Customer-Focused Technology: Where’s the Return?

Based on the results of a number of recent, unrelated research studies, it appears that the business community -- including insurance companies -- finally is going beyond the rhetoric about providing quality and tailored customer service. That is, it appears that customer service-related technologies are going to see a significant increase in spending in the decade ahead.

In fact, believe it or not, IT organizations may be more focused on improving and innovating customer service than are other business areas of the community. That's according to a recent Customer Experience study conducted by Optimize Research (a sibling business unit to Insurance & Technology). Just over 60 percent of respondents to the survey (which polled 200 business technology professionals across multiple industries) reported that new ideas for using technology to improve the customer experience come from IT, compared to the 58 percent who said marketing, 35 percent who said market research or focus groups, 20 percent who said R&D and nearly 30 percent who cited "another part of the organization."

According to the Optimize Research study, on average 27 percent of IT budgets are spent on customer-related technologies, and nine out of 10 professionals surveyed expect to spend about the same or more on IT to improve the customer experience this year. Forty percent of respondents said their companies will devote far more time and money to customer-relation strategy issues and IT strategies this year.

Meanwhile, IDC estimates that worldwide sales of CRM applications will increase by a compound annual growth rate of 8.9 percent between 2004 and 2008, to reach $11.4 billion. And Forrester Research predicts that worldwide spending on CRM projects will reach $13 billion in 2005, of which $3.2 billion will be spent on new software licenses, while the rest will go toward integration, administration and maintenance costs.

Of course, it's not all good news on the customer service front. A new study from Accenture indicates that the spending upsurge isn't coming a moment too soon -- or perhaps that the investment in customer service-related technology is not achieving its goals. Almost half of the respondents to this survey of consumers in the U.S. and U.K. reported that poor customer service led them to change a service provider in the past year. The study tracked attitudes about service experiences in 10 service-related industries: life insurance, banking, Internet services, wireless telephone, home telephone, utilities, cable/satellite television service, hotel, airline and retail.

Not surprisingly price is a major reason why consumers switch service providers - it was cited by 46 percent of the respondents. But the No. 1 reason, according to 61 percent of those surveyed, was poor service or product quality, followed by "a service representative's lack of knowledge about a provider's services or products" (39 percent), lack of customized solutions (22 percent), company policies that create bureaucracy (19 percent), and technologies that delay or stop service (19 percent).

But here's a surprise: Life insurance providers evidently are doing the best job of retaining customers, according to the Accenture study. The average level of customer churn across all categories was 10 percent, but life insurers posted 3 percent turnover, compared with retailers at 19 percent (the worst numbers reported).

It's encouraging to know that the insurance industry is actually getting some return on service-related technology expenditures. But all these statistics also show how difficult it can be to make the right investments and get a meaningful payback.

To learn more about what the industry is doing right in terms of achieving a more integrated, customer-centric approach to the business, check out today's special edition Connected Enterprise newsletter and also visit https://www.insurancetech.com/ConnectedEnterprise

Katherine Burger Editorial Director

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio