Savvy business leaders consistently push to increase market share, profitability and value in any business cycle. In insurance, creating strategic partnerships with forward-thinking businesses to introduce revenue optimization strategies are both mutually beneficial and fundamental for their growth.
The idea of ‘set and forget’ client partnerships no longer exists, especially within affinity insurance partnerships. When looking at each unique business scenario, we need to work with partners to understand the various ways that their business is attracting customers and earning revenue; as well as where it is losing sales. With in-depth understanding of the customers’ buying journey, we are able to work with partners to identify the key areas for revenue optimization.
If we looked at today’s online businesses – the trend of consumers making digital payments is ever increasing whilst smart companies rush to maximize their piece of the pie. In Singapore, a total US$9 billion in digital transactions were made in 2017 and expected to double in 2022, showing an annual growth rate of 12.4% (Statista). Whilst the numbers are appealing, most businesses in Asia are not operating at their potential to convert online visitors into customers; as well as their potential for increasing customer spend during the buying cycle.
Taking Expedia as an example, it is one of the world’s largest online travel companies with a 2018 market cap of US$17.1 billion and taking in close to US$10.4 billion in sales. To continue to be relevant and profitable, Expedia would be consistently working to increase revenue throughout its whole customer attraction, acquisition and retention phases. By making integrations such as improving its digital marketing, UX/UI, upselling or cross-selling timely and relevant services, the company would be able to increase customer traffic, conversions, loyalty and ancillary revenue. More importantly, for a company of that size, a 1% increase in customer conversions can lead to millions of dollars in additional revenue.
In order to do this effectively, companies need to focus on customer journey mapping, personal solutions, testing, refining and optimization.
Some useful revenue optimization strategies for partners include:
- Price testing – changing prices and monitoring the results accordingly. The perfect balance of an optimal volume/margin trade off can then be identified to drive revenues.
- Optimization of purchase paths – by reviewing online conversion data, we can better understand customer behavior to identify opportunities such as upselling and cross-selling products and services. With this data, companies will be able to identify the drop offs within the purchase path and review where changes should be made to enhance the acquisition rate. A key example would be bundling star products with a complementary product which could result in an increase in the Average Order Value.
- Tactical marketing and campaign management – leveraging the customer base with tactics such as trigger-based marketing; or online procurement with search engine marketing. For example, identifying segmentation to apply the suitable marketing tactics to the relevant customers as well as diversifying channels.
- Contact strategy – employing effective retargeting techniques, for customers who did not purchase cross-sell services; as well as strategies to re-engage former customers.
Each of the initiatives will need to be tested, altered and carefully tweaked based on unique business and customer needs; as well as its potential to drive revenue. It is a winning formula used by Chubb for many of its partners.
Companies are compelled to constantly revisit their strategies and alter business models to ensure that they are optimally using their resources to boost profits. The smart use of revenue building strategies will provide opportunities for enhanced profitability in the short term, as well as greater competitiveness and maximization of customer value in the long term.