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Customer Profiling

The term, 'Profiling' has assumed a poor connotation due to the actions of several police departments around the country. However, 'profiling' as a tool has also been given a bad 'rap.' Profiling involves identifying and studying the characteristics of individuals and groups in order to provide goods and services tailored to the buyer. Here's how....

If you have one of the common agency management systems, you have the potential of profiling your customers. While this capability is available, relatively few agencies complete, update, or use their customer profiles to their best advantage.

The term, 'Profiling' has assumed a poor connotation due to the actions of several police departments around the country. They, presumably, picked out certain cars to stop based on racial profiling of the driver and passengers. The police apparently determined that occupants of one race were more likely to be wrongdoers than occupants of another race. As a result, famous actors were not picked up by New York cabs, congressmen were 'routinely' stopped for traffic checks, and regular citizens may have been harassed simply because of their race.

However, 'Profiling' as a tool has also been given a bad 'rap'. Profiling involves identifying and studying the characteristics of individuals and groups in order to provide goods and services tailored to the buyer. Profiling in an insurance agency begins with KNOWING YOUR CUSTOMER. It causes PRODUCT FOCUS and results in ACCOUNT ROUNDING AND DEVELOPMENT. All of these, managed properly, will both increase account revenue and account lifetime for insurance agencies.

For over twenty years we have been echoing a University of Texas study that concluded that single policy insurance accounts (personal lines) lasted less than three years, two policy accounts lasted over five years, and accounts with more than three policies lived an average of ten years. This is an interesting study that 'sells' the theory of account selling, but fails to deliver the true conclusion. This study would have been far more valuable if it were translated into revenue dollars of value of single-policy, two-policy, and multi-policy clients to an agency.

In the book, CUSTOMERS FOR LIFE (Pocket Books, 1991), Carl Sewell determined that a customer -- any customer -- will spend $332,000 on cars during his productive life. If you provide him a great car-buying experience the first (and every) time he comes to a car dealer, that customer is worth $332,000 to that dealer. Using that example, how much is a customer worth to an insurance agency? In another article, we identified a potential of over $60,000 of COMMISSION available from a single personal lines customer from the time he first needs insurance through his insurable lifetime, and that does not include potential commercial business generated from him as a source!

In order to make that customer a lifetime, $60,000 client instead of a $125 commission one-year auto client you have to do two things: (1) treat him like a $60,000 client, and (2) understand what the customer wants and needs at various stages of his lifetime.

The Profile permits you to understand your customer well enough to provide him information and advice on products and services that fit his condition and needs at every stage of his life.

KNOW YOUR CUSTOMER. The profile asks pertinent questions about the customer and revises that information as he matures and his conditions change. An 18 year old college freshman's needs are much different than when he is a 22 year old getting married and starting a career, a 25 year old starting a family, a 30 year old taking on the responsibilities of property ownership, or a 40 year old building assets for his family's future. You have to keep up with the changes by re-asking the questions every few years.

PRODUCT FOCUS. An agency with a large personal lines book of business would be well served to identify those products and services that his clientele needs (or will need soon) and becoming expert in those products. You may not need geriatric-care products if your clientele is comprised of 20- and 30-year old couples and families, but you should certainly know your basic life insurance products...the clients need those. On the other hand, if you insure many baby boomers, you should be an expert in Long Term Health Care.

ACCOUNT ROUNDING AND DEVELOPMENT. The way to turn your clients into Customers for Life, and to maximize the revenue to the agency and the service to the clients, is to offer each customer the products that they need at the various stages of their economic and family lives. In order to accomplish this you need INFORMATION. That information is gathered through the Profiling process.

Whether your agency has a pre-set profile within your agency management system, or creates a manual form to identify the information needed from the client, profiling is a critical need and process for every agency. The exercise of profiling, itself, presents the best opportunity for cross-selling as needs are identified. If profiling is done as a routine event, it becomes another contact point with which to cement relationships between customers and the agency.

Note: To find out how Al's company can help you set up an agency profiling system, click on "Author: Al Diamond" at the top of this article for contact information - Ed.