No power is stronger than the bargaining capacity of customers in today’s globalised markets. It goes without saying that the impact of bargaining power on any industry will bring about bankruptcy if companies are not proactively managing it. This power, however, can be changed into an opportunity through strategic thinking. A reasonable tolerance should be given to bargaining.
Today’s bargaining power has risen above the way it was viewed traditionally. It is not simply a matter of customers seeking a reduced price for the services or goods that they buy. Customers see a product from the perspective of dynamism, uniqueness, modesty, knowledge, and timeliness.
Take the insurance industry. Old networks have been chucked for new social trends. Increasingly knowledgeable consumers have disrupted the usual transactional patterns between firm and customer.
Insurance customers increasingly demand simplicity, transparency, and speed when dealing with insurance agents, advisers and carriers. Though we are far from digitalization, the relentless march of online and mobile technologies is bound to fuel this change in customer expectations.
The online world is becoming increasingly accessible through mobile phones. The use of smartphones and tablets is expanding and fueling the demand for localized information, available anytime and anywhere. Smart cards are replacing agents in the provision of services while automated teller machines (ATMs) are substituting officers at the gate of banks.
Every day we receive messages of account transactions through our mobile phones that used to be delivered to us after being reviewed by more than three accountants. Moreover, bankers are automating their support services, something which will be a lesson for insurers.
The rationale behind bargaining power is modernization and knowledge-based services which customers utilize daily in their business interactions directly or indirectly. Providing notification of claims through technological devices reduces both the insurer’s and the insured’s time and energy.
The customer can, at a distance, easily renew an existing insurance policy, adding more products at a profitable premium. Most of us think that modernization is complex and costly, and, once it takes hold of a particular market, it creates dependency on few innovations. But the moment such technophobic attitudes are lifted it will be easy to see the fruits of technology. In today’s market, trading traditionally is like going fishing with bare hands.
Automation is also critical in transforming the management process of claims, underwriting, and marketing. It streamlines the inbound and outbound logistics and gives customers full knowledge of every stage of the operations.
The saying “insurance is sold and not bought” has been substituted for a better one, “insurance is joyfully compensated’’.
This fundamental shift will force insurers, agents and brokers to re-examine their roles in the insurance value chain and become more relevant to the end-user. Moreover, the chain has to be seamless. A fluid service that will match the customer’s expectations of simplicity and transparency will foster innovations in product design and delivery.
Those insurers with loyal customers have a better advantage here, especially if they can transform their services into ones that are in-step with the times.
Innovative ideas can only be realized through effective leadership and governance. This is especially important for the Ethiopian financial sector, a sector which is highly regulated.
Unlike in Ethiopia, consumers of the financial sector elsewhere have more tools at their disposal to use to enhance their bargaining power. These tools are a result of competition. As the number of suppliers increases, accompanied with an array of diversified products and services, customers will have the upper hand, since they will be able to choose with whom to negotiate from a pool of providers.
That such competition is lacking in our country is unfortunate, since it leads to the weakening of the industry. Whose fault this is a matter of perspective for many. Some point the finger at the National Bank of Ethiopia (NBE), which is responsible for regulating the industry, claiming that it does not give the insurance industry enough attention. Others say it is the industry’s players that are at fault, indicating that their primary mode of competition has become price-cutting.
Whatever the case, with undiversified products and services, realizing innovative business models that give control to the customer will be a challenge that will continue for an indefinite period. With diversification, however dire the price-cutting war maybe, innovation can compensate loses by cutting costs by up to 55pc, according to researchers.
We need more of such advancements to ultimately clear the way and enable businesses to maintain their strategic positions. A win-win situation of high profits for insurers and low costs for the insured can be realized.
The workable strategy for insurers should be to customize products and services to meet the specific needs of their existing and potential customers and complimenting this with a speedy delivery. This will eventually help them amass greater customers.
The leadership at the top should focus on how to translate innovation into investments in mobile and interactive technologies for multimedia content creation and distribution. It also must include transactional capabilities across multiple digital platforms.
Most of us may believe that the emerging and ever-increasing risk in the sector will be costly; that it will reduce profitability and restrict new participants as it pays lesser dividends. Wiser business leaders would contradict this assumption. They would find that the return on investment on innovation will take companies to greater heights in the future, with more significant dividends for shareholders. Companies will remain flexible and be able to carry burdens that come with disruptions.
The rapid adoption and fast evolution of social networks will continue to empower both consumers and businesses. It will enable them to communicate transparently, and it will help businesses in harnessing the buying power of virtual communities.
The insurance sector must also step forward and manage the power of the customer through innovations rather than blaming the customer for this shift in power. The customer is always king – they are the reason for the industry’s existence. A demanding insurance customer is an opportunity for insurers to improve and grow. If the goal is to see attractive dividends, then we must be able to have the customer put a seal of “joyfully compensated” in return for the provided insurance.
The honeymoon appears to have come to an end. Members of the public are...
The rapprochement between Ethiopia and Eritrea has led to the signing...
The Revolutionary Democrats concluded their council...
The National Bank of Ethiopia needs to take measures to improve the red...
I love and respect Prime Minister Abiy Ahmed (PhD). I want him to succ...
Back in the middle of June, when all the jubilation and hope was in ful...
The rallies of the past weeks are healthy manifestations of citizens’...