![What is Customer Lifetime
Value
Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services
7
The monetary value each customer generates over
the lifetime of their engagement with YOUR agency.
The Customer Lifetime Value
Framework
Current Relationship
Revenues
Predicted Customer
Tenure
Predicted Future Revenue
44 Year old married couple
purchases a new car and shops
your agency for liability +
Physical damage coverage.
Premium is $150 monthly.
Model predicts the policy
survival months of for this policy
based on variables input to rate
the auto insurance policy.
Policy tenure is predicted at 60-
months.
Cross-Sell probability models
predict ability of agency to pick-up
other lines of business (eg.
Home and/or life). Probability of
cross-sell of home is 60% @
$100 Monthly for auto + home
and survives 120 months)
Auto Policy Monthly Premium
$150
x 60 Survival
Months
+ [(.60 x $100) x 120 months] =
$16,200
$16,200 of premium equals agency revenues of $2,400 @ 15%
commission rate
Cross –
Sell
Models](https://image.slidesharecdn.com/customerlifetimevalue11-20-141120233218-conversion-gate02/85/Customer-Lifetime-Value-for-Insurance-Agents-7-320.jpg)
Uploaded byScott Boren
Customer Lifetime Value for Insurance Agents
The document outlines a partnership between Quantum Sight Marketing and IronPoint Insurance Services, focusing on customer lifetime value (CLV) within the insurance industry. It discusses the importance of analytics in optimizing customer strategies, segmenting customers based on CLV, and how targeted marketing can enhance profitability. Key takeaways emphasize that integrating a CLV strategy can lead to improved marketing ROI and customer retention.
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Customer Lifetime Value for Insurance Agents
- 1. Presented by: ScottBoren Co-Founder and Partner Quantum Sight Marketing CUSTOMER LIFETIME VALUE 1 President IronPoint Insurance Services An optimized customer strategy framework
- 2. Partnership of TwoCompanies Quantum Sight Marketing is an analytic marketing consulting firm specializing in product and consumer marketing analytics. Quantum Sight Marketing also has an insurance practice focused on: Distribution Analytics Loss Cost Modeling Credit Model Development Product Design and Development Operations and Claims Analytics IronPoint Insurance Services is an Independent retail insurance agency. Focused on Preferred Personal Lines and built on the Customer Lifetime Value model. Affiliate program for startup agencies. Preferred Appointments Agency Management System Errors & Omissions Insurance Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services And more…. 2 Quantum Sight Marketing, LLC IronPoint Insurance Services
- 3. Who the heckis this guy? Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 3 • Director of Research and Development: Led team to design, develop and implement new national auto insurance product, including credit model and point-of-sale system. • Director of Product Management: Led West Region and managed P&L in excess of $2.1B. • Senior Product Manager: Managed the California Auto Insurance Market for the leader in Direct Response auto insurance. Responsible for all P&L, product design, performance, and revue growth. Was part of the West Region leadership team responsible for Quality of Sales, Services and Underwriting. • Mid-West Zone Product Manager: Worked at esurance shortly after their initial start-up. Was part of the team of product managers who implemented a new product design and expansion into new states of opportunity. Managed their growth in the Mid-West in excess of 20% annually. • Product Manager: Worked up from Product Analyst to assume the role of Product Manager of the state of California. At the time California represented nearly half of the companies exposure and was a top 20 market share company in the state, and a leader in the nonstandard auto market here in CA.
- 4. Marketing Analytics Proprietaryand Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 4 There is a growing push across most business categories to apply analytics to solve or assist in solving business questions. Examples are all around us---- the selections provided to you by Netflix, airline ticket pricing, credit card offers and rates, and much more… Insurance has long used analytics in pricing: Conventional actuarial practices Recent use of multivariate pricing techniques.
- 5. Insurance Analytics –Not Just Loss Costs Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 5 Loss cost modeling used in personal lines insurance in the US is getting more advanced. Over 80% use advanced multivariate tools to solve pricing. Many companies are using similar analytics to study consumer behavior. Consumer Demand Elasticity (Price Sensitivity) Predict Retention (Policy Life Expectancy – PLE) Marketing Mix Models (MMM) Marketing Response Models …and Customer Lifetime Value
- 6. Critical Measurements ofCLV Intrinsic Loyalty/ CLV ($) ? •Predictive •Segment-”able” •Separates customer & company Service and Sales Data Custome r Insights VOC Optimized CLV Strategy Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services
- 7. What is CustomerLifetime Value Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 7 The monetary value each customer generates over the lifetime of their engagement with YOUR agency. The Customer Lifetime Value Framework Current Relationship Revenues Predicted Customer Tenure Predicted Future Revenue 44 Year old married couple purchases a new car and shops your agency for liability + Physical damage coverage. Premium is $150 monthly. Model predicts the policy survival months of for this policy based on variables input to rate the auto insurance policy. Policy tenure is predicted at 60- months. Cross-Sell probability models predict ability of agency to pick-up other lines of business (eg. Home and/or life). Probability of cross-sell of home is 60% @ $100 Monthly for auto + home and survives 120 months) Auto Policy Monthly Premium $150 x 60 Survival Months + [(.60 x $100) x 120 months] = $16,200 $16,200 of premium equals agency revenues of $2,400 @ 15% commission rate Cross – Sell Models
- 8. Why is thisImportant to me? The analysis suggests that investment in developing a high CLV customer base produces better margins. How do we find these customers? High Mid Low 25x Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 8 Customer Lifetime Revenue (CLV) $16,200 $8,100 $2,835 Lifetime Commissions $2,430 $1,215 $425 Acquisition Costs $125 $125 $125 Lifetime Margin $2,305 $1,090 $300 % of Current Book 15% 50% 35% High CLV customers bring in 25x more revenue to your agency. 12.5 0.5 0 Hig h CLV Avg CLV Low CLV
- 9. Develop a Revenuebased Segmentation Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 9 If you can predict the lifetime revenue value of a customer at the point-of-sale, what might you change? How you segment your customers? Align your agency practices with these new segments? Align products offered to meet new needs? Change your service levels for specific segments? Reconsider how, where, and when you market or advertise?
- 10. Revenue Based (CLV) Segmentation Using market analysis one can identify the predictors of CLV, segment membership, and Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 10 Segment 1: Comfort Seekers • 40+ years old • Have assets • Find Insurance complicated • Desire Relationship • Education • Tend to be a Higher CLV customer. Segment 2: Ambivalent • 30+ years old • Want things easy • Educated • Low hassle • Prefer phone or email relationship. • Don’t have a preference (online or agent OK). Segment 2: Do It Yourself • Younger group • Place a low value on insurance. • Distrust Insurance Company/Agent • Likely to purchase online. • Price sensitive • Low CLV consumer. develop actionable profiles.
- 11. CLV and AgencyBest Practices Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 11 Some agencies already locate these consumers….what are the best practices? Where can I find these consumers? What would a survey of the agents with a book of high CLV reveal? My CLV best practices Checklist Here is a list of places we market to find all of our best clients: ____ 1. Direct Mail ____ 2. Telemarketing (ex-dating) ____ 3. Internet ____ 4. In-Person Contact ____ 5. Local Advertising (Newspaper) ____ 6. Centers of Influence Maybe it’s not directly attributable to the marketing mix, and it has to do with business practices? What are the business habits of the agents with the highest mix of high CLV customers? 1. What is the sales craft? 2. What is the cross-sell philosophy 3. How and when do they approach cross sell? 4. Does marketing matter? Why? 5. Staff training?
- 12. Forming Good CLVAgency Habits 3.50 Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 12 The agents who have the highest concentration of high CLV customers have common agency best practices. 0 1 2 3 4 5 1.00 Number of CLV Best Practice Traits Relative Difference in High CLV CLV Best Practices Count Where do You Network? What Affiliations do you have? What is your Cross- Sell Philosophy? When do you attempt to cross-sell? What is your sales craft? Consultative?
- 13. Can You useCLV in Marketing? Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 13 Including a CLV measure in your direct mail campaigns will improve your ROI. Conventional Segmentatio n Segmentatio n including CLV Expected Response Expected Response Expected Response Do Not Mail Do Not Mail
- 14. CLV Optimized DirectMail Business Case Before CLV Focus Optimized for CLV Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 14 Mailed to 500,000 Households • 0.05% Return • 1000 Respondents • 100 Converted Leads @ and average of $1,250 lifetime revenue each. Total expected lifetime revenue return = $125,000 (premium) or $18,750 Commission Mailed to 350,000 Households • 0.04% Return • 750 Respondents • 75 Converted Leads @ and average of $2,750 lifetime revenue each. Total expected lifetime revenue return = $206,250 (premium) or $30,937 Commission Basis for mailing was conventional response model. Targeted all likely respondents Targeting both High and Mid CLV along with response model, company reduced costs and increased revenues.
- 15. CLV Broadcast AdBusiness Case Conventional Copy Testing Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 15 Ads can be optimized using CLV to improve messaging, aid recall and consideration for best ROI. CLV Optimized Copy Testing Ad Recall 55% Consideration 36% AD ROI 87% OPTIMIZED FOR CLV Ad Recall 45% Consideration 24% AD ROI 67% PRE-CLV
- 16. Goal: Use CLVto Optimize Marketing Mix Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 16 Radio Interne t TV Print Radio Interne t Direct Mail TV Print Direct Mail Pre- CLV Post- CLV Total Radi o Internet TV Print Direct Mail Total Radi o Internet TV Print Direct Mail Pre- CLV Post- CLV Work with ad agency to target High and Mid CLV in conjunction with CLV marketing mix model to optimize marketing spend. CLV allows marketing managers to justify expenditure, more easily calculate ROI, and produce results. Marketing Mix Allocation Marketing Mix ROI
- 17. CLV Implication onOperations If time is your “shelf space” where should you spend 25x High CLV consumers exhibit higher overall Retention. Basically, most of your revenue comes from a small % of consumers types. Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 17 12.5 0.5 0 Top 10 % Avg Bottom 10% CLV Impact on Revenue 120 60 0 Top 10 % Avg Botto m 10% Retention in Months As already exhibited, the higher CLV consumer provides better lifetime revenue. it? On the % of the book that makes you the most money!
- 18. Additional CLV Consideration Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 18 Customer Loyalty Consideration CLV is intrinsic to the consumer, but their loyalty to YOUR agency is largely determined at the Point-of- Acquisition and On- Sale. Boarding Post Sales Service Transactions 80% 20%
- 19. Key Take Aways Proprietary and Confidential Property of Quantum Sight Marketing, LLC and IronPoint Insurance Services 19 A CLV strategy integrated into your current strategy, can elevate your ROI. Segmenting consumers on a CLV/Revenue basis can change your marketing mix allocation and improve ROI on marketing spend. CLV is intrinsic to the consumer and largely not causal. Loyalty is determined largely at the point-of-sale.
- 20. Proprietary and ConfidentialProperty of Quantum Sight Marketing, LLC and IronPoint Insurance Services 20 Scott A. Boren President IronPoint Insurance Services Partner Quantum Sight Marketing, LLC
Editor's Notes
- #7 Life Time Value customers generate for a company with no stimuli (Good or Bad) from the company. Different for each customer Predictive (identify as early as prospecting stage) Powerful segmentation tool Most important! Seperates Loyalty drivers (who you attract vs. what you do!)