terms of trying to offer a product that meets a client's needs, you really want that high advice environment,” says Dry.
The test campaigns involved segmenting the customer and intermediary databases, and building propensity models based on new products purchased and on lapsed customers. The company felt it could not only strengthen customer relationships, but better retain intermediaries if they were getting added support from Liberty that other insurers didn't provide.
“The concept we were trying to demonstrate was that we could [produce] leads for our intermediary within its own customer base, essentially for cross-sell, upsell and retention, using the power of data mining to cover the hidden value in the database,” says Dry. “We believed we could generate significant revenue from that and retain policyholders because they were getting the right offer at the right time.”
One test campaign used a model to identify clients at various life stages (such as parents with young children or empty nesters) and identify their propensity to purchase additional products. These customers were targeted with tailored mailings or e-mailings and encouraged to meet with an agent for a financial needs analysis. Closure rates increased by up to 400% in the test, with larger policies being sold, says Dry.
The ROI of the seven-month test of the data warehouse was judged by traditional measures, like sales figures, as well as behavioral indicators. Likelihood to churn is being looked at, as well as how customers liked or disliked the additional communication they received from their agent, and how the relationships might grow over time.
“It was very much a collaborative program, working in partnership [with the intermediaries],” says Dry.
At present, the campaign management system is rolled out to much of the sales force, but it's still early in the program. In two to three months, the system will be fully implemented.
Going forward, Gnodde would like to see the intermediaries get better about relaying information back to Liberty, so the company can help them more with retention and the intermediaries can focus on prospecting. “A 100% commission sales force is more hunters than gatherers.”
