ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, April 14, 1996 TAG: 9604120040
SECTION: BUSINESS PAGE: 1 EDITION: METRO
COLUMN: Customers
SOURCE: JOHN LEVIN
Change your brand of toothpaste, and chances are Procter & Gamble Co. may never notice the impact on its $33 billion in annual sales.
Switch dry cleaners and - unless you left in a huff after an ugly scene with the counter clerk - it's likely the company won't realize you've defected.
Brand loyalty is a rare commodity; studies have shown that U.S. companies on average lose half their customers every five years.
So consider the issues that Shenandoah Life Insurance Co. now faces knowing that a group of its customers gave it a near perfect score on satisfaction issues.
"It certainly was a surprise," said Jim Harshaw, the Roanoke company's vice president of group marketing and sales.
Having totally happy clients is the kind of problem every company would like, you might conclude. Think again.
"If they're finding their customers are happy with them, certainly it means they're doing something right," said Joseph Sirgy, a professor of marketing and consumer psychology in Virginia Tech's Pamplin College of Business.
It also means, he said, that Shenandoah must strengthen its programs that are working, keep an eye on competitors who probably are watching for chinks in the armor, and monitor any signs of erosion. It means customers expect quick response to any problem.
Shenandoah's results are from a survey of 50 corporate benefits administrators for whom it supplies group life insurance, dental coverage and disability policies - benefits that companies in turn offer their employees. The survey was conducted by LIMRA International, a Windsor, Conn., marketing and research organization that serves the life insurance industry. It compared what Shenandoah's customers said against averages for other insurers its size.
Although Shenandoah Life is a relatively small player in the corporate benefits business, revenue from policy sales represents about half the $110.2 million the company raised in insurance premiums last year, Harshaw said. It gradually has become an important aspect of Shenandoah's business over the past 15 years, he said.
And, unlike traditional life insurance sold to individuals, group customers are more sensitive to the kind of service they get and are far quicker to switch carriers if they're unhappy, Harshaw said. In most cases, contracts are renewed - or not - annually.
Also significant is that the survey comes less than three years after Shenandoah's former president and chief executive, Joseph Stephenson, resigned amid sharp criticism from a group of general agents, those selling Shenandoah's life insurance to individuals. In 1993, the agents complained about the company's management, its products and service. Robert W. Clark replaced Stephenson in 1994.
The satisfaction survey was part of the company's efforts in strategic planning. "We were giving consideration to marketing differently" and upgrading computer systems, Harshaw said. But customers gave some of their highest scores to Shenandoah's home-office staff, the 210 people who work in Roanoke, for their high-touch service. "Customers felt they had an individual to talk to, not just a machine," Harshaw said. Thus, the dilemma of what to change and what to leave alone.
The study "put it to us - what you're doing is right; don't screw up what you're doing. Obviously, it makes us a little nervous, whether we are going to be able to maintain those kinds of service levels," Harshaw said.
"Many studies have documented that customer service is closely related to brand loyalty," Sirgy said. And loyal customers not only are cheaper to service, but once they've established buying habits, they are easy to persuade to increase their spending, he said.
Many companies are evaluating programs that were designed to spur sales - including airline frequent-flier credits and cents-off coupons for toothpaste - questioning whether they create loyal customers or merely encourage buyers to switch brands.
Something that starts as an economic incentive ought to lead ultimately to emotional attachment to a company and habitual buying of its products, Sirgy said.
It doesn't matter whether you're selling insurance or toothpaste: "Loyal customers are well-served customers who react favorably," he said.
LENGTH: Medium: 80 linesby CNB