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B2B or not to be?

Harjit Sekhon – Senior lecture, London Institute

Carolyn Kennnington – Management lecturer, Sems, University of Surrey

Insurance providers need to improve their customer service and technical knowledge to win IFA loyalty, according to new research.

The focus of business-to-business marketing has been shifting towards relationship marketing for some time. In the UK insurance industry, products are sold directly to the consumer and through intermediaries so a company&#39s marketing effort has to work on two levels.

Marketing strategies for selling direct to the consumer are well documented but, where intermediary channels exist, industrial relationship maintenance is the most important type of marketing for insurance companies.

The group permanent health insurance market is a good example of industrial marketing maintenance because nearly all sales go through intermediaries.

The sector is highly competitive and, relatively speaking, there are only a few players that control the majority of the market. Because of its dynamics, this sector is ideal for industrial relationship marketing.

Relationship marketing focuses on the management and cultivation of long-term relationships. A company&#39s profitability will improve as holding on to clients will reduce business costs. This is the opposite of classic marketing which centres on creating one-off transactions. To achieve profitability, it is important for insurance companies to begin making customer management part of the fabric of the company rather than being pigeonholed in the marketing department.

We carried out research through phone interviews with 100 IFAs focusing on five key elements to establish how the players in the industry perform. These were commercial skills – improving contact between insurance companies and intermediaries; technical skills – where competence can lead to greater co-operation, commitment to the customer, co-operative relationship – which improves adaptability, and conflict.

The research showed IFAs were largely satisfied by technical skills but were unimpressed by conflict. Providers should pay more attention to areas where IFAs showed a lack of satisfaction and encourage a change from the traditional marketing mix focus. Currently, the greatest focus is paid to technical skills – knowing the product – rather than relationship management skills such asconflict and adaptability.

In-company research and training programmes should take note the research uncovered a direct correlation between market share and the delivery of relationship marketing.

The research shows there is support for relationship marketing within the group PHI sector. Quality service and customer responsiveness – two of the building blocks of competitive advantage – seem to have been neglected. These two factors may differentiate insurance companies from their competitors. Insurance companies which improve performance in these areas could gain an advantage.

In a service industry, it is important to create some differentiation from competitors but this is difficult as service aspects can be imitated. The creation of a strong reputation/brand image based on service provision is a feasible strategy.

So how can an insurance company develop relationship-marketing skills? The development of commitment and loyalty with all staff as well as training should be the first step.

Conflict management and adaptability are front-line situations and involve sales-people as well as admin staff so a holistic approach must be taken.

Everyone in the company should be trained in customer care and this should become part of the company&#39s culture.

This research demonstrates the importance of relationship marketing in the group PHI sector but could be equally applicable for the insurance market ingeneral, particularly where the channelto market is through the intermediary.

Relationship marketing allows a company to increase market share because it encourages customers to come back. This may be the key to developing loyalty and results in enhancing efficiency and effective marketing.

The application of relationship marketing models needs to be holistic across the firm. The approach can produce a level of service that will provide competitive advantage and create the all-important barriers to the company&#39s role in the field.

Clearly, some of the suggested changes will be costly but if IFAs come back for more, the long-term reward will be greater customer retention.

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