Keeping customers beyond the online quote

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Keeping customers beyond the online quote

Online shoppers less loyal, profitable, says U.K. researcher

Terri Goveia on February 16, 2011

Customers gained from online quoting services tend to be less loyal, and harder to retain.

Insurance shoppers who use online sites tend to return to them–not the insurer–at renewal time, according to a U.K. study of web-based insurance sales that finds such shoppers are “more inclined to perceive their relationship to be with the price comparison site and not the insurance company.”

Companies looking to solidify relationships with their consumers should invest in different types of promotion, including pre-web activities like direct mail and advertising, researcher Gary Robertshaw, a fellow at the Institute of Direct Marketing found in a recent study.

“The long-term profitability of customers acquired from price comparison sites will inevitably be weaker in the longer term than those acquired from traditional media,” he found.

The personal touch

Although the U.K. market was an early adopter of online insurance quoting–several popular quoting sites, including Insurancewide and Moneysupermarket emerged there in the late 1990s–and quoting is popular with consumers–78% said they’d likely turn to such a site for their auto insurance–the online channel isn’t as effective when it comes to holding onto a consumer.

Robertshaw cites earlier research on online insurance shopping that found that 39% of price-comparison site customers are likely to be disloyal compared to those who responded to newspaper ads (12%), direct mail (18%) and television advertising (21%). “In contrast, the best way to capture a loyal customer was found to be through personal recommendation or through traditional media advertising,” he writes in the latest Journal of Direct, Data and Digital Marketing Practice.

Although the cost to acquire a customer through the quoting channel is markedly cheaper than traditional channels–£39 vs. £130.51 for cold list direct mail–in the longer term, the more loyal (traditional) customers are more profitable.

The “loaned” consumer

Some sites try to develop their own relationship with the shopper through cross-selling and other promotions, and in doing so, “create a situation in which there is an ongoing competition between themselves and the insurer for customer ownership,” the study points out. “It could be argued that price comparison sites loan customers to insurers rather than create them.”

Robertshaw’s study also compared premiums offered through online sites and insurers’ own websites–using three specific user profiles. He found that different price comparison sites often gave different quotes from the same insurer, and that the quoting sites often offered the lowest premiums.

Given the profitability and consumer retention implications of online quoting, he concludes that “it is expected that more insurance companies will be prompted to review their degree of engagement with price comparison sites and reappraise their strategic role in customer acquisition.”