Case Study

Kwik-Fit insurance services

Since opening its first Kwik-Fit Centre in Edinburgh back in 1971, the company has grown to become one of the world’s largest independent automotive repair specialists and has established its credentials as a leading brand in the field of motoring. During 1994, Kwik-Fit came to the realization that technology in terms of advanced telephony and database management techniques provided an opportunity to address both of the strategic imperatives of defending the customer franchise and creating cross-selling possibilities. Thus, the idea of Kwik-Fit Financial Services (KFFS) was born. KFFS signalled a major form of diversification for Kwik-Fit. Motor insurance was the obvious first product for KFFS, and so it set up a panel of motor insurance providers and commenced its telemarketing operations in 1995.
To begin with, KFFS created an inbound model using significant abovethe-line advertising and promotion to create consumer demand-pull. It did not take KFFS long to realize that this model presented logistical and commercial challenges. First, it is difficult to plan the resources needed to handle demandpull telemarketing when using in-house facilities, and KFFS did not wish to outsource these functions. Secondly, the cost per sale did not make economic sense. Kwik-Fit responded quickly to this experience and created a wholly new model. This involved the creation of four separate groupings of telephone call agents, namely Research, Sales, Customer Service and Claims.
The research team role contacts customers who have used a Kwik-Fit Service Centre during the previous two days. Following an assessment of satisfaction, customers are asked whether they would like to receive a quotation for motor insurance, and a positive response to this line of questioning results in a lead. The motor insurance lead and relevant customer data are transferred electronically to the sales team, which makes outbound sales calls.
This new model has proved to be a great success solving the problems of resourcing and cost encountered in the earlier phase. Initially, the research team contacted some 5000 customers each day; more recently, the company has adopted a more precisely targeted approach by only telephoning those customers to whom it believes it can offer a competitive deal. By using this research encounter to obtain leads, Kwik-Fit has driven down the cost of customer acquisition dramatically. At the same time, it can manage sales call resourcing much more efficiently through the adoption of an outbound approach. This business model is an example of a service organization leveraging a real source of competitive advantage to achieve what in Ansoff’s terms is a strategy of product development. An unexpected spin-off from this research–lead–outbound call process was a material level of inbound requests for quotations as a consequence of word-of-mouth advocacy by ‘delighted’ customers.
So successful has this new business acquisition model become that the company has ceased all forms of demand-pull advertising and promotion. Its sole form of publicity is advertising in Yellow Pages. As at the end of 2005, some 75 per cent of KFFS’ new customers were sourced from the Kwik-Fit Service Centres, an additional 15 per cent originated via the directories, and the remaining 10 per cent via the Internet.
The third call agent grouping concerns customer service, and has the role of dealing with inbound customer service requirements such as a change of address or including an additional driver on the policy. Customer service call agents also have objectives – to generate leads to cross-sell other products which have now been added to the KFFS portfolio, including breakdown insurance, home contents and buildings insurance. In addition to general insurance products, the company also sells life assurance as an Appointed Representative of Legal & General. A further broadening of the product range concerns an arrangement the company has developed with Scottish Power to sell gas and electricity on its behalf. Again, calls are monitored frequently to ensure the quality of the call-agent–customer dialogue. The fourth team is responsible for the initial handling of claims in response to inbound customer contact. However, the actual claims management process is handed-off to the individual insurance companies.
KFFS has faced ever more intense competition from a widening variety of sources, including supermarkets and on-line brands such as Esure and the HBOS subsidiary Sheilas’ Wheels. It might be imagined that Direct Line poses the single most important threat. However, Direct Line does not have KFFS’ competitive advantage of low-cost acquisition via the nationwide Kwik-Fit Service Centre network. Direct Line would appear to be pursuing a somewhat selective customer recruitment policy, given that it underwrites its own policies. KFFS, on the other hand has an altogether more inclusive approach based upon its strategy of acting as an intermediary to a range of underwriting companies.
Now in its eleventh year of operation, it is estimated that KFFS has built an in-force book of more than 500000 policies, and for the last financial year it posted an operating profit of £6.8m. Its operation has grown to comprise some 800 employees, and it is considering further product range extensions. The company is believed to have the largest insurance outbound telephone marketing operation based in the UK. Moreover, KFFS has been rated as one of the UK’s best 100 companies to work for some four years in a row.

Case Study

Rabobank – building on domestic and business banking relationships in the Dutch market

Rabobank is an AAA rated co-operative bank with 5 million retail customers and a very strong local presence evidenced by approximately 1500 branches. In 1995 Rabobank was the first to introduce Internet banking, and today holds the largest number of Internet bank accounts in Europe. The Dutch banking market has learned that customers are usually unwilling to change from a trusted brand to a new bank, and this places certain limitations on the strategic choices that are available to banking institutions. In practice, this means that a large number of financial institutions opt for a customer penetration strategy, thus devoting resources to their existing customer base. A combination of this strategy of penetration, and what Treacy and Wiersema (1996) call customer intimacy, has proven to be a very successful aspect of the strategy of Rabobank, one of the top three banks in the Netherlands.
Rabobank has concentrated on being physically close to customers through both the Internet and a physical branch network. Cross-selling of mortgage and savings products to current-account customers has allowed Rabobank to become a market leader in retail banking. Similarly, the removal of restrictions on bancassurance in 1990 provided further opportunity for Rabobank to expand the range of services offered to its established customers.
Rabobank’s success is not limited to personal markets. Management built on the bank’s traditional strengths in agricultural markets and expanded into the non-agricultural small and medium-sized enterprise market. Rabobank now has 21 per cent of the small business market in the Netherlands, and is making solid progress with cross-selling and up-selling to their existing customers. To support the range of services offered to medium and larger companies, Rabobank has built an international network of branch offices, strategic alliances and acquisitions to ensure that the bank can offer a comprehensive service to customers operating internationally.