Chapter 7

Question 1

Identify four types of relationships.

Answer 1

Hands-On/High Involvement
Face-to-Face
Distant
Brand

Question 2

Describe a “Hands-On/High Involvement” relationship.

Answer 2

The closest relationship a client can have with a service provider. These relationships are personal and are characterized by relaxed, casual conversation, and a high level of emotion. Examples of these relationships are hairdressers or physicians.

Question 3

Describe a “Face-to-Face” relationship.

Answer 3

Characterized by client interaction with company on a regular basis and in a personal environment. May or may not develop a close, friendly relationship. This relationship most closely defines most insurance brokerages.

Question 4

Describe a “Distant” relationship.

Answer 4

Less frequent contact and less face-to-face. The client is contacted through technology (telemarketer, email, voicemail), and will not recognize the face of the businesses employees. More and more client relationships are being conducted this way.

Question 5

Describe a “Brand” relationship.

Answer 5

This type of relationship involves the connection consumers have with major brands. For example, Kraft & Kellogg have meaning for consumers, and develop loyalties to such brands, though they only meet agents and retailers.

Question 6

What are the four factors to client profitability?

Answer 6

1. Clients spend more money with a business the longer they deal with it.
   When the need for additional coverage arises, those who have a solid relationship with their broker will continue to place insurance there rather than shopping around.
2. Comfort and lack of price sensitivity also contribute. The longer they are with a brokerage, the less likely they are to shop for small price decreases.
3. Time. The effort it takes to switch and the time to build up trust with a new broker.
4. Referrals. Long-time clients are likely to recommend family and friends.

Question 7

Explain the cost to service new clients vs. old clients.

Answer 7

Long term clients are much less costly to serve as there over time there is less maintenance to perform. Often, if a client is satisfied, the business just ‘rolls over’ year to year. Research shows that as much as 80% of profits are generated by 20% of the client base - the loyal customers.

Question 8

Who are the most valuable clients?

Answer 8

Not necessarily those who spend more. Some have additional growth potential, some are influential members of their community. It is important to achieve client loyalty with all by ensuring the highest quality service.

Question 9

What action should be taken when relationships are at risk?

Answer 9

When behaviour is changing, ie. policies are lapsing, or certain lines of business are being withdrawn, the client is demonstrating a lack of loyalty. The broker must find the source of the dissatisfaction and attempt to resolve it.

Question 10

Explain the service-profit chain.

Answer 10

Internal Quality Service >
Employee Satisfaction >
Employee Retention / Employee Productivity >
External Quality Service >
Client Satisfaction >
Client Loyalty >
Increased Revenue / Increased Profitability

Question 11

What are three benefits of client management relationships as a strategy?

Answer 11

Retention - Keeping a client coming back
Referrals - Client will refer friends, family, associates
Recovery - Key to satisfaction is to use a mistake as an opportunity. Loyal clients are less likely to respond negatively to mistakes.

Question 12

What seven areas should a brokerage focus attention on to successes in developing and implementing a client relationship management strategy?

Answer 12

Client Activity
Employee Activity
Process Effectiveness
Loyalty Recognition
Consultative Selling
Financial Management
Commitment

Question 13

Success Factors - Client Activity

Answer 13

Knowing what products are currently in use will help the broker determine what to offer and when.

Question 14

Success Factors - Employee Activity

Answer 14

Tracking employee progress:
By Client - Who has brought what, when, why, and how profitable they were.
By Product - Determine usage and profitability
By Employee - Which employees are best at sales, service, and building relationships
By Branch - For those with multiple offices, compare branch by branch but keep in mind differences due to locale.

Question 15

Success Factors - Process Effectiveness

Answer 15

Many brokers spend too much time on routine procedural activities. Brokerages should review:
Employee Mix - Make sure the right blend of employees are in place to meet client needs.
Tasks & Division of Duties - Ensure the roles of sales, service, and admin are clear and that sales and service employees are not distracted with non-client related duties.
Client Needs & Perception - Process may need to be amended depending on client expectations.
Office Design - Meet the clients definition of convenience and accessibility.
Telephone System Protocol - Phones must be configured to ensure efficient handling of call traffic. Not too complex.

Question 16

Success Factors - Loyalty Recognition

Answer 16

Reward clients who consolidate all products, who provide referrals, who represent important accounts, or who have been long-term clients.

Question 17

Success Factors - Consultative Selling

Answer 17

Proactive approach to making products and services available & increasing awareness of clients as to what is available.

Question 18

Success Factors - Financial Management

Answer 18

Relationship management requires an investment in employee training, development, and technology. Clients will benefit before revenues are realized. Track cost savings and control expenses.

Question 19

Success Factors - Commitment

Answer 19

The success of relationship management depends on dedication of all employees. Without long-term delivery of quality of service and value, relationship management will fail.