Social media presents both threats and opportunities for insurance companies in the 21st century. It provides new ways to understand customer behavior through their online activities and social connections. However, it also reduces some of the information advantages that insurers previously held. To navigate this changing landscape, insurers need a strong understanding of behavior economics and how new technologies are impacting consumer behavior. They also must ensure they truly know their customers to identify the right opportunities in this new environment.

1. Social Media
Threat or Opportunity for the 21C
Insurance Company ?
Alan Newman
agnewman.is@virgin.net and uk.linkedin.com/in/alangnewman/
December 2013
www.fitn.co.uk

2. We’d like to acknowledge the insights and contributions we’ve
had from a number of sources in preparing this presentation:
• Anthony Burke at WSI
• BDO and their EIU Report on Customer Service Trends
• Dr Will Reader at Sheffield Hallam University
• John Bancroft at Incognate
• Martin Hill-Wilson at Brainfood Consulting
• Neil Sharp formerly Insight Now; currently The Pen Partnership
• Reachfurther.com (Leeds based)

3. The audience for this presentation
• The busy-but-curious who are supposed to know
what’s going on the market (but are too busy with
Solvency II, RDR, MiFID, MMR, TCF etc to find out).
• Those of you who have a job spec or performance
measurement that means you have to think about
“What to do next (and why)?”
• Those of you who will have to implement a poorly
informed and badly thought-out ‘plan’ once your
company decides, “we have to do something.”
1

4. The Presentation’s Objectives & Agenda
• The Objectives:
– To inform and energise
• The Agenda
1. It begins with behaviour and . . . .
2. Behavioural economics
3. Technology is having a BIG IMPACT on consumer behaviour
4. What do you really know about your customers?
5. So what to do next?
2

5. THE BIG PICTURE: 4 FACTORS CONVERGE
IT BEGINS WITH BEHAVIOUR.
How well do you and your
colleagues really understand
human behaviour?
NEW TECHNOLOGIES MATTER
here. A lot. How technology
savvy is your company? How
agile is it? Does it experiment?
CONTEXT & STRATEGY.
Do you have a good basis on
which you can assess threats
and opportunities?
HOW WELL DO YOU KNOW
YOUR CUSTOMERS? Why have
they bought what they’ve
bought: and why from you?
3

6. It begins with behaviour . . . .
Despite what our personal experiences might tell us, human behaviour isn’t
simply common sense. We have Stone Age brains in 21C Skulls. For the purposes
of this document there are three important consequences:
1. Our brains don’t do ‘Money’. The architecture of the modern human brain is
about 180,000 years old. Money is about 8,000 years old. We’ve evolved
special areas for speech, vision, or music , for example, but not money.
2. We have two different processes for making judgements about risk and
reward: the first is fast, subconscious and emotion driven (the basis of the
brain as a ‘habit machine’). The second is slow, conscious and logic driven.
The former is our default. The latter takes up a lot of time and energy.
3. We’re a social species. One consequence of this is that judgements can be
strongly influenced by other people and by social context.
BEHAVIOUR
4

7. It begins with behaviour . . . .
BEHAVIOUR
5

8. It begins with behaviour . . . .
You’ve not met the young woman whose face is shown on the opposite
page. You’ve not spoken to her. But can you interpret her expression?
What do you think she’s going to do next?
Now look at the arithmetic question.
Think about what you’re brain is doing as you process the information to
answer these questions. From an information processing point of view
the first task is much more of a challenge but most of us find it easy.
Regarding the arithmetic, most of us will know, quickly, that the answer is
less than 400 and more than 250 but it’s time-consuming and energyconsuming to work out the exact figure in our heads.
Why is this so? What can we conclude from this?
BEHAVIOUR
6

9. It begins with behaviour . . . .
17 x 23
BEHAVIOUR
7

10. It begins with behaviour . . . .
BRAINS ARE HABIT MACHINES.
From an evolutionary point of view, the brain’s natural priorities are
food (we need to survive) and sex (we’ve a subconscious drive to
produce offspring) and it has developed shortcuts, habits, to satisfy
them.
A business has much more chance of succeeding if it can build on or
utilise consumers’ existing habits. It is unlikely that a proposition
will be readily accepted or acted upon if people have to change
their habits to do so.
BEHAVIOUR
8

11. It begins with behaviour . . . .
FOOD
& SEX
BEHAVIOUR
9

12. It begins with (social) behaviour . . . .
ONE BRAIN IS ONLY HALF A BRAIN.
We’re a social species. Brains are at their most powerful when
they connect with other brains. We create problems
collectively and we solve them collectively.
By definition, language, one of the most important aspects of
human behaviour, is a social phenomenon and stories from
family, friends, and our culture affect how we perceive risk
and reward.
BEHAVIOUR
10

13. It begins with (social) behaviour . . . .
BEHAVIOUR
11

14. It begins with (social) behaviour . . . .
Stockmarket bubbles and the tendency for an
index such as the FTSE 100 to overshoot or
undershoot illustrate how social factors affect
judgement.
And if the vast majority of UK adults believe
that in the long run ‘you can’t go wrong with
property’ and that rent is money down the
drain, the perception can be selfperpetuating.
Two books, The Madness of Crowds and The
Wisdom of Crowds both have merit even
though they appear to contradict each other.
BEHAVIOUR
12

15. It begins with (social) behaviour . . . .
BEHAVIOUR
13

16. Social behaviour: The Dunbar Number
Within primates there is a general relationship between the size of the brain and the
size of the social group. We fit a pattern. Our ‘natural tribe size’ is about 150. This is the
number of people we can have a relationship with involving trust and obligation: there's
some personal history, not just names and faces. Typically this is the size of an average
village; the size of a company of soldiers in most armies, past and present, and the
average number of friends via LinkedIn or Facebook. There’s recent evidence
(http://arxiv.org/abs/1105.5170) that it applies to Twitter as well. Intimacy groups are
smaller – typically 5 or 6 people – and close friends typically number about a dozen. It
seems as if our brains organise social information as quantum steps rather than as a
continuum.
www.guardian.co.uk/technology/2010/mar/14/my-bright-idea-robin-dunbar
BEHAVIOUR
14

17. Social behaviour: The Dunbar Number
BEHAVIOUR
15

18. Social behaviour: Hole-in-the-Wall
The hole-in-the-wall experiments that were pioneered by Sugata Mitra, now a
professor at Newcastle University, inspired the book and film, Slumdog Millionaire.
For the purposes of this presentation/document, there are three important lessons
from the work of Professor Mitra and his colleagues. First, we should not
underestimate the power of self-organising behaviours. Second, it was children
who were unable to attend school who were the project’s early adopters and they
worked collectively rather than individually to solve specific problems. Third, when
looking at new media, we need to think in terms of ‘Internet Speed’ where focused
web-users, working together, can accomplish in days what would normally take
weeks or months in circumstances that have been the norm hitherto.
www.hole-in-the-wall.com
www.ted.com/talks/sugata_mitra_shows_how_kids_teach_themselves.html
BEHAVIOUR
16

19. Social behaviour: Hole-in-the-Wall
BEHAVIOUR
17

20. Information foraging
Information foraging theory which was developed at the Palo Alto
Research Center by Peter Pirolli and Stuart Card. They wondered whether
the mathematical models that biologists use to study how animals forage
for food could be applied to how web users ‘forage’ for information.
In the wild animals benefit if they know how nutritious a food is; how easy
it is to obtain; how far away an alternative supply is; and how much time
and energy can be afforded to obtain it. Substitute ‘information’ for ‘food’
and we see that web visitors (who ‘feed’ on information) face the same
challenges as food-foraging animals and we respond with similar strategies.
BEHAVIOUR
18

21. Information foraging
BEHAVIOUR
19

22. Evolution & social behaviour
Three illustrations to help our thinking:
From the perspective of a biologist parental investment is a trade off between energy
spent reproducing and energy spent investing; energy spent investing cannot be used
for reproduction and energy spent reproducing cannot be invested. It does not take a
great leap of imagination to see how this applies to financial behaviour too.
Genealogy is one of the most popular uses of the Web. Families matter. Always have
done, always will. But who is in your family and how might that change? Consider
how divorce affects ideas of who’s entitled to inherit what from whom.
Mathematicians and biologists like to use Game Theory, of which the Prisoner’s
Dilemma is a well-known example, to model how we perceive risk and reward. The
‘best’ strategy in a one-off game is different to the ’best’ strategy if you’re likely to
encounter the same person (or his friends and family) on several future occasions.
BEHAVIOUR
20

23. Evolution & social behaviour
BEHAVIOUR
21

24. Evolution, social behaviour and trust
Insurers are selling us a promise, so trust matters. Indeed,
much if not all financial services rely on trust – and many
bank notes illustrate this. In recent years we have seen
what can happen when this trust is undermined.
Currencies and companies come and go, but different
cultures down the ages, and different cultures in the
modern world, have been drawn to gold. Why? What
does this metal’s allure tell us about how people perceive
material value? Has it ever gone out of fashion?
BEHAVIOUR
22

25. Mapping social behaviour
Many networks exhibit
characteristics of selforganising groups. Key
individuals are identified
by their interactions
rather than their actions:
by the behaviour of
others rather then the
behaviour of themselves.
BEHAVIOUR
23

26. What kind of web animal are you?
We exhibit distinctive behaviours with reference to three criteria:
•Search time. Fast movers flit between many sites, skim content, and rarely
visit a web page twice. Slower movers are more methodical: they’re likely to
delve deeper and will often double-check their answers.
•Sources. Some of us prefer to use our friends and social media as sources of
information, while others prefer more traditional, ‘objective’ sources of
information such as the BBC or (online) newspapers.
•Concentration. Younger people in particular, those who’ve grown up with
the web, seem to be happy multi-tasking – talking on the phone, for example,
while consuming TV and checking out Facebook at the same time. Other
people prefer to focus on one task and see it through to completion.
BEHAVIOUR
24

27. What kind of web animal are you?
The BBC and Professors David Nicholas and Ian Rowlands at UCL developed The Web
Behaviour Test to get answers to a number of questions, such as: How do we filter
the information we find on the web? How much search time do we spend before
we’re confident that we have found the ‘right’ answer? How is our concentration
affected when we’re using the web? How influential are brands in affecting affect
our choices in online world? How do we make decisions about the quality and
‘authority’ of information?
They found that three key characteristics search time, sources and concentration
gave rise to 8 types of ‘web animal’. (www.ucl.ac.uk/infostudies/research/ciber/GG2.pdf)
BEHAVIOUR
25

28. Behavioural economics
Despite what our personal experiences might tell us, human behaviour isn’t simply
‘common sense’. For retail banks and insurance companies insights from the relatively
new field of behavioural economics are particularly relevant.
Behavioural economics brings together ideas from economics, psychology, sociology
and neuroscience to develop insight into people’s financial decision-making. Key
concepts include anchoring, base rate neglect, bounded rationality, choice architecture,
the endowment effect, framing, heuristics, hindsight bias, hyperbolic discounting, loss
aversion, maximizers, mental accounting, multiple selves, satisficers, the status quo bias,
the sunk cost fallacy, and the ultimatum game.
Why not draw up a spreadsheet/matrix and identify whether the impact of each of
these concepts is High, Medium or Low for selected financial services products?
www.ted.com/talks/dan_ariely_asks_are_we_in_control_of_our_own_decisions.html
BEHAVIOUR
26

29. Behavioural economics
BEHAVIOUR
27

30. Behavioural economics
The diagram on the opposite page illustrates the pattern of thinking that
characterises the financial services sector. It focuses on products and it assumes
that we’re completely rational and have the time, energy and inclination to think
things through.
We consumers don’t operate this way. First of all, as demonstrated by
behavioural economists, we treat money differently based on how we got it (e.g.
salary, bonus, lottery win or tax rebate) and what we plan to use it for (e.g. pay
off debt, go on holiday, have a night out, or make a pension contribution).
And in a recent project in which we were involved, most consumers said that
their highest priority was paying for their children’s education – and that doesn’t
appear on this pyramid at all.
BEHAVIOUR
28

31. Behavioural economics
Logical
Rational
Liked by financial services people
Misleading
BEHAVIOUR
29

32. BBC Big Money Test
In the BBC Big Money Test devised by personal finance guru Martin Lewis, Professor Adrian Furnham of
UCL and Professor Fenton-O’Creevy of the Open University the point was made that money means
different things to different people:
•Money as security. Emotional security is represented by financial security. Money bolsters feelings of
safety and self esteem and so is hoarded.
•Money as power. Because money can buy goods, services and loyalty, it can be used to acquire
importance, domination and control.
•Money as love. For some money is given as a substitute for emotion and affection. Those who spoil their
children, ostentatiously give to charity or even visit prostitutes are buying love. Others sell it.
•Money as freedom. It buys time and frees us from the daily routine and restrictions of a paid job. Money
buys escape from orders, commands – everything that restricts autonomy and limits independence.
The researchers also noted that we have money-habits and that there are five archetypes: misers fear
becoming penniless and have trouble enjoying the benefits of their money; spenders shop in an often
uncontrolled manner, particularly when feeling low - and get a short-lived high followed by guilt; tycoons
see money as a route to power and approval, and believe wealth will make them happy; bargain hunters
feel superior when they get discounts and feel angry if expected to pay full price; gamblers feel exhilarated
when taking chances and find it hard to stop - even when losing - as a win brings a sense of power.
BEHAVIOUR
30

33. BBC Big Money Test
BEHAVIOUR
31

34. BBC Big Risk Test
Research suggests there are two distinct ways in which humans comprehend risk.
The first is referred to as the ‘experiential system’. It is intuitive, fast and often automatic. It relies
on images and associations, based on experience, to arrive at a ‘gut feeling’ that something is
good or bad. This is the more emotional side to risk, and it is this system we use when we decide
not to walk down a dark alley at night. The second can be described as the ‘analytic system’ and
involves using logic and our understanding of arithmetic. This system is slower and requires a
great deal of effort and concentration.
Scientists think that ‘gut feeling’ judgments about risk may be influenced by irrelevant
information, such as the way the risk is presented. They predict that presenting an activity in a
positive way may cause us to perceive it as less risky, while presenting it in a negative way may
make it seem more risky. For example, if we imagine someone scuba diving in a tropical paradise,
surrounded by beautiful fish, we might perceive scuba diving as less risky than if we imagine
them diving into cold, murky water in winter.
The Big Risk Test is also investigating how people perceive the large-scale risks that society faces.
These include things like terrorism, natural disasters and climate change. Does everyone perceive
these risks in the same way? If not, what factors cause us to view them differently?
BEHAVIOUR
32

35. BBC Big Risk Test
BEHAVIOUR
33

36. Social media – new segmentation?
According to a 2008 Ofcom report there are 5 types of social media user:
1. Alpha Socialisers (a minority) used sites in intense short bursts to flirt, meet new
people, and be entertained.
2. Attention Seekers crave attention and comments from others, often by posting
photos and customising their profiles.
3. Followers join sites to keep up with what their peers were doing.
4. Faithfuls typically used social networking sites to rekindle old friendships, often
from school or university.
5. Functionals tend to be single-minded in using sites for a particular purpose.
Non-users of social networking sites also fall into distinct groups. Concerned about
safety; technically inexperienced; and Intellectual rejecters – people who have no
interest in social networking sites and see them as a waste of time.
BEHAVIOUR
34

37. Social media – new segmentation?
BEHAVIOUR
35

38. Social media - new segmentation?
In the world of social media it may
seem plausible to define users as
creators, conversationalists, critics,
collectors, joiners, spectators or
inactives – but isn’t it more likely that
an individual will exhibit two or three
types of behaviour depending on
circumstances?
And how useful are these designations
in helping an organisation engage with
its customers?
Which of these definitions applies to
you?
BEHAVIOUR
36

39. Social media - new segmentation?
In a 2011 report, Emily Hunt and Richard
Bussy looked at how consumers interact with
brands via social media.
Originators
20%
Curators
29%
Sharers
24%
Participants (updates)
52%
Based on their research Hunt and Bussy
identified two key types of customer of most
interest to those conducting social media
campaigns: CURATORS and SHARERS.
Participants (comments)
60%
Before social media came along Curators were
the folks in the office emailing funny links,
Spectators
78%
games and industry gossip.
http://www.brandrepublic.com/research/1078178
http://www.brandrepublic.com/news/1108677/Special-Report-Social-media---battle-brands
BEHAVIOUR
37

40. Social media – generational effects
BEHAVIOUR
38

41. Social media and consumer behaviour
BEHAVIOUR
39

42. Social media – it’s about time
BEHAVIOUR
40

43. Social media and Trust
We’re a social species and our default
setting is to trust. It saves time and helps us
manage complexity.
(Trust is complicated. I may trust my bank
to clear a cheque and not steal; but I may
not trust it to sell me a product that
represents value for money.)
Research described by Dr Miriam Meckel
and her colleagues at the University of St
Gallen identified several core drivers of
online trust: brand and reputation,
customer service, offline presence,
reciprocity, (technological) reliability, third
party endorsements and user control.
BEHAVIOUR
41

44. Something old, something new
http://www.economist.com/node/13914661?fsrc=rss
In an article in June 2009, The Economist published an article comparing
and contrasting LinkedIn and Freemasonry. The merit of this approach
is that it helps us get a handle on how modern technology is affecting an
age-old behaviour. Networking isn’t new – so what are the similarities
between LinkedIn and Freemasonry; what are the differences; and what
are the consequences?
BEHAVIOUR
42

45. Something old, something new
NEW
TECHNOLOGIES
43

46. Social media – where to begin?
The word cloud opposite illustrates the challenge that a management team has in getting its
collective head around the issue of social media and the associated threats and opportunities.
In his book, Socialnomics (www.socialnomics.com) Erik Qualman suggests four critical steps:
SELL
The Company
REACT
INTERACT
LISTEN
LISTEN
B
U
Y
INTERACT
REACT
The Customer
SELL
Listen to customers and conversations about the brand or products; interact – join the
conversation; react – adjust your product or service based on feedback; sell – if you do the
previous three well this will take less effort. Customers have a similar journey.
NEW
TECHNOLOGIES
44

47. Social media – not a clear picture
NEW
TECHNOLOGIES
45

48. ‘Social media’ is a BIG topic
The image on the opposite page image illustrates just
how big a topic Social Media is. The image on the left
probably does a better job at communicating how a
manager who has to implement social media projects
actually feels.
Which of the elements opposite are likely to add the most value to your
business in general (i.e. What is basic value proposition of your market
sector?) and which are most relevant for your differentiation and
strategy?
Whatever your answers are, how likely is that they will / won’t change in
the next one, two or three years?
NEW
TECHNOLOGIES
46

49. ‘Social Media’ is a BIG topic
http://www.simplyzesty.com/social-media/17482/
NEW
TECHNOLOGIES
47

50. Social media are part of a BIG trend
Despite the uncertainties referred to in previous slides there are some
developments we can be sure of, and their confluence will shape the world in
which we conduct business:
1. The increase in popularity of smart phones will continue with the result that
this will be the main way in which people connect with commerce.
2. Tablet PCs complement smart phones and will replace laptops and PCs as the
‘larger format device’ that consumers prefer. Personalising interfaces will
become more important.
3. Significantly faster broadband services and 4G will mean that graphic and
video information will become as important, maybe more important, than
text as the main way in which a business engages with consumers.
NEW
TECHNOLOGIES
48

51. Social Media are part of a BIG trend
NEW
TECHNOLOGIES
49

52. Social media become mainstream
According to Experian (Jan 2011) 56% of all UK online traffic goes to
social sites, and the average Facebook user spends just under 2 hours a
day on his/her site. Furthermore, users are increasingly accessing their
social media sites via their phones and tablet PCs rather than laptops.
According to a talk by Google at Imperial College Business School in
November 2011, the UK spends more per head online than any other
country.
For several reasons we seem, as online consumers, to be opting more
for self service. And we expect online suppliers to remember/store
information from our previous visits and recognise us on our return.
NEW
TECHNOLOGIES
50

53. Social media become mainstream
NEW
TECHNOLOGIES
51

54. Social media become mainstream
Writing for The Economist, Sheryl Sandberg, COO of Facebook,
noted that many social media users post photos on their sites so
that friends and family, often hundreds or thousands of miles away,
can see them. “They share because they care.”
On the flip side of this, people are now sharing stories many of which provoke
strong feelings and encourage people to act. Campaigns can be started this way,:
“They care because they share.”
Sandberg also referred to Iceland where the Government, drafting a new
constitution, used social media to put the figurative pen in the hands of its citizens;
and The Arab Spring where (mainly younger) people used social media to give
individual citizens a voice that had to be heard.
NEW
TECHNOLOGIES
52

55. Social media become mainstream
NEW
TECHNOLOGIES
53

56. Social media become mainstream
How do you use social media?
How do your children use social media?
To what extent would your decision to buy a financial services product online, or
not buy one, be influenced by what you encountered via a social media site?
Which of these would you be willing (or unwilling) to purchase online (and how
do you think your answer might change 2-3 years from now)?
1.
2.
3.
4.
5.
Buildings insurance
Contents insurance
Credit card
Critical illness cover
Health Insurance
NEW
TECHNOLOGIES
6. Income Protection
7. ISA
8. Life insurance
9. Loan
10. Motor insurance
54
11. Pension
12. Pet insurance
13. Premium bonds
14. Travel Insurance
15. Shares

57. Social media become mainstream
NEW
TECHNOLOGIES
55

58. Social media – generation matters
BUT THE EVIDENCE IS CHANGING
It is perhaps not surprising that teenagers and those in their
early 20s are more comfortable with new gadgets and social
media than there parents are. And yet . . . .
There are more ‘silver surfers’ year on year. Business men and
women are hooked on their Blackberrys and iPhones, and
grandparents are connecting with their grandchildren as never
before.
NEW
TECHNOLOGIES
56

59. Social media – generation matters
NEW
TECHNOLOGIES
57

60. Generations and behaviours
Facts
do
not
speak
for
themselves. Yes, teenagers
and adults behave differently:
no surprises there.
The question is, “As this
cohort of teenagers become
adults will they revert to
behaving as their parents did
or will their experiences as
teenagers persist as they get
older?”
NEW
TECHNOLOGIES
58

61. Social media: mobile phone addiction
NEW
TECHNOLOGIES
59

62. Social media and gender
http://blog.ted.com/2011/02/02/social-media-and-the-end-of-gender-johanna-blakley-on-ted-com/
Media and advertising companies still use the same old demographics to
understand audiences, but they’re becoming increasingly harder to track
online, says media researcher Johanna Blakley in this thought provoking
2010 TED talk, “Social Media and the End of Gender”.
As social media outgrow traditional media, and women users outnumber
men, Blakley explains what changes are in store for the future of media.
NEW
TECHNOLOGIES
60

63. Social media and gender
NEW
TECHNOLOGIES
61

64. Social media habits
NEW
TECHNOLOGIES
62

65. Social media habits
NEW
TECHNOLOGIES
63

66. What we’ve covered so far
So far we’ve focused on (i) behaviour, because there’s a limit to how
much our enterprise can benefit from social media if we’re not behavioursavvy and (ii) technology, because in this context it is not simply an
enabler: it is having a profound effect on consumers’ habits.
We focus next on customers and strategy. As customers we know what
matters to us, so why is it that when we turn up for work at the office we
leave these insights at reception?
How much weight we give to an issue, ‘What we do next’, depends on our
strategy. We can’t invest in everything – strategy helps us focus on those
issues that help us create value and obtain competitive advantage.
64

67. The Presentation’s Objectives & Agenda
• The Objectives:
– To inform and energise
• The Agenda
 It begins with behaviour
 Behavioural economics
 Technology is having a BIG IMPACT on consumer behaviour
4. What do you really know about your customers?
5. So what to do next?
65

68. Consumer behaviour and social media
CUSTOMERS
66

69. Consumer behaviour – some indicators
The Web is already a significant distribution channel for financial
services. (Google presentation to TISA Oct 2011)
47%
of people who acquired credit cards did so online
49%
of General Insurance is now bought online
21m
49%
people researched at least one financial product in the last year
of savings accounts have been set up online
75%
of people looking for a mortgage research online first
66%
of consumers would consider arranging their mortgage online
CUSTOMERS
67

70. Customer Contact Matters
In the middle to late 1980s, when I was studying at INSEAD, the cool
companies included Unilever and Procter & Gamble because they were
about brands, and because there was a difference in Strategy if you were an
international, multinational, global or transnational organisation. Retailers
such as Carrefour, Sainsburys or Tesco weren’t cool at all. Market
capitalisations reflected this: in the 1980s Unilever and P&G had market
caps that were several times greater than that of major retailers. Today
that’s changed: it is the Carrefours, Sainsburys, Tescos and Walmarts that
have the marketing muscle, realtime customer information, and greater
market valuations: and Amazon and eBay can now be added to the list.
CUSTOMERS
68

71. Customer Contact Matters
CUSTOMERS
69

72. Customer service: don’t kid yourself
Much like male car drivers, many of whom believe they are excellent drivers,
most (nearly seven in 10) firms consider themselves to be “above average”
when it comes to customer service, although relatively few (16%) regard
themselves as excellent. Some of these, however, appear to be getting
slightly ahead of themselves. Just six in 10 have a defined strategy for
tracking customer feedback and complaints, while even fewer (55%) have a
system for identifying service gaps, and less than four in 10 think they do a
good job of addressing customer feedback. (BDO EIU Service 2020)
CUSTOMERS
70

73. Customer service: don’t kid yourself
CUSTOMERS
71

74. Customer Service: don’t kid yourself
In March 2011, IBM conducted research in to the dichotomy between
customers’ perceptions and those of the business with whom they were
interacting. IBM called this The Perception Gap. These findings are consistent
with those reported by Bain (where 70% of CXOs thought their businesses
delivered superior customer service, and yet only 7% of customers agreed) and
the BDO study referred to previously.
The IBM report noted: “Many companies have misunderstood their social
network audience and have flooded them with inappropriate offers.” To get it
right a business needs to know its customers’ habits, biases, followings,
preferences and trust circles.
CUSTOMERS
72

75. Customer service: don’t kid yourself
CUSTOMERS
73

76. Customer service: don’t kid yourself
If I work for Starbucks I probably think people are more interested coffee than they are.
If I work for Dell I probably think people are more interested in computers than they are.
If I work for Thomas Cook I probably think people are more interested travel than they are.
If I work for Ageas I probably think people are more interested in Protection than they are.
If I work for L&G I probably think people are more interested in pensions than they are.
If I work for ITN I probably think people are more interested news than they are.
This is probably why we over-focus on selling to satisfy our needs and pay insufficient
attention to letting customers buy in a manner that helps them satisfy their needs.
CUSTOMERS
74

77. Customer service: don’t kid yourself
CUSTOMERS
75

78. You’re the customer . . . . .
1.
What’s the best customer experience you’ve had? What could your
company learn from this?
2.
What’s the worst customer experience you’ve had? What could your
company learn from this?
3.
Which brands or organisations do you associate with good service? On
what is this perception based?
4.
Which brands or organisations do you associate with poor service? On
what is this perception based?
5.
Which organisations (not just companies – e.g. Your GP’s surgery; or
HMRC) do you feel know you well?
6.
What does a company need to know about YOU personally, to sell the
right things to YOU in the right way?
CUSTOMERS
76

79. Think about your customers . . . . .
1.
How many ways do you segment them?
2.
If each customer knew how you segmented him/her what is the
likelihood that he’d agree or disagree with you?
3.
If each customer knew how you segmented him/her what is the
likelihood that he’d perceive you as insightful?
4.
No doubt you have opinions, but do you KNOW why your customers
bought from you rather than a competitor?
5.
What is the likelihood that they’ll buy from you again? On what
evidence do you base your answer?
6.
Are you more likely to be delighted or anxious if a random selection of
30 of your customers were to meet up?
CUSTOMERS
77

80. Think about your company . . . . .
1.
2.
Where does customer expertise reside?
How well does it score on ‘Customer Intimacy’
3.
4.
Does it know why customers defect?
How likely is it that customer expertise is being overlooked or underutilised?
How many of your employees are also customers – and how well do
you use them as assets?
How well do you use existing customers to help you develop new
products?
5.
6.
7.
8.
How well do you use existing customers to help you develop new
services?
Who are the customers’ champions?
CUSTOMERS
78

81. Customers, information, management
What has
CRM
ever
done
for us?
CUSTOMERS
79

82. Context and strategy
For every £100 you have available to spend on social media, how much
would be spent on:
1.
Selling more current products to existing customers
2.
3.
4.
Selling new products to existing customers
Selling current products to new customers
Selling new products to new customers
To what extent do these different options call for different (social media)
approaches?
Where do social-media-based campaigns add most value?
80

83. THE BIG PICTURE: 4 FACTORS TO CONVERGE
IT BEGINS WITH BEHAVIOUR.
How well do you and your
colleagues really understand
human behaviour?
NEW TECHNOLOGIES MATTER
here. A lot. How technology
savvy is your company? How
agile is it? Does it experiment?
CONTEXT & STRATEGY.
Do you have a good basis
on which you can assess
threats and opportunities?
HOW WELL DO YOU KNOW
YOUR CUSTOMERS? Why have
they bought what they’ve
bought: and why from you?
81

84. Social media: strategic impact 1
ARE SOCIAL MEDIA
SO DISRUPTIVE
THAT THEY FORCE YOU TO
RETHINK YOUR STRATEGY?
CONTEXT &
STRATEGY
82

85. Social media: strategic impact 2
DOES YOUR STRATEGY
EASILY ACCOMODATE
THE IMPACT OF
SOCIAL MEDIA?
CONTEXT &
STRATEGY
83

86. Social media: strategic impact 3
HOW EASY WOULD IT BE
FOR A COMPETITOR TO GAIN
AN ADVANTAGE OVER YOU
BY USING SOCIAL MEDIA WELL?
CONTEXT &
STRATEGY
84

87. CONTEXT &
STRATEGY
85

88. Social media – organisational impact
The diagram on the opposite page is based on the business best-
seller, Groundswell by Li and Bernoff. Unlike the other books on
social media (which opt more for the Wow! and Gee Whiz aspects
of social media, there’s a strong corporate element in Groundswell
(Li works for Forrester Research), i.e. it aligns its messages with the
day to day realities of corporate life – business functions such as
Marketing and Ops; strategy; or performance measures; so many
managers will find this matrix relevant and useful.
CONTEXT &
STRATEGY
86

89. Social media – organisational impact
CONTEXT &
STRATEGY
87

90. Summary of key points
1. Learn to listen
2. Think differently about segmentation
3. Learn to listen
4. Adapt to consumers’ habits
5. Learn to listen
6. Become behaviour-savvy
7. Learn to listen
8. Social media: a strategic or an operational one?
88

91. LISTENLISTENLISTENLISTENLIS
TENLISTENLISTENLISTENLISTEN
LISTENLISTENLISTENLISTENPAY
ATTENTIONLISTENLISTENLISTEN
LISTENLISTENLISTENINTERACTL
ISTENLISTENLISTENLISTENLIST
EANLEARNLISTENLISTENLISTENL
ISTENLISTENLISTENADAPTLISTE
NLISTENLISTENLISTENLISTENLI
STENLISTENENGAGELISTENLISTE

92. WHAT TO DO NEXT?
CONTACT ME AT
agnewman.is@virgin.net
COME TO THE NEXT
FINANCE IT NETWORK
MEETING (www.fitn.co.uk)

93. Thank you
After graduating with a degree in Psychology from UCL, Alan spent 3 years
in Kenya on VSO as a science teacher. He worked for DEC as a software
services manager in the UK and Middle East and attended the
International Advanced Management Programme at INSEAD. He became
a freelance consultant in 1992. Clients with whom he’s worked include
Aviva, AXA, BT Syntegra, Capita Registrars, Computershare, CSFB,
Hannover Life Re, iFapps, L&G, Liverpool Victoria, RSA and Swiss Re. He
has also written for FT Finance and The Journal of Brand Management.
agnewman.is@virgin.net
www.fitn.co.uk ; www.inv8.co.uk