How can companies reach every customer with the right message without overloading them with information? What has taken lots of time and effort in the insurance sector in the past is now more successful and easier with the help of sophisticated analytics. The quality level in customer service is rising.
The super savings offer for a new pair of sports shoes directly on the homepage of a shopping platform on the Internet. How does the site know that I have just been searching for them? Every Internet user has certainly experienced such situations. For companies, it is important to offer people exactly the products they are interested in and they need. ERGO is doing just that in the insurance sector. Complex calculations within the framework of sophisticated analytics make this possible. They lead to: Next Best Action (NBA) and Next Best Offer (NBO).
“This is based on a system that permanently and individually determines the next best action or product recommendation for each customer at the optimal time via the customer’s preferred channel”, explains Dr Alexander Hombach, Head of Customer Relationship Management (CRM) for ERGO in Germany. “NBO is therefore a part of this methodology which is based on the sales contact with the customer.”
Very different data sources are used in this complex system. In addition to obvious internal information, such as age, contracts and place of residence, they also include external sources such as official market data, microgeographic household data, purchasing power classes or market research results, explains Katharina Preischl, Product Owner Customer Relationship Management from Alexander Hombach’s team. “Therefore, we potentially have access to up to 2,000 data signals for each customer. Depending on the intended application, however only up to 20 signals are really relevant – in the case of NBO that would, for example, be a recommended tariff.” It is important that ERGO always complies with the highest data protection standards.
But how does the Next Best Offer process work in practice? Katharina Preischl explains it by using an example: “Roughly speaking, the data of our fictitious customer Mr Müller is analysed, compared with other customers and transformed into an individual forecast for him.” Part of the product recommendation process consists of comparing an individual customer profile with the profiles of typical customers for a specific product. At the end, you get a so-called score. “This value reflects how high Mr Müller’s affinity is for a particular product”, explains Preischl.
“If this value is above a specified limit compared to all other customers, then Mr Müller’s affinity and thus the relevance of the recommendation is particularly high.” Therefore, Mr Müller can be given an appropriate product recommendation. “As of course we do not only offer one tariff, this analysis is carried out for many other products. This is not yet possible for every product, but we are working on it”, says Preischl. Currently up to three recommendations are issued for each customer. Those with the highest scores.
These predictions are not fixed forever, but are constantly recalculated – based on new findings or an acute action of a customer. “Once the system has been fully developed, it should determine new recommendations within milliseconds”, explains Katharina Preischl and adds: “It won’t ever be one hundred percent correct, after all it is about affinities and probabilities.” But the better the data, the more accurate the recommendations. Initial successes in a test with more than 200 sales partners confirm the effectiveness and the opportunities associated with the use of NBA and NBO.
The biggest advantage for the customer is that he is only addressed with things that are really relevant for him. “He should feel that he is being taken seriously and have the impression that he is in good hands with ERGO”, says Head of CRM Dr Alexander Hombach. The company thus creates longer and more profitable customer relationships and can achieve its goals with fewer advertising e-mails. “Our local sales partners can be better supported by the system in their daily work”, says Dr Hombach. In this way, they can respond to their customers’ needs even more precisely.
Customers have learnt what good service is from online retailers. Dr Alexander Hombach concludes: “They expect a comparable level of quality also from other companies – even from their insurer.” That is exactly what has been achieved with NBA and NBO. “In fact, not only online but for all points of contact that every single customer has with us. From the broker to customer service, from e-mailing to chats”, explains Dr Hombach. However, this system is just out of its infancy. “There is therefore still a lot to be done. The success we have achieved so far, however, confirms our efforts”, says ERGO’s Head of CRM.
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