A Project Report OnCustomer Relationship Management in IDBI
Federal Life Insurance
Submitted in partial fulfilment of the requirements forSummer
Internship
Submitted by
ANKIT PANDEY
Under the Guidance of
Mrs. Shaanthi YagyanathIDBI Federal Life Insurance Co. Ltd.
Xavier Institute of ManagementBhubaneswar,Odisha
ACKNOWLEDGEMENT As I look back after the completion of my
project I feel it would not have been possible without the
guidance. I am very grateful to all the people who have lent their
precious time and advice for rendering this project successful. I
take this opportunity to thank them all.Firstly, I am grateful to
IDBI FEDERAL LIFE INSURANCE COMPANY LTD, for giving me an
opportunity to undertake this project in their organization.I
sincerely express my thanks to my company project guide Mrs
Shaanthi Yagyanath for her strong support and inspiration during my
project period.I am thankful to Mr. Gireesh, Mr. Sachin Garg, Ms.
Jaya and all the executives of the company for their valuable
guidance and for sharing their experience in completing this
project successfully,I also express thanks to my parents, my family
members, and all my friends for their valuable support in
completion of this project successfully.Last but not least I am
thankful to all those people who helped us directly and
indirectly.
DECLARATIONI hereby declare that the project entitled CUSTOMER
RELATIONSHIP MANAGEMENT undertaken at IDBI FEDERAL LIFE INSURANCE
COMPANY LTD. submitted in partial fulfilment of the requirement for
the completion of summer internship. It is my original work and is
not submitted for the award of any other degree or diploma.
Place: LUCKNOW Date: 30/06/2014 ANKIT PANDEY
Table of ContentsINTRODUCTION5COMPANY PROFILE9CUSTOMER
RELATIONSHIP MANAGEMENT14CUSTOMER RETENTION21RESEARCH
METHODOLOGY27DATA COLLECTION, ANALYSIS &
INTERPRETATION28EXPECTED CONTRIBUTION FROM THE
STUDY45FINDINGS46CONCLUSION47
INTRODUCTIONWherever there is uncertainty there is risk. We do
not have any control over uncertainties which involves financial
losses. The risks may be certain events like death, pension,
retirement or uncertain events like theft, fire, accident,
etc.Insurance is a financial service for collecting the savings of
the public and providing them with risk coverage. The main function
of Insurance is to provide protection against the possible chances
of generating losses. It eliminates worries and miseries of losses
by destruction of property and death. It also provides capital to
the society as the funds accumulated are invested in productive
heads.Types of Insurance:1. Life Insurance - Insurance guaranteeing
a specific sum of money to a designated beneficiary upon the death
of the insured, or to the insured if he or she lives beyond a
certain age.2. Health Insurance - Insurance against expenses
incurred through illness of the insured.3. Liability Insurance -
This insures property such as automobiles, property and
professional/business mishaps.Challenges faced by Insurance
Industry Threat of New Entrants: The insurance industry has been
budding with new entrants every other day. Therefore the companies
should carve out niche areas such that the threat of new entrants
might not be a hindrance. There is also a chance that the big
players might squeeze the small new entrants. Power of Suppliers:
Those who are supplying the capital are not that big a threat. For
instance, if someone as a very talented insurance underwriter is
presently working for a small insurance company, there exists a
chance that any big player willing to enter the insurance industry
might entice that person off. Power of Buyers: No individual is a
big threat to the insurance industry and big corporate houses have
a lot more negotiating capability with the insurance companies. Big
corporate clients like airlines and pharmaceutical companies pay
millions of dollars every year in premiums. Availability of
Substitutes: There exist a lot of substitutes in the insurance
industry. Majorly, the large insurance companies provide similar
kinds of services be it auto, home, commercial, health or life
insurance. Present scenario of Insurance industryThe brief outlook
about the regulatory changes done by the Indian Government over the
years is given below:-
The effect of insurance reforms has been positive on the
insurance industry. There has been positive growth in all the
segments, with investments flowing in the right direction. Reforms
have helped to achieve rapid growth in critical areas and sustain
them over a period of time through channelized strategies.Post
reforms, the number of players have increased from 4 to 22 players
presently registered under IRDA (INSURANCE REGULATORY AND
DEVELOPMENT AUTHORITY OF INDIA). Financial viability of insurance
companiesHowever, although the insurance industry is a flourishing
in world economy today, one needs to keep in mind that financial
viability/stability of the insurance company is a major
consideration at the time of purchasing insurance contract. The
viability factor is important because many a times, an insurance
premium paid currently provides coverage for losses in distant
future and there are instances where a number of insurance
companies have gone insolvent, thus leaving their policyholders
with little helpful or no coverage. Therefore, even if the global
industry is strengthening more and more, the weak links are also
co-existent and blind faith can lead to a severe downfall. There
are also independent rating agencies for insurance companies which
could be helpful in providing sound information on financial
viability of various insurance companies. Marketing in
InsuranceInsurance comes under the service sector and while
marketing this service, due care is to be taken in quality product
and customer satisfaction. While marketing the services, it is also
pertinent that they think about the innovative promotional
measures. It is not sufficient that you perform well but it is also
important that you let others know about the quality of your
positive contributions.The creativity in the promotional measures
is the need of the hour.The advertisement, public relations, word
of mouth communication needs due care and personal selling requires
intensive care.There areinsurance marketing strategiesthat can take
any insurance agency from mediocre to success when utilized
correctly. Hence it is necessary that an insurance company
formulize their marketing strategies with lot of thought and
diligence to capture the untapped potential in the insurance
industry. Through this project we aim to understand the strategies
adopted by IDBI Federal and to find out the effectiveness of these
promotional strategies through a study on consumer behaviour.
The insurance industryThe insurance sector has gone through a
number of phases and changes. Insurance in India used to be tightly
regulated and monopolized by state-run insurers. Following the move
towards economic reform in the early 1990s, various plans to revamp
the sector finally resulted in the passage of the Insurance
Regulatory and Development Authority (IRDA) Act of 1999.
Significantly, the insurance business was opened on two fronts.
Firstly, domestic private-sector companies were permitted to enter
both life and non-life insurance business. Secondly, foreign
companies were allowed to participate, albeit with a cap on
shareholding at 26%. With the introduction of the 1999 IRDA Act,
the insurance sector joined a set of other economic sectors on the
growth march. During the 2003 financial year, life insurance
premiums increased by an estimated 12.3% in real terms to INR 650
billion (USD 14 billion) while non-life insurance premiums rose
12.2% to INR 178 billion (USD 3.8 billion). Growth in insurance
premiums has been averaging at 11.3% in real terms over the last
decade. There are strong arguments in favor of sustained rapid
insurance business growth in the coming years, including Indias
robust economic growth prospects and the nations high savings
rates.
COMPANY PROFILE
IDBI Federal Life Insurance Co. Ltd.: IDBI Federal Life
Insurance Co. Ltd. (formerly known as IDBI Fortis Life Insurance
Co. Ltd.), is a joint venture between three financial
companiesDevelopment and Commercial Bank, IDBI Bank, Indias private
sector Bank, Federal Bank and European insurer Ageas (formerly
Fortis). IDBI Federal Life Insurance Co. Ltd. was formed on March
2008. In this venture, IDBI Bank owns 48% equity while Federal Bank
and Ageas own 26% equity each. The Headquarters is located in
Mumbai, India. IDBI Bank Ltd. continues to be, since its inception,
Indias premier industrial development bank. Created in 1956 to
support Indias industrial backbone, IDBI Bank has since evolved
into a powerhouse of industrial and retail finance. Today, it is
amongst Indias foremost commercial banks, with a wide range of
innovative products and services, serving retail and corporate
customers in all corners of the country from 720 branches and 1228
ATMs. The Bank offers its customers an extensive range of
diversified services including project financing, term lending,
working capital facilities, lease finance, venture capital, loan
syndication, corporate advisory services and legal and technical
advisory services to its corporate clients as well as mortgages and
personal loans to its retail clients. As part of its development
activities, IDBI Bank has been instrumental in sponsoring the
development of key institutions involved in Indias financial sector
such as the Securities and Exchange Board of India (SEBI), National
Stock Exchange of India Limited (NSE) and National Securities
Depository Ltd. Federal Bank is one of Indias leading private
sector banks, with a dominant presence in the state of Kerala. It
has a strong network of 708 branches and 749 ATMs spread across
India. The bank provides over four million retail customers with a
wide variety of financial products. Federal Bank is one of the
first large Indian banks to have an entirely automated and
interconnected branch network. In addition to interconnected
branches and ATMs, the Bank has a wide range of services like
Internet Banking, Mobile Banking, Tele Banking, and Any Where
Banking, debit cards, online bill payment and call centre
facilities to offer round the clock banking convenience to its
customers. The Bank has been a pioneer in providing innovative
technological solutions to its customers and the Bank has won
several awards and recommendations. Fortis is an international
insurance group composed of AG Insurance, the overall market leader
in life and non-life insurance in Belgium, distributing its
insurance products through the network of BNP Paribas Fortis Bank
and independent insurance brokers, and Fortis Insurance
International with subsidiaries in the UK, France, Hong Kong,
Luxembourg (Non-life), Germany, Turkey, Russia and Ukraine, and
joint ventures in Luxembourg (Life), Portugal, China, Malaysia,
Thailand and India.Vision and Values Vision To be the leading
provider of wealth management, protection and retirement solutions
that meets the needs of our customers and adds value to their
lives. Mission To continually strive to enhance customer experience
through innovative product offerings, dedicated relationship
management and superior service delivery while striving to interact
with our customers in the most convenient and cost effective
manner. To be transparent in the way we deal with our customers and
to act with integrity. To invest in and build quality human capital
in order to achieve our mission. Values Transparency: Crystal Clear
communication to our partners and Stakeholders. Value to Customers:
A product and service offering in which customers perceive value.
Rock Solid and Delivery on Promise: This translates into being
financially strong, operationally robust and having clarity in
claims. Customer-friendly: Advice and support in working with
customers and partners. Profit to Stakeholders: Balance the
interests of customers, partners, employees, shareholders and the
community at large. Excellence: "In every aspect of work ranging
from the in-house training institute to the detailed Personal
Insurance Plan. IDBI Federal is focused on achieving the highest
standards of quality in every aspect of their business". Honesty:
"Is the heart of the Life Insurance business? IDBI Federal believes
that above all, Life Insurance is based on trust. Transparency,
Dependability and Integrity will form the cornerstones of the IDBI
Fortis experience." Knowledge: "Is what makes experts. IDBI Federal
is focused on the Life Insurance business. Perfectly combining
global expertise with local knowledge, IDBI Federal is the Indian
Life Insurance specialist." Caring: "For the customer IDBI Federal
is redefining the Life Insurance paradigm to focus on the needs of
the customers. The IDBI Federal service process is responsive,
personalized, humane and empathetic." Culture: Our "in house
culture recipe" has some of the finest ingredients going into its
making. Some of the more prominent aspects of our culture are
stated below: 1. Customer comes first.2. Do it right the first
time.3. Bias for result oriented action.4. Financial strength and
discipline.5. Clarity of purpose.6. International quality
standards.7. Inclusive Meritocracy.8. Learning opportunities.9. Fun
at work.10. Commitment to published value system Technology: To
monitor and manage its network equipment across 34 sites, IDBI
Federal uses Tulip Proactive Managed CE solution. The solution
includes device management, proactive troubleshooting and
notification support. With the implementation of the solution, IDBI
has reported improvement of network performance and availability,
with a faster, more effective change and configuration
management.Products IDBI Federal launched its first set of products
across India in March 2008, after receiving the requisite approvals
from the Insurance Regulatory and Development Authority (IRDA).
IDBI Fortis offers services through a nationwide network across the
branches of IDBI Bank and Federal Bank in addition to a network of
advisors and partners. IDBI Federal has 35 branches across the
country.Sponsorships, Awards IDBI Federal Life Insurance Company
was selected as the title sponsor for the India-Sri Lanka Cricket
Series. This was followed by the IDBI Federal Wealthsurance
Twenty20. Wealthsurance Made Easy (WME), a knowledge aid by IDBI
Federal for its sales force, won The Bronze Dragon in the category
for Best Dealer/Sales Force activity at the Promotion Marketing
Awards of Asia (PMAA).Milestones
March 2008IDBI Federal starts operations with two products
Homesurance & Wealthsurance.
August 2008IDBI Federal becomes one of the fastest growing new
life insurers to collect premiums worth Rs 100 crores.
October 2008IDBI Federal launches Bondsurance
January 2009IDBI Wealthsurance Cup 2009 India v/s Sri Lanka held
in Sri Lanka.
March 2009Collected premium of over 328 corers and 87,000
policies and a Sum assured of Rs 2825 crores since inception
November 2009IDBI Federal launches Incomesurance
CUSTOMER RELATIONSHIP MANAGEMENTCustomer Relationship Management
focuses on acquiring, developing and creating satisfied loyal
customer; achieving profitable growth; and creating economic value
in companys brand.Customer Relationship Management strives to
improve the customers experience of how they interact with the
company and produce high customer equity .the more loyal customer,
the higher are the customer equity.Recently CRM has taken a center
stage in the business world with businesses concentrating on saving
money and increasing profits by redefining internal processes and
procedures. It costs a company dramatically less to retain and grow
an existing client, than it does to court new ones. It is said that
It is seven times more expensive to acquire a new customer than to
keep an existing one, therefore the value of customer information
and management should never be underestimated.Customer equity
comprises of three drives Value equity Brand equity Relationship
equity
CRM (Customer Relationship Management) is something that is not
restricted to any country or culture. Wherever customers are there,
business cannot afford to keep them unhappy; and that is where CRM
comes in as a strong requirement.In India, the trend is positive.
When compared to about twenty years ago , people have more choice
and every company knows it cant take customer for granted .May be
the movement is slow ,but we see a steady progress towards an
increased focus on the customer rather than merely on the products
and price . Todays era is of service because customers are ultimate
base line for any business to sustain in this competitive world For
example: Banks started providing gold, silver cards to its valued
customer, depending on their needs the customer get faster
services. The concept of CRM is relatively simple and familiar to
insurers. The two points of the concept are: Understand your
customers' unique requirements. Offer them the services and
products over their lifetime that will maintain or increase their
profitability and retain them as your customers.These are the some
supporting strategies that implement these concepts to yield
significantly greater results and a true competitive
advantage.These supporting strategies generally fall into three
groupings: analytical, marketing and operational. The analytical
path focuses on mining the data you have on your existing
customers, and marrying that data with external data when possible
to develop a scoring index. This index can then be reliably applied
to individual customers to indicate their level of profitability,
tendency to remain a customer, and propensity to acquire other
products and services. While the CRM market in India is still
nascent, bigger players such as ICICI Prudential Life Insurance
Company are adopting it in a big way. The company was earlier using
Gold Mines (a sales and marketing tool) and HEAT (an operational
CRM solution) from Front Range Solutions. Last year it took a
decision to invest in CM3 from Tera data and SASs statistical tool
for BI. Head-IT at ICICI Prudential Life Insurance Company says, As
a forward looking company, we see CRM playing a significant role in
acquiring new customers. CRM lets us obtain granular details about
our customers, helping us to design better products, improve
service levels and reduce operational costs. CRM has helped ICICI
Prudential Life capture five lack customers through effective
event-based marketing and lead tracking to cross- and up-sell
products.Business drivers for CRMA couple of years ago, LIC
dominated the insurance market with the help of its sales force and
channels and margins were reasonably high. Today, there are close
to 20 companies offering both life and general insurance products.
All of them have equally strong international and local partners;
all are focusing upon similar geographies and target audiences. The
new firms selling life insurance and non-life insurance [pensions,
insurance as saving, etc] have failed to emulate the LIC model
because margins are getting squeezed. There are several pain areas
that new insurance firms faceacquiring new customers, retaining
them, cross-selling products and controlling rising costs while
providing comprehensive support. Insurers have added a variety of
products and services to their kitty. These range from insurance as
an investment option to pension plans. They target the younger
generation in the 20 to 30 years age group. The convergence of four
factors protection, saving (investment option), loans and pension
has compelled insurance companies to align with banks in reaching
out to a larger audience, says Head IT. This trend has led to
another insurance companies are joining hands with banks by
becoming channel partners for insurance. Tata AIG has a marketing
alliance with HSBC, Birla Sun Life has one with Citibank and IDBI
and LIC ally with Corporation Bank, while Kotak Life Insurance has
an arrangement with Kotak Bank. This strategy helps insurance firms
increase their footprint to cover a larger part of the customer
base in the 20-30 years demographic. CRM helps connect a banks high
net worth customers with insurance firms.Where to beginoperational
CRM or analytical CRM?The choice between operational and analytical
CRM as a starting point depends upon the insurers needs. Gartner
says that insurance companies with multiple financial products and
a big customer base, such as integrated insurance solution
providers, will leverage their customer base to cross- and up-sell
different financial products, including insurance. Such providers
will benefit from adopting analytical CRM. Market segmentation,
campaign management and data mining applications will benefit them
in many ways. Call centre text mining: This tool can help improve
the customer experience by resolving complaints rapidly. Insurers
are using these tools to mine text from call centre transcripts to
identify issues faced by customers. Text mining tools also help
detect and capture other useful pieces of information around a
customers life stage, financial needs and product interests. These
can be used to generate leads and trigger cross-selling. However,
to be fully effective, customer service representatives must be
trained to probe for information that will help in cross selling
during the text-mining phase. Text mining tools are leading edge
today, but are predicted to take off quickly. Event-triggering and
profiling: Insurers can use event triggers to generate leads that
can be acted upon quickly, usually within 24 hours, says Head IT.
Event-triggering tools monitor incoming transaction and contact
data in near-real-time to recognize changes in a customers
behaviour or profile to trigger actions or alerts. Lead management
gets sophisticated: Often the ability of an insurer to generate
leads by means of event-triggering, re-engineered touch points and
cross line-of-business referral can outstrip their ability to
manage said leads. In such a situation, though the number of leads
generated rises, the conversion rate does not. It may even drop.
CRM can help provide sales representatives with a mechanism to
prioritize and manage leads.Changing customer behaviour in
insurance buyingIn insurance buying, most customers would probably
describe their level of understanding of insurance contracts in the
above manner. Customers know generally what a policy covers; they
also know that there are several fine prints in insurance
contracts, which they do not know, or perhaps care to know, at the
time of buying. And they also seem to generally conclude that when
it comes to making a claim under an insurance policy, there could
be several issues of which they are just unaware at the time of
buying the policy in the first place.Changing expectationsA
remarkable trend in the insurance industry in the last three years
is the rapid change in the knowledge level as well as expectations
of the customers. A study conducted last year by Forte, a
collaborative effort between FICCI and ING Vysya Insurance Co.
about the consumer behaviour in the pre and post liberalization
days of the industry had revealed stunning changes in consumer
expectations.It looks as though the docile, uninformed, insurance
consumer has suddenly been transformed into an aggressive and
highly demanding species. While the fresh air of competition in
every sector of the economy brings in major changes in consumer
expectations (witness the sea change in the attitude of automobile
buyers in India in the last five years), the insurance industry has
witnessed a few unique aspects, such as regulation-inspired efforts
to educate insurance buyers, and a vast change in the skills and
capabilities of the intermediaries involved in
distribution.Motivating factorsIn respect of life insurance,
potential buyers are driven to buying a policy for one or more of
three major reasons: security of the money invested, saving for one
or more specific purposes, and the availability of tax benefit.
Customers are increasingly known to place less reliance on the tax
benefit factor, and stress more on the security aspect and the
end-use objective. The challenge of the insurance companies is to
address the motivating factors imaginatively and come up with
genuine solutions. Take for example, the consumers objective of
taking a policy to save money for higher education of a child. This
has been a driving force in the sale of new insurance contracts in
several other countries too, notably in Asia.A potential buyer
primarily expects that the saving should be a painless process and
that the money saved should be absolutely safe. The challenge is to
provide not only convenient payment options, but also mechanisms
that could offer some measure of protection and relief to the
customer if he is forced to disrupt the payment arrangement for
unforeseen reasons.On the issue of the consumers perception of
security of the money invested, there are two important aspects.
One is how the features of the insurance contract are put across to
the buyer (whether it is a unit-linked policy or endowment
oriented). The second is how to address more effectively the
question about the dependability of the new generation companies
that potential new insurance buyers raise during sales calls
especially outside metros and in small towns (referred to in
publicity jargon as buyers in the SEC B and C categories). Both
insurance companies and the Regulator need to address this
behavioural challenge more actively.Consumers experienceThere has
been a vast change in the approach of the insurance agent from the
pre-liberalization days. While the agent in the past established
informal contacts with potential buyers and often depended on
referrals from friends and family members, the new age companies
insist on a professional, and often aggressive stance on the part
of the sales staff. Customer expectations in this regard revolve
around two key aspects: first, whether the customer is getting
truthful advice from the agent, or if he is pushing a product that
yields him the highest commission rate. Invariably, the customers
today expect the insurance agent (and other intermediaries such as
the banc assurance sales staff) to provide a ready comparison of
competitors products and how the product the agent is suggesting is
superior to the others. How far is the need-based analysis of
insurance requirement, that the new age sales staff are trained to
offer, found to be relevant and useful to potential insurance
buyers? The answer varies from the metro cities and small towns.
However outside metro cities, customers tend to take a clear view
that saving-oriented policies are more needed. There is also marked
reluctance to disclose the true personal financial status and the
corresponding insurance needs to insurance salespersons.The second
aspect of customers perception about the new generation of
insurance agents is the level of continuing commitment of the agent
to arrange post-sale service. Potential insurance buyers are unsure
that they would continue to deal with the same agent who sold the
policy throughout the term. They would tend to place more reliance
on the companys general promises of service and commitment. This is
an important message for the insurance companies. As insurance
customers increasingly make arrangements to pay periodical premiums
directly through the electronic medium, or though automatic
transfers from their bank accounts, thereby bypassing the need for
regular post-sale service by the agents, customers would tend to
place more reliance on the direct standard of service from the
company concerned. Instances of customers requiring agents to
arrange for loans against their policies, or change nominations
etc. are rare. Therefore companies need to gear themselves to
provide high service standards directly.Premium shoppingIs pricing
or the premium rate for a policy, a deciding factor for buying
insurance? It is indeed so in a price sensitive market such as
ours. In several forums, customers have voiced the general feeling
that as insurance products become more complex, and they get
bundled with several riders, it is becoming impossible to make
price comparisons between different companies.An increasingly
larger segment of customers now questions why the premium rate
should be the same for a policy if bought direct from the company
over Internet, or through a channel considered simpler, such as the
banc assurance channel. There is logic in the insurance companies
passing on the cost saving to customers in such cases.It is time
the Regulator seriously considered the customer expectations of
differential premium rates for the same policy bought through
different channels and allowed the practice. It should therefore be
conceivable to offer premium rebate to insurance buyers who
consciously decide to approach the company directly for buying a
policy (after presumably taking the trouble of educating themselves
about the product features and other aspects), and choose to deal
with the company directly for future servicing needs.High
expectationsOne aspect of customer service from new age insurance
companies that a remains to be tested widely is the claim payment
record. While consumers seem to be satisfied that the survival
benefits under a life insurance policy would get paid rather
promptly from the tech-savvy new companies, obviating the need for
interlocution by the insurance agent, insurance buyers are not yet
convinced about hassle-free payment in the event of a claim,
whether under a life policy or a general insurance policy. This is
especially so in respect of rider benefits such as critical illness
or hospitalization benefits.The level of consumer skepticism on
claim payment is markedly high in respect of non-life insurance
products, such as Householders Package or Medicaid policies. There
is considerable work to be done to boost the level of confidence
both by insurance companies and the Regulator. By the time a
company completes the development of a strategy and makes
investments to pursue the strategy, the opportunity often ceases to
exist. It is therefore important that the new age insurance
companies become kinetic enterprises, which can take advantage of
unpredictable customer demands and unexpected market events
immediately. This is vastly relevant for the Indian market where
the insurance consumers are rapidly coming of age.
CUSTOMER RETENTIONIntroductionA literature review discusses
published information in a particular subject area, and sometimes
information in a particular subject area within a certain time
period. A literature review can be just a simple summary of the
sources, but it usually has an organizational pattern and combines
both summary and synthesis. A summary is a recap of the important
information of the source, but a synthesis is a re-organization, or
a reshuffling, of that information. It might give a new
interpretation of old material or combine new with old
interpretations. Or it might trace the intellectual progression of
the field, including major debates. And depending on the situation;
the literature view may evaluate the sources and advice the reader
on the pertinent or relevant. This chapter began with retention,
measuring retention, importance of customer retention, advantage of
customer retention, benefits of customer retention.In todays
challenging economy and competitive business world, retaining their
customer base is critical to organization success. If the company
doesnt give their customer some good reason to stay, organizations
competitors will give the customer a reason to leave. Customer
retention and customer satisfaction drive profits. Its far less
expensive to cultivate organization existing customer base and sell
more service to the customer than it to seek new, single-
transaction customers. Most surveys across industries shows that
keeping one existing customer is five to seven times more
profitable than attracting one new customer. A customer-focused
approach among its employees is still not present. In this era of
intense competition .it is very important for any service company
to understand that merely acquiring customer is not sufficient
because there is a direct link between customer retention over time
and profitability & growth. Customer retention to a great
extent depends on service quality and customer satisfaction.
Complaints are natural part of any service activity as mistakes are
an unavoidable feature of all human endeavour and thus also of
service recovery. Service recovery is the process of putting things
right after something goes wrong in the service delivery. Customer
retention is the maintenance of continuous trading relationships
with customers over the long term. Customer retention is the mirror
image of customer defection or chum. High retention is equivalent
to low defection. In an industry where there are a multiple
purchases over the years, organizations entire team should be very
focused on retaining those customers: i. Delivering service thats
consistent with your value proposition and brand.ii. Cross-selling,
up-selling and asking for referrals from existing customers.iii.
Developing programs to increase customer loyalty and decrease
turnoveriv. Prioritizing retention as a major focus in your annual
marketing plan.v. Knowing the lifetime value for different segments
and using that data to improve the marketing. Studies say it costs
ten times more to generate a new customer than to maintain an
existing one. If organization has a small number of customers,
losing a few could cripple company. Even if there are a large
number of customers, a small increase in the rate should
dramatically increase profits. The maintenance of the patronage of
people who have purchased a companys goods or services once and the
gaining of repeat purchases. Customer retention occurs when a
customer is loyal to a company, brand, or to a specific product or
service, expressing long-term commitment and refusing to purchase
from competitors. Of critical importance to such strategies are the
wider concepts of customer service, customer relations, and
relationship marketing. Companies can build loyalty and retention
through the use of a number of techniques, including database
marketing, the issue of loyalty cards, redeemable against a variety
of goods or service, preferential discounts, free gifts, special
promotions, newsletters or magazines, members clubs or customized
products in limited editions. It has been argued that customer
retention is linked to employee loyalty, since loyal employees
build up long-term relationships with customers. Customer retention
has always been an important topic for the marketing. For sure, the
advantages of loyal clients are obvious. Often CRM is only
implementing new systems for data mining and client segmentation or
operational system like a complaint management. But the thing is:
data mining system or client clubs are not the basis. They are the
cherry of the cake called client retention. A key principle of
relationship marketing is the retention of customers through
varying means and practices to ensure repeated trade from
pre-existing customers by satisfying requirements above those of
competing companies through a mutually beneficial relationship.
This techniques is now used as a means of counter balancing new
customer and opportunities with current and existing customers as a
means of maximizing profit and counteracting the leaky bucket
theory of business in which new customer gained in order direct
marketing oriented businesses were at the expense of or coincided
with the loss of older customers. This process of "churning" is
less economically viable than retaining all or the majority of
customers using both direct and relationship management as lead
generation via new customers requires more investment. Many
companies in competing markets will redirect or allocate large
amounts of resources or attention towards customer retention as in
markets with increasing competition it may cost 5 times more to
attract new customers than it would to retain current customers, as
direct or "offensive" marketing requires much more extensive
resources to cause defection from competitors. However, it is
suggested that because of the extensive classic marketing theories
center on means of attracting customer and creating transactions
rather than maintaining them, the majority usage of direct
marketing used in the past is now gradually being used more
alongside relationship marketing as its importance becomes more
recognizable. According to Buchanan and Gilles the increased
profitability associated with customer retention efforts occurs
because of several factors that occur once a relationship has been
established with a customer. i. The cost of acquisition occurs only
at the beginning of the relationship, so the longer the
relationship, the lower the amortized cost. ii. Account maintenance
costs decline as a percentage of total costs or as a percentage of
revenue.iii. Long-term customers tend to be less inclined to
switch, and also tend to be fewer prices sensitive. This can result
in stable unit sales volume and increase in dollar-sales volume.iv.
Long-term customer may initiate free word of mouth promotions and
referrals.v. Long-term customers are more likely to purchase
ancillary products and high margin supplemental products.vi.
Customer that stay with company tend to be satisfied with the
relationship and are less likely to switch to competitors, making
it difficult for competitors to enter the market or gain market
share.
Importance of customer retention There are a number of reasons
for this. To begin with, to acquire a customer a company incurs
promotional costs like advertising, sales promotion etc. It is said
that it costs five times more to attract a new customer than
retaining one. The operating cost decrease when a customer stays.
Service being rich in experience and credence qualities, it takes
some time for customers to get accustomed to it and once they are
used to the service and are satisfied with the service provider,
they tend to purchase more over a period of time. As they remain
satisfied with a service provider, they spread a positive word of
mouth, which is very effective in case of service for attracting
new customers. Longer the customer stays with an organization, more
the organization knows about him, which enables it to offer a
customized service which makes it difficult for the customer to
defect. This may even provide opportunities to the organization to
charge price premium by offering individualized service which may
be difficult for the competitors to offer. Considering the
importance of retaining customers in service business, Reichheld
& Sasser coined a term Zero Defection. They highlighted that
companies can boost profits by almost 100% by retaining just 5%
more of their customers. Further, it is also very important to
understand the life time value of a customer. Further, if by a
positive word of mouth, he brings just one more customer to the
organization, his value to the organization doubles. Therefore, it
is important for all the employees in the organization to
understand the life time value of their customers. Advantages of
customer retention Possibility of repeat business: This is probably
the most obvious advantage of customer retention. Effective
services that lead to customer satisfaction will make customer
coming back to again, thus giving repeat business. Repeat business
is a win-win proposition for the business or service and the
customer. The business reduces the cost of customer acquisition,
while the customer reduces the cost of finding a reliable vendor
and thus also saves on costs associated with switching vendors.
Reduced costs for customer acquisition: Acquiring a customer has
certain associated costs. These include the costs associated with
advertising, following up, sales demos, travel and meeting cost
etc. having a repeat customer means that the customer means that
the customer is already aware of your processes and can predict
certain quality of output, thus minimizing the cost involved in new
customer acquisition. Having a repeat customer also has the
potential to open up another channel to advertise your business
word of mouth. Word of mouth advertising / recommendations are
perhaps the most important outcome of having a satisfied customer.
Fostering greater interaction between business and customer: Todays
markets are increasingly moving away from mass produced standard
products and service, towards a more customized market, where
products and service are tailored to meet customers specific
requirements. Having a repeat customer is an opportunity for you to
build a more focused relationship based on your customers specific
needs and requirements. Being ensured of having a customer who
comes back, you have more confidence to suggest improvements,
provide an insight to better understand their needs and
consequently design products and services that are relevant. Having
a repeat business also provides an opportunity for the buyer and
the seller to co-create products and services. Having more
delighted customers: Effective customer retention strategies allow
you to move from the zone of customer satisfaction to customer
delight. Studies have shown that customer delight is achieved only
when there is a perfect synergy between the buyer needs and the
buyer understands what the seller can deliver exactly what the
customer need. If you are able to deliver your customers, you have
better chance of them coming back to you, since they now know why
you are different from the rest of competition. Statistics:i.
Acquiring new customer can cost five times more than satisfying and
retaining current customers.ii. 2% increase in customer retention
has same effect on profits as cutting costs by 10%. iii. The
average company losses 10% of its customer each year.iv. 5%
reduction in the customer defection rate can increase profits by
25-125%, depending on the industries.v. The customer profitability
rate tends to increase over the life of a retained customer.vi.
Companies can boost profits anywhere from 25 to 125% by retaining
merely5% more existing customers.vii. Only one out of 25
dissatisfied customers will express dissatisfaction. Measuring
Customer Retention Retention rate is normally calculated as the
number of customers who have been lost over a period of time,
usually calculated over a quarterly or annual period. The key is to
calculate the percentage versus existing customers, and not
underestimate the loss rate by tallying new customer acquisitions
into the mix. The customer retention rate refers to the number of
customer lost over a period of time. It is normally calculated by
the percentage of lost customer versus existing customers over a
quarterly or annual period, without tallying new customer
acquisitions. While there are obvious benefits to keeping customers
loyal and maintaining retention rates, it can be extremely
challenging for management to keep retention rates up. Some
companies can measure retention rate using their CRM system, since
any of the vendors with solid sales modules should offer this
capability. Customer service expert Lori Bocklund recommends that
companies look for this functionality when evaluating CRM
solutions, even though it is unlikely to be the differentiating
factor. Companies like witness, Performix, AIM, and Merced offer
these types of tools. To measure this, some companies combines data
from the CRM system and data from other systems, such as your
systems, such as your quality monitoring system, ACD or CTI
solution handling contact routing and reporting. There are no hard
and fast rules on calculating customer defection and customer
retention, according to Lowenstein. It can depend on the industries
or the type of business, since companies have long-term
arrangements with customers. However, several consulting and
database management companies have succeeded in creating them.
However, the appropriate interval over which retention rate should
be measured is not always one year. Rather, it depends on the
customer repurchase cycle. Car insurance and magazine subscriptions
are bought on an annual basis. Carpet tiles and hi-fis are not. If
the normal hi-fi replacement cycle is four years, then retention
rate is more meaningful if it is measured over four years instead
of twelve months. Additional complexity is added when companies a
sell a range of products and services, each with different
repurchase cycles. Automobile dealers might sell cars, parts, fuel
and service to a single customer. These products have different
repurchase cycles which make it very difficult for the dealer to
have a whole of customer perspective on retention. Sometimes
companies are not clear about whether an individual customer has
defected. This is because of the location of customer related data,
which might be retained in product silos, channel silos or
functional silos. Type Of Customer Retention Rate Raw customer
retention rate:This is the number of customer doing business with a
firm at the end of a trading period, expressed as percentage of
those who were active customer at the beginning of the period.
Sales-adjusted retention rate: This is the value of sales achieved
from the retained customers, expressed as a percentage of the sales
achieved from all customers who were active at the beginning of the
period. Profit-adjusted retention rate: This is the profit earned
from the retained customers, expressed as a percentage of the
profit earned from all customers who were active at the beginning
of the period.
RESEARCH METHODOLOGYIntroduction The system of collecting data
for research projects is known as research methodology. The data
may be collected for either theoretical or practical research for
example management research may be strategically conceptualized
along with operational planning methods and change management.
Research methodology is to describe how to gather information
(method) this can be survey interview, litterateur review etc. And
then explain each method what are they, what are the method. Some
important factors in research methodology of measure most of your
work is finished by the time you finish the analysis of data.
Formulation of research questions along with sampling weather
probable or non-probable is followed by measurement that includes
surveys and scaling. This is followed by research design, which may
be either experimental or quasi-experimental. Methodology includes
a philosophically coherent collection of theories, concepts or
ideas as they relate to a particular discipline or field of
inquiry. Method of Data Presentation Any research finally leads to
a result, which would be analyzed, from the data that have been
received by the researcher. Data analysis is meant to be the most
sensitive part of any research work. On achieving this various
methods can be adopted there are three different methods using for
data analysis such as univariate statistic. The univariate analysis
consist of mean, standard deviation, percentage etc. although the
mean most commonly seen representation of central tendency and the
stranded deviation takes into account each observations distance
from the mean. The obtained data were presented through table based
on the percentage of the respondents and were analysis through
spread sheet under the univariate measures such as mean, standard
deviation.
DATA COLLECTION, ANALYSIS & INTERPRETATIONSampling
Method:The data collection was done from a sample of existing IDBI
customers.Population Size = Sample Size = The sample consisted of
existing IDBI customers from different locations of India. Thus,
stratified sampling method was used. The customers were grouped
into separate strata based on their location. Each stratum was then
sampled as an independent sub-population, out of which individual
elements were randomly selected. This implies that Simple Random
Sampling was used for each stratum.Method of Data Collection: After
the data analysis, it must be evaluate to get the decision. The
likers scale is given 1-3 to each statement in the questionnaires.
1) Agree 2) Neutral 3) Disagree. Personal Information: The research
is to identify the customer retention in IDBI federal insurance Co
limited in Coimbatore branch. Retaining the customer is based on
the customer satisfaction. Age, sex, civil status, education level,
occupation, income also decide the satisfaction.Questionnaire: Good
morning. I am Ankit from IDBI federal one of the leading
wealthsurance solution provider in India. Do you have a moment to
talk? I work extensively in the area of proving future financial
planning solution to people. My expertise includes planning for
your familys financial security, your childrens education, marriage
or your personal retirement. The reason why I called you today is
to get your idea and feedback about IDBI federal can I continue?
Part A: Personal Details 1. Is your age: a) 17-35 years b) 35-50
years c) Over 50 years 2. Gender:a) Male b) Female 3. Marital
status a) Single b) Married 4. Education qualification a) UG degree
holder b) PG degree holder 5. Monthly income a) Rs 10000-25000 b)
Rs 25000-45000 c) Above Rs 50000 Part B: Research Details Evaluate
the statement on the basis of the point given below 1. Agree 2.
Neutral 3. Disagree 6. In thinking about the recent experience with
IDBI Federal life insurance, rate the satisfaction with the
customer service received by you? 7. The process for getting your
concerns resolved is fast? 8. Please think about the features and
the benefits of the insurance you took. Are you satisfied with the
insurance? 9. Customer service Representative Pertain to the
customer service representative you spoke with most recently please
indicate whether you agree or disagree or none to the following
statements a.) The customer service representative was very
courteous b.) The customer service representative handled your call
quickly c.) The customer service representative was knowledgeable
10. The policy plans of IDBI Federal Company provide highest
benefits for you? 11. The insurance plans policy and procedure of
IDBI insurance company are understandable easily? 12. Is the
premium payment mode of IDBI federal insurance is easy? 13. Do you
like work or held the relationship between you and IDBI insurance
company for long time? 14. Do you recommend IDBI Insurance Company
to your friends? 15. You insure in IDBI because friends insisted?
16. Would you like to have another insure policy in IDBI in future?
Thanks a lot for your response Have a nice day!Analysis:A1. Age
Distribution AGE DISTRIBUTIONPERCENTAGE
17-35 YEARS73%
35-50 YEARS15%
OVER 50 YEARS12%
A2. GenderGENDERPERCENTAGE
MALE78%
FEMALE22%
A3. Marital statusMARITAL STATUSPERCENTAGE
SINGLE37%
MARRIED63%
A4. Educational QualificationQUALIFICATIONPERCENTAGE
U.G. DEGREE HOLDER29%
P.G. DEGREE HOLDER71%
A5. IncomeINCOME RANGE (PER MONTH)PERCENTAGE
10000-2500024%
25000-4500048%
ABOVE 5000028%
PART B:A6.CUSTOMER SATISFACTIONPERCENTAGE
AGREE40%
NEUTRAL8%
DISAGREE52%
A7.FAST CONCERN RESOLUTIONPERCENTAGE
AGREE45%
NEUTRAL15%
DISAGREE40%
A8.SATISFIED WITH INSURANCE FEATURES AND BENEFITSPERCENTAGE
AGREE30%
NEUTRAL10%
DISAGREE60%
A9(a).CUSTOMER SERVICE REPRESENTATIVE WAS VERY
COURTEOUSPERCENTAGE
AGREE82%
NEUTRAL8%
DISAGREE10%
A9(b).CUSTOMER SERVICE REPRESENTATIVE HANDLED YOUR CALL
QUICKLYPERCENTAGE
AGREE55%
NEUTRAL5%
DISAGREE40%
A9(c).CUSTOMER SERVICE REPRESENTATIVE WAS
KNOWLEDGEABLEPERCENTAGE
AGREE60%
NEUTRAL7%
DISAGREE33%
A10.THE POLICY PLANS OF IDBI FEDERAL COMPANY PROVIDE HIGHEST
BENEFITS FOR YOU?PERCENTAGE
AGREE30%
NEUTRAL15%
DISAGREE55%
A11.EASILY UNDERSTANDABLE?PERCENTAGE
AGREE70%
NEUTRAL8%
DISAGREE22%
A12.IS THE PREMIUM PAYMENT MODE OF IDBI FEDERAL INSURANCE IS
EASY?PERCENTAGE
AGREE80%
NEUTRAL5%
DISAGREE15%
A13.LONG TIME CUSTOMER RELATIONPERCENTAGE
AGREE26%
NEUTRAL15%
DISAGREE59%
A14.DO YOU RECOMMEND IDBI INSURANCE COMPANY TO YOUR
FRIENDS?PERCENTAGE
AGREE45%
NEUTRAL8%
DISAGREE47%
A15.INFLUENCE OF FRIENDS FOR IDBI INSURANCE?PERCENTAGE
AGREE56%
NEUTRAL4%
DISAGREE40%
A16.ANOTHER INSURANCE POLICY IN IDBI IN FUTUREPERCENTAGE
AGREE42%
NEUTRAL9%
DISAGREE49%
Interpretation based on above data:The target group is between
17-35 years of age and from middle income groupProblems/Threats to
Customer Retention: Over 50% of the sample of existing customer
base is dissatisfied with the IDBI Insurance policies 59% of the
sample do not wish to continue long time customer relation with
IDBI Federal. This implies that the customer retention ability
currently is poor. 47% of the sample does not recommend IDBI
Federal Insurance policies to others over competitors policies.
This indicates poor word of mouth and customer dissatisfaction. 49%
of the sample disagreed to take another insurance policy in future.
This is another indication of customer dissatisfaction.
Strengths: Customer Service Representative Good behaviour
Knowledgeable Efficient in handling service calls Policy terms and
conditions are easily understandable to the customers Easy and
convenient premium payment modeWeaknesses: Concern resolution speed
is slow 60% of the sample dissatisfied with the insurance policy
features and benefits 55% of the sample did not rate IDBI policy to
be best in the marketSuggestions for Customer RetentionThe IDBI
federal insurance company in Coimbatore branch has to take some
action to have customers for long time.i. Free some amount of
premium on continuous purchase.ii. Give some gifts which must
satisfy the needs of the customers.iii. Establish membership cards
and membership programs iv. Frequent buyer programs which permit
customers to build up fair playv. Databases that keep track of
customers purchases, preferences, complements and complaints, which
are used to carry out loyalty building services and dialogs.vi.
Integrated marketing programs where the advertising, direct
communications, customer service, database marketing and sales
programs are all orchestrated together and designed to build
loyalty.
EXPECTED CONTRIBUTION FROM THE STUDY As the number of visits
made by the advisors to the customers is less, and the relation can
be build/maintained by effective communication with the customers
by being in constant touch with the customer. As many of the new
life insurance companies are entering, IDBI Federal Life Insurance
Co. Ltd. has to maintain its relation with the customer, So that it
can be able to generate more number of loyal customers. To educate
the customers about the new products, the company can use SMS
service for reaching its customers. Due to large number of
customers, the reach of the entire customers in less time may not
be possible from its advisors and sales officers. This can be a
less costly medium of taking direct response of the customers. As
it does not disturb the customer. To effective closing of any sales
call, one should understand the need of the customers in depth. The
Advisors can be trained by the sales officers, and training
institution. The IDBI Federal Life Insurance Co Ltd. should come up
with more number of Products for those customers who are feeling
that the product that they purchased does not match their needsThis
research has been brought up many facts regarding the Customer
relationship Management. IDBI Federal Life insurance has large
number of products in its portfolio. But the advisors are unable to
find out the need of the customers and they are unable to suggest
the right suitable product. By this project, now I can understand
the various factors of insurance industry and how the customer
relation is maintained in this industry. The potential customers
are more in number and they are still not secured their life. Due
to distribution channels, to reach every other customer in shortest
time is not possible; hence company can adopt some of the
suggestions
FINDINGS1. Even though the sales officers and advisors provide
sufficient information to customers, while selling the product some
of the customers feel that they had not received sufficient
information. Information was rather complex, rest of the
respondents feel that the information provided was less.2. Found
that IDBI Federal Life Insurance has large variety of products in
its portfolio, it is observed that many of the customer feel that
the product purchased by them and their needs are not matching.3.
Most of the advisors do not prepare themselves for the sales call;
in turn they may not perform better at the call of the customer.
They do not provide adequate help to the customers and they just
try to avoid it and refer it to the higher officials.4. Due to lack
of the effective training, most of the advisors were not able to
handle the customer properly, and may not solve the customers
queries
CONCLUSIONThe data were collected from the customers response of
the IDBI Federal Life Insurance Corporation Limited Coimbatore
branch. Based on the percentage of the customers 100 sample size
was collected. The age, gender, marital statuses, educational
qualification, occupation, monthly income, were analyzed as
personal information in the questionnaire. According to the
collected personal information, most of the sample customers were
young age, single, educated, higher income customers who got
insurance. According to the research the IDBI Federal Life
Insurance Corporation Limited Coimbatore have high customer
relinquishment because most of the customers did not insure out of
their own interest. Parents, Friends who are working or doing their
project or internship in IDBI Federal Life Insurance wanted them to
have a policy. This is the reason why customers move out of IDBI
Federal.