- 87 -
communication needs of the customers, along with developing the right interaction capabilities to communicate with the customers. It is difficult to assess the costs of implementation and the operational costs, which in term would follow, without having knowledge of the individual insurance company, as it would vary how much data that would need to be processed.
However, based on the simplicity of the segmentation and the knowledge being available to the insurance companies, it is believed to be fairly feasible to implement. Furthermore, it is argued that the costs of building trust with current customers outweigh the costs of losing the customer, which in terms is profitable for the insurance companies in the end. Hence, it is argued that insurance companies should be able to implement this service-oriented segmentation based on their current knowledge of their customers, which would allow them to understand how to communicate with them and ultimately to build trust and hereby loyalty.
- 88 - 3. How is trust and loyalty defined in the literature?
Brand trust leads to brand loyalty, whereas trust is a significant driver when it comes to developing relationships of high value. Loyalty is imperative in highly competitive markets with low product differentiation, since the value generated by loyalty results in; substantial entry barriers for competitors, a customer base which is less sensitive to marketing efforts by competitors and ultimately leads to greater sales and hereby revenue. Brand trust has been a research topic in various fields and numerous definitions of trust exist. In recent literature is trust defined as the extent to which a consumer believes his or her desire is satisfied by a certain brand, they have confidence in. Some of the key words for trust includes vulnerability, risk, exploitation, reliability, integrity and confidence. In order for trust to come into effect, trusting parties must be vulnerable to some extent. Trustworthiness is seen to precede trust, as trust, in other literature, is defined as; highlighting and emphasising to consumers why an organisation is worth trusting through its reputation, tradition, etc. A company’s trustworthiness is
determined by its: expertise and competence; integrity and consistency in behaviour; effective communications; shared values; concern and benevolence. Companies can improve upon the determinants in order to appear more trustworthy. In order for a company to be considered trustworthy it must prove it can be trusted. Communication is considered a key determinant in order to appear trustworthy, especially for financial service companies. As financial service companies do a lot of advising it is important for them that their communication is; accurate, explained well and that they are open.
4. How is trust defined for the young customers?
Based on the analysis of the empirical findings, three main trust drivers were identified.
Common for all of them are that they impact trust, both positively and negatively depending on how they are managed. The three main trust drivers are understood to be; transparency, brand intentionality and authenticity. These three trust drivers are evaluated to be the most important factors in building and preserving trust with the young customers, as these were central in the collected primary data. Similarly, for all three trust drivers is that they are collectively
affectable through the means of communication to a certain extent. The first trust driver, transparency, refer to a company’s ability to act transparent. Transparency is a broad term that can be connected to various elements. However, on the basis of our empirical findings,
transparency refers to; language and information. The second trust driver is brand
intentionality. Brand intentionality refers to the concerns of a company’s actions and decision and the intend they reflect, as they can be used to take opportunistic advantage of a consumer’s vulnerability. Based on the empirical findings, brand intentions were considered to be important in the relationship and more specifically referred to; attention to current needs and proactivity.
The third main trust driver is authenticity, which refers to the brands performance and
- 89 -
competence, according to their value proposition and whether or not they deliver upon set value. The three trust drivers can be used in the means of enhancing brand trust with the young customers. Although they are presented as three different components of trust, they are to some extent interrelated and also have synergies as a result. When they are emerged, they encompass the essence of brand trust which ultimately results in brand loyalty.
5. How should insurance companies communicate with the young customers?
Based on the empirical findings of the analysis, a proposed segmentation was developed to divide the customers into groups based on their current behaviour. The customers are
segmented by the variables of; their number of insurances and contact frequency. Number of insurances and contact frequency are used in a continuum running from “low” to “high” in order to form a matrix with four quadrants representing a combination of “Number of insurances” and “Contact Frequency”. They represent the level of interaction the customers need from the insurance companies in regard to communication and the model is a further development of Beckett et al’s. ditto from 2000. Customers who have a home insurance or three other insurances are defined as being highly involved, whereas if they do not hold a home insurance or only two other insurances they are considered being involved to a little extent.
Number of insurances is used as an indicator for how young customers’ current need for
insurances are and their risk willingness. By categorizing customers by number of insurances, it is further argued that it would also enable the insurance companies to determine which of their customers that are more profitable than others. Contact frequency is explained in this specific context to be how often the customers are in contact with the insurance company. Customers who are in contact with their insurance company more than once are year are defined as having a high contact frequency. On other hand, customers who are in contact with their insurance company once a year or less, are defined as having a low contact frequency. Furthermore, contact frequency act as an indicator for the level of knowledge the young customers hold in regard to insurances. A high contact frequency is correlated with a high knowledge about insurances, whereas a low contact frequency correlates with a low level of knowledge.
By implementing this service-oriented segmentation, insurance companies are able to provide their customers with timely and relevant communication based on their behaviour, in order to enhance trust by emphasizing how trust is built with the respective segments. Thus, building and preserving trust will lead to improve loyalty, which will lead to higher profits for the insurance companies.
- 90 -