Innovation | 08.03.18
A Simple Retention Solution for Evolving Customer Needs
This content was developed by Great American Insurance Group for the BISA audience.
In today’s busy world, we jump from task to task and are constantly looking for ways to streamline, simplify and synergize. From your local supermarket to the technology you have right in your home, today’s savvy consumers (and businesses) want bundled solutions.
Think about what’s located within a grocery store. There’s often a coffee shop, a florist, a bank sometimes even a doctor’s office. Businesses have figured out that customer satisfaction and loyalty rates increase when they can offer quality service and one-stop shopping.
Banks and other financial institutions have mastered the art of the one-stop shop for decades. The more products or percentage of the customer’s wallet are in-house, the better the likelihood that the customer relationship remains intact. Inherent in retention metrics are lower costs and better revenue earning opportunities — and more engaged customers.
In their book, Human Sigma: Managing the Employee-Customer Encounter, Gallup researchers John Fleming and Jim Asplund state that “engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees and engaged customers returns a revenue gain of 3.4 times the norm.” Further, research shows that it costs nearly seven times as much to acquire a new customer than it does to retain an existing one.
So, what does this mean to you? Quite simply, it means that in order to continue moving your business forward, retention is just as important as acquisition, and retention requires increasing your array of products and services. To do so, you need both access and the ability to offer tools and services that address customers’ evolving wants, needs and expectations.
A New Opportunity to Balance Growth and Stability
The carriers you work with are likely committed to developing products that help you attract new money. They also strive to provide you with tools that will help you retain the customers you have. Consider the case of variable-indexed annuities. According to LIMRA Secure Retirement Institute, when these products hit the market in 2014, industry sales were less than $500 million. Sales exceeded $9 billion in 2017. This explosive growth can be attributed to consumers’ need for competitive accumulation and a level of downside protection. Prior to the development of variable-indexed annuities, there wasn’t a financial tool that checked both boxes.
Let’s take a closer look at why a variable-indexed annuity may be beneficial.
Investing directly in the market can be a lucrative way to grow a retirement portfolio. However, with no protection against loss, market downturns can wreak havoc on the savings clients have worked hard to build. Equity markets are near all-time highs, and while consumers have reaped the benefits of that growth, those nearing or in retirement should consider ways to garner some level of protection before the next market downturn. As history has shown, when long-run bull markets end, the decline can be dramatic. In fact, financial services firm Edward Jones discovered that more than a third of baby boomers don’t think their retirement portfolio could withstand a market correction.
To alleviate the risk that’s inherent with high equity allocation, fixed income investments are commonly used to bring safety and stability to a portfolio. However, with interest rates and yields near all-time lows, mitigating risk could mean getting little in return. For pre-retirees who need to boost their savings, traditional fixed income investments may not be a viable option.
As consumers plan for a secure future, they may be looking for a tool to help balance their need for growth and protection, which is why variable-indexed annuities are such an attractive option. These products are designed to help clients grow their retirement assets by taking advantage of some market growth, while allowing them to pick a level of protection from market loss. Additionally, they offer tax-deferred growth, annual penalty-free withdrawals and the opportunity to receive lifetime income.
The Bottom Line
Consumers increasingly want choice. Increasing your offering to include more financial solutions, such as a variable-indexed annuity, can be an effective way to retain existing clients and grow your customer base. Your customers trust you, and they are looking for recommendations to get them better results. Expanding your portfolio of products and services will demonstrate your commitment to more comprehensively address your customers’ wants and needs.
To learn more about Great American’s annuity solutions, visit GAAFI.com.