Fortune News | Jan 23,2021
Jul 24 , 2021
By Asseged G. Medhin
No power is stronger than customer bargaining capacity in today’s business world. The impact of this will bring about bankruptcy if companies are not proactive to manage it. The power of the customer, however, can be changed to opportunity through strategic thinking.
Today’s bargaining power is not what we thought of traditionally – that the customer is seeking a reduced price for the service delivered. Today’s customers challenge businesses from the perspective of dynamism, uniqueness, modesty, knowledge and timeliness.
If we take the insurance industry alone, the business pattern has changed extensively as modernisation has arrived. The networks we knew will no longer serve us for new and ongoing social trends that are shaking up traditional business patterns in the insurance industry, resulting in an increase in consumer power.
Insurance customers, particularly businesses, are increasingly demanding simplicity, transparency and speed in their transactions with businesses, including insurance agents and carriers. The relentless march of online and mobile technology is continuing to fuel this change in customer expectations though we are far from digitalisation, only dabbling in it at the time.
Still, the online world is becoming increasingly mobile as smartphone and tablet use increases and fuels the demand for localised information, available anytime and anywhere. In the banking industry, we are using smart cards as agents of service facilities. ATM cards replace facilitation officers at the windows of banks. Every day, we receive messages of account transactions through mobiles delivered to us after being reviewed automatically.
These are augmented services on the core processes that will be used as a lesson to insurers. For instance, providing claims notification through technological devices reduces both the insurer and insured’s time and energy and creates agility. The customer can also, at a distance, renew their existing insurance policy. Mere automation and digitisation of services are not only what we need to transform in the insurance sector. We also need to improve claims management, underwriting management and marketing management processes.
The age-old wisdom of “insurance is sold and not bought’ has been challenged by a new one: “insurance is joyfully compensated.’’
This fundamental shift will force insurers, agents and brokers to re-examine their roles in the insurance value chain and become more relevant to the end-user. This chain has to be seamless; a fluid service will meet customer expectations of simplicity and transparency to foster innovation in product or service design and delivery.
Another necessary bargaining power, an age-old one, in fact, is price. As the number of services providers increases, all of whom provide similar products, they begin undercutting one another as a way of competition. This is a zero-sum game and hurts everyone else.
Who is responsible? The customer, who has got the power to buy insurance at almost zero premiums? The regulator? Experts in the field? Executives or board members?
Whoever is responsible, unless diversified products and services are introduced through innovation, we cannot address them. The workable strategy for experienced insurers is customising product and service attributes to meet the specific needs of their existing and potential customers. This eventually amasses a greater number of customers, diversity of products and speed of service demanded by customers.
Leadership from the top should focus on how to translate innovation into investments in mobile and interactive technologies. Many of us may think that the ever-increasing ‘disruption’ risk in the sector can incur us damage. Wise business leaders, nonetheless, put their chips on constantly growing the business through innovation and competency. Ultimately, the ever-changing company can absorb any shock to ‘disruptions,’ adapt and even use it as an opportunity to grow.
Let us change our mindset towards managing the power of customers through innovation instead of complaining about the shift. From the insurance perspective, demanding customers are an opportunity to change the business and reinvent oneself. Fear not customer bargaining power, fear not being able to adapt to it.
PUBLISHED ON
Jul 24,2021 [ VOL
22 , NO
1108]
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