Developed by
Stonegate Advisors, LLC –
July 2010
D
CONTENT
The 6 Elements of Product Value
by Marc E. Pierce
The 6 Elements of Product
Value
1.
Introduction
2.
Elements of Product Value
3.
Benefit Design
4.
Network / Quality
5.
Service Experience
6.
Operating Model
7.
Distribution
8.
Brand
9.
Differentiating through
Product Value
10. Parameters of Customer
Value
11. Bridging Product with
Customer Needs
12. Individual Segment
13. Conclusion
The four Ps of marketing, commonly referred to as the marketing mix and applicable
across most industries, define the unique combination of product, price, promotion, and
place needed to create value for and generate a positive response from a select target
market. However, organizations within the health insurance industry should consider
other key elements. The Six Elements of Product Value provide health insurers an
approach to creating a differentiated product portfolio needed to achieve competitive
distinction and maintain sustainability. By matching these elements with the needs of
the customer, an insurer can drive greater customer acquisition and retention.
Introduction
Since its inception in the 1960s, marketers
have been deploying the principles of the
4 Ps of marketing – Product, Price, Place
and Promotion to design their strategies
(see figure 1).
The marketing mix
elements are used to tailor a product
offering to a unique customer segment.
While used successfully across many
product focused industries such as
manufacturing,
consumer
packaged
goods, and retail, the 4Ps are insufficient
in addressing the various complexities
within the health insurance industry. As
such, Stonegate Strategic Advisors offer a
more tailored approach to health
insurance solutions, the 6 Elements of
Product Value:
Benefit Design,
Network/Quality, Service Experience,
Operating Model, Distribution, and Brand.
The 6 elements of product value are an
adaptation of the 4 Ps of marketing.
Five years ago, an individual or family
seeking health insurance would look for a
simple plan covering two essential
components – benefits and provider
network. For example, an individual from
Pennsylvania would buy Aetna's PPO40
plan which offered affordable premiums
with moderately high co-pays and wide
network coverage. Plan benefits and
provider networks were the lynchpins of
product design and served as the key
drivers in the consumer decision-making
process.
Figure 1: The 4 Ps of Marketing (The
Marketing Mix)
Product
Price
Target
Market
Place
Promotion
Health insurers emphasized benefit
design and network depth and breadth,
with minimal regard to customer
experience, transparency of network
quality and safety, availability of
alternative distribution channels, and
product level branding.
However, as competitive intensity
continues to increase, insurers now look
for new avenues to realize distinction and
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
1
The 6 Elements of Product Value
sustainability.
Greater focus is being
placed on transcending one-size-fits-all
service models to tailoring product and
service offerings to meet the unique
needs of various constituents.
By considering all 6
elements, an organization can develop a
more robust product
portfolio tailored to
the unique needs of
specific constituents,
thereby increasing the
chances of acquisition, retention and
greater competitive
distinction.
For example, in 2007, Humana designed
the “No Worry” package for employers in
Illinois to alleviate the financial stresses of
increasing health insurance costs by
restricting the annual premium rate
increase to 6%.
Similarly, WellPoint
created a youth focused program called
Tonik, with pricing, distribution, and
customer service tailored to 21-35 year
old single, “young invincibles.”
The Product Value model puts the
customer at the center of each business
activity. By considering all 6 elements, an
organization can develop a more robust
product portfolio tailored to the unique
needs of specific constituents (member/individual,
employer,
broker,
provider), thereby increasing the chances
for acquisition, retention and greater
competitive distinction.
ELEMENTS OF PRODUCT VALUE
The health insurance industry in the U.S.
has changed its strategic focus on product
design and pricing policy (James C.
Robinson 2007). The focus now is on
transforming the health care system by
embodying new elements of product
value to improve product offerings.
Customers are becoming better equipped
with information. With online tools they
can compare different plans and benefits
before making a final decision. Today’s
web-savvy consumers are looking beyond
the traditional features of benefits and
provider network, and seek ease of doing
business, access to health and wellness
programs, and improved reporting and
metrics.
Figure 2: 6 Elements of Product Value Model
Benefit
Design
Network /
Quality
Brand
Product
Service
Experience
Distribution
Operating
Model
The Stonegate product value model (see
figure 2) combines all these key elements
and develops a more holistic marketing
mix tailored to the health insurance
industry. Using this model, insurers take
a more robust and systematic approach to
product portfolio development, including:
Re-introducing consumer-driven healthcare plans – by bringing transparency of
price and quality into the service delivery
model and provider network tiering; and
rewarding prevention and healthy
lifestyles.
Enhancing disease, care management,
and wellness offerings – by complementing health insurance with a portfolio of
preventative services to keep employees
healthy, as well as providing focused
attention to the chronically ill.
Offering greater choice and flexibility of
plan offerings, by covering modular or
tiered levels of benefits with varying cost
share arrangements.
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
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The 6 Elements of Product Value
Improving
customer
service
and
experience – by utilizing web-based
technologies and other automation for
marketing, sales, distribution, enrollment
and service.
Reducing administrative costs – by
improving operational efficiency and
reducing processing costs.
Simply giving
consumers a price list
of ‘a la carte’ services
does little to help
them make informed
choices about which
providers will cost less
for an episode of care,
let alone which
providers offer the
best value.
Peer industries have already paved the
way using similar approaches.
For
example, the life insurance industry has
turned towards cost reduction, regulatory
compliance and overall value chain
effectiveness
due
to
increasing
competition and slow premium growth.
The life insurers are analyzing their
operations both internally and externally
to reduce costs and enhance revenue by:
Putting emphasis on the distribution
channel to promote the ease and
consistency of the customer experience; eliminating siloed sales channels
and building interaction strategies
based on customer touch point data,
for example, analyzing which consumer segment prefers which type of
distribution channel.
Reengineering,
streamlining
and
automating processes using business
process management tools. Automation can reduce cycle time of new
business
application
processing,
quoting, rating and claims processing.
The 6 elements of product value include:
1 – Benefit Design
Benefit design includes benefits covered,
cost shares, and limitations and
exclusions, as well as the pricing of
products. While the basic construct of
product has evolved over time, each
component is fairly easy to emulate, so
differentiation remains a challenge in this
highly competitive market.
Premiums for health insurance products
have been trending well above the overall
inflation rate. Since 2000, health
insurance premiums for employersponsored plans have risen by 87%. As a
result, employers are increasingly shifting
health-care costs to workers through
higher premiums, deductibles and co-pays
or are simply not providing medical
benefits to employees.
Health insurers are fostering higher
patient “skin in the game” by maximizing
cost sharing for services that are
discretionary and sensitive to patients’
preferences, and minimizing services that
are nondiscretionary and not sensitive to
preferences.
The limitation of this
strategy is that cost sharing is designed
uniformly with no regard for variation in
consumers’ financial resources. It
provides meaningful incentives for a
higher-income family, while putting more
burdens on lower-income families. Also,
when this approach is applied incorrectly,
critical access to prescriptions and
preventative physician office visits may be
cost prohibitive to chronically ill patients
(e.g. Diabetics), resulting in long term
health deterioration, not improvement.
Insurers are also beginning to offer basic,
stripped down plans at a minimum
premium and value added products at
higher premiums. However, according to
Paul Ginsburg (President, Health System
Change (HSC)), simply giving consumers a
price list of ‘a la carte’ services does little
to help them make informed choices
about which providers will cost less for an
episode of care, let alone which providers
offer the best value, or the optimal
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
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The 6 Elements of Product Value
“The most important
characteristic of the
private voluntary
health insurance
market is that
individuals differ
widely in what they
want and are willing to
pay for.” - Dr. James
Robinson, Health
Economist
combination of the lowest cost and
highest quality. The question is, how
should insurers tailor plans to meet
consumer needs?
According to a study by HSC, insurers
should look beyond cost sharing and use
innovations in benefit design such as
incentives to encourage healthy behavior
and incentives that vary by service type,
patient condition or enrollee income.
Incentives can also encourage the use of
efficient or high quality providers to make
cost sharing a more effective tool. This
would help the health insurer to
differentiate its plans and develop a
competitive advantage.
In the health insurance business, different
individuals in different age groups
represent different levels of risk. An
insurer should be cognizant of where in
the dimensions of health, well being and
readiness for change consumers might fall
and where to focus their products, from
preventative services to management of
the care continuum for acutely ill
patients. Treatment of chronic illnesses
accounted for the biggest cost increase
over the last five years. While insurers
should develop disease management
programs for chronically ill members, not
all individuals that are at risk of
developing a - or worsening an existing condition are ready to change their
behaviors. Programs should be developed
that are tailored to an individual’s
willingness to change.
While it is hard to differentiate on benefit
design alone, having speed to market, and
a focus on wellness and care management
can help drive greater distinction.
2 – Network
/ Quality
Health insurers are offering new plans
with wider choice and thinner benefits.
Although provider networks are broader,
they are now increasingly tiered. Network
designs seek to balance the virtues of
reimbursing providers adequately to
promote quality and innovation, on the
one hand, while motivating them to
search for more efficient and less costly
forms of treatment, on the other.
Quality of network providers and
transparency are also becoming key
factors in the consumer decision-making
process. Health insurers are able to
gather and analyze data on the quality
and efficiency of physicians, and
designate them as “high performers” on
the basis of efficiency scores and quality
measures. This enables them to provide
members with transparent information
about provider performance outcomes, or
use of evidence based medicine. They
also can offer incentives or steer
members to use high performance
providers.
In 2003, Aetna introduced its Aexcel
network of specialists in Jacksonville,
Dallas, and Seattle for six specialties and
in January 2006, extended the program to
12 specialties in 20 markets. Aetna claims
its Aexcel network reduces members’
health care costs.
Some
insurers
and
independent
organizations have started to produce
"report cards," which include satisfaction
survey results and other information on
quality, such as whether a plan provides
preventive care or if the plan follows up
on test results. For example, Indiana
Department of Insurance issues a
“Consumer HMO Report Card” which
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
4
The 6 Elements of Product Value
shares information about the performance of Indiana Health Maintenance
Organizations (HMOs). The report cards
help consumers compare the different
plans and organizations, to make an
appropriate selection.
Service experience can
serve as an important
differentiator as it is
difficult emulate.
The importance of network depth and
breadth, which historically served as a
distinct advantage, is being challenged.
As the national health insurers reach
network parity, transparency and quality
have emerged as the new sources of
advantage.
3 – Service Experience
Service experience focuses on creating
unique customer experiences at every
touch-point. The ease of doing business
with a company plays a key role in the
customer
decision-making
process.
Service experience advocates that
insurers develop a unique experience for
target constituents such as direct
purchase individuals, group members,
large or small groups or brokers to
increase satisfaction and retention. Most
insurers follow a one-size-fits-all model,
which is not effective in today’s evolving
marketplace. Today’s health insurance
companies that desire to improve their
service quality could take a lesson from
other industries such as banking and
auto-service. One way to do so would be
through lowering the defection rate of
customers.
Reduced defections drive greater
profitability. To use a few cross industry
examples, according to a research report
by John G. Sanchez, reducing the
defection rate by just 5% generated 85%
more profits in one bank's branch system,
50% more in an insurance brokerage, and
30% more in an auto-service chain. As per
a 2006 report, when MBNA America, a
Delaware-based credit card company, cut
its 10% defection rate by half, profits rose
over 120%.
No customer action speaks louder than
defection, but insurers should not wait
until their customers have left to think
about making changes. Defection rates
are one of many indicators insurers can
use to improve service quality. Insurers
can learn exactly where the company is
falling short and where to direct their
resources just by listening to their
customers. To use another cross industry
example, Staples uses feedback from
customers to pinpoint products that are
priced
too
high.
That way, the company avoids expensive
broad-brush promotions that pitch
everything to everyone.
Service experience also extends to include
the tools, programs, and techniques
insurers use to connect with their
customers. For example, in 2007, Aetna,
WellPoint, and CMS launched portable,
Web-based
Personal Health Records
(PHR) programs for maintaining patient
treatment information. Personal health
records help doctors and patients track
medications and treatments. Doctors can
record test results, immunizations,
prescriptions
and
other
medical
information into an online database that
can be accessed by patients, the insurer
and other physicians, if needed. Patients
can also add details about over-thecounter
medications, plans of care, family health
histories and other information. Personal
health records have the potential to make
the delivery of healthcare services more
efficient and accessible, less costly, and
safer.
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
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The 6 Elements of Product Value
Insurers are also partnering with network
providers to reduce cost and improve
service offerings. For example, they are
helping doctors and hospitals purchase
the technology needed to compare the
effectiveness of various treatments while
avoiding redundant tests and medication
errors and enabling them to provide
better care while wasting fewer resource.
Particularly in the
individual market, an
insurer must “go to
where the individual is,
not make them come
to you.”
Take for example "the Nordstrom's
model." Nordstrom is a department store
chain renowned for its outstanding
customer service. Penn Medical Center
sought to emulate the Nordstrom Model
and change the way their doctors
interacted with their patients. Doctors
worked alongside "patient service
representatives" who were trained to
attend to all patients’ non-clinical needs,
from insurance to scheduling and
referrals. As Nordstrom’s sales personnel
are compensated for high customer
satisfaction, Penn modified the physician
compensation to reward high patient
satisfaction.
4 – Operating Model
The health insurance industry is facing
challenges
including
administrative
inefficiencies, increasing costs, lack of
standards, reduced payments and
consumer concerns over costs and
control.
The insurers’ success depends on their
ability to transform obstacles into
opportunities by improving internal
process and removing inefficiencies. A
streamlined internal process not only
optimizes the company’s operations, but
also can provide a competitive edge over
the competition.
Decreasing lifetime values and increasing
pressure on premiums are adversely
affecting the insurers’ profitability. The
insurers are targeting significant cost
reductions in the areas of customer
acquisition and service, while at the same
time enhancing their service offerings.
The only way to achieve both is through
greater efficiency. It will therefore be
imperative to re-evaluate current routes
to market and redesign internal
processes.
Medical underwriting is also becoming a
crucial element for the insurers’ survival.
The insurers can use approaches to
underwriting as a differentiator, based on
their risk tolerance, speed, and
geographic proximity to the customer.
A robust underwriting method should be
adapted to price product according to
more than just the risk involved.
Understanding the proper relationships
between rate changes and the corresponding impact on retention, frequency,
number of claims reported, and the
number of people required to handle the
new claim volume is essential to
accurately estimate profitability and
underwriter income.
With increased spending on technology
and automation, costs should go down.
An efficient back-office process not only
helps to reduce the cost of operation, but
also helps generate more business from
customers. But throwing expensive
technology at a problem is not always the
best solution. Rather than increasing
spending, health insurers should consider
outsourcing or off-shoring non-core
functions and develop their core
operating capabilities as the key
competitive advantage.
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
6
The 6 Elements of Product Value
In sum, the prime opportunities to
achieve distinction with an operating
model are scale, efficiency, streamlining
of
operations,
and
underwriting
sophistication.
to reach prospective customers who
might otherwise not be reached.
Customers such as small groups and
individuals don’t have or know how to
work through a broker.
5 – Distribution
The distribution matrix (see figure 3)
classifies the distribution channels on the
basis of customer profile.
Distribution is an important factor for
determining a company’s ability to
maintain and increase its market share. A
decision regarding which distribution
channel to use depends on two things,
which channel can best serve the
customers by providing appropriate
information and accessibility; and, what
value a channel adds to the company’s
products.
In the health insurance industry,
distribution channels can be divided into
two broad categories:
From the Internet that
reaches the broadest
segment of customers
to fitness centers that
reach a very defined
segment these
channels are opening
doors for insurers.
Traditional channels include general
agents, distributors, brokers, associations
and direct agents. These have been the
main sources of distribution for the health
insurance products until now.
Alternative channels like Internet, banks,
mobile sales units, retailers such as
grocery stores or office supply stores,
fitness clubs and co-branded programs
have become more influential, efficient
and cost effective mediums. They give
insurance companies easy access to
people who may have been difficult to
reach through traditional channels. From
the Internet that reaches the broadest
segment of customers to fitness centers
that reach a very defined segment, these
channels are opening doors for insurers.
The traditional channels are often more
effective at serving mid-sized or large
employers, with more complex product
needs. Alternative channels can be used
Figure 3: The Distribution Matrix
New
Mid-Size, Large
Individuals
and National Accounts
and progressive,
and less price sensitive
price sensitive, or
Small Groups
uninsured Small Groups
Customers
Existing
In-force
Book of Business
Individuals and
progressive or
price sensitive
Small Group
Traditional
Alternative
Channels
New distribution channels, like the
Internet, have been successfully adopted
by the financial services sector and have
been widely accepted by customers due
to ease of use and accessibility. The
Internet has also reduced operating costs
for companies and has helped create new
financial products like online payment
and E-banking.
Online shopping for health insurance has
risen dramatically. Many large e-brokers
are providing online health insurance to
people on behalf of insurers, and they
have been widely successful, for instance
eHealthInsurance, founded in 1997, had
about 1.6 million customers in 2006.
LifeWise plans started using eHealth in
2006 and saw online sales for individual
and family plans grow to 40% of total
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
7
The 6 Elements of Product Value
sales of the company. The same trend is
visible in other related sectors. According
to a comScore, Inc. study of online auto
insurance activity, in 2006, auto insurance
policies purchased online increased 58%.
Taken individually
each element can
provide some added
benefit, but taken
together they can help
to build a sustainable
competitive advantage.
The industry needs to continue to evolve
these and other innovative channels to
reduce the distribution cost and directly
reach the target market. For example,
Destiny Health recently launched its
individual plans to members in four
Illinois Life Time Fitness (LTF) centers. This
helped the insurer reach out to a new
segment of customers.
While traditional channels have become
widely penetrated, it is difficult to use this
form of distribution as a source of
competitive advantage. But alternative
channels can be used effectively as a
source for distinction, particularly in the
short run. While this can create some
channel conflict, insurers can be creative
in launching new channels. For example,
with an alternative channel, the broker
does not have to be eliminated. Insurers
can reward top producers by giving them
exclusive access to new channels. Top
producers can be awarded “rights” to set
up shop in a retail chain or bank, enrolling
any new members using that channel.
6 – Brand
Branding gives the product/service a
separate identity. It can be thought of as a
promise, creating associations in the
minds of customers with the features and
benefits of a product. Through branding,
companies try to stand-out and create a
unique identity which may result in
increased sales and customer retention.
In the last 5 years, branding has gained
importance in the health insurance
industry. The industry has become more
retail-oriented and focused on individual
consumers, whereas, in the past, these
companies marketed their products on a
wholesale basis to employers.
Branding products involves a more
focused strategy. Insurers target specific
segments, and communicate based on the
behavior of different segments. For
example, UniCare's Sound plan and
WellPoint’s Tonik plan target “young
invincibles” (19-34 year olds). To make
the communication meaningful, the
companies brand their products to
connect with the customer, rather than
using names such as HMO20 or PPO50
which are often meaningless.
Anthem Blue Cross and Blue Shield
named its new product, for the small
business segment in Colorado, BeneFits.
Humana has named its new product
portfolio as HumanaOne under which it
has launched 3 new products - Autograph, Portrait, and Monogram for
personal health insurance targeting
individuals and families not insured by an
employer,
such
as
self-employed
entrepreneurs, small business employees,
part-time workers, students and early
retirees.
To attract and retain customers, health
insurance companies are trying to create
brand awareness. Health insurers have
struggled with poor image, and as claim
payers there was little that set them
apart. Branding provides an avenue for
distinction.
Health insurers are designing new brand
logos to connect with the local audience
and reflect their core values. For example,
FirstCare designed a new logo to brand
itself as “a neighbor” to the local
community. Then, instead of using
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
8
The 6 Elements of Product Value
generic product names, they emphasized
strong product identity. This has made it
easier for the companies to communicate
their products to customers and
customers are better able to associate
with these names.
An insurer must
consider its own core
competencies and
emphasize those
elements that best
align with its own
current or aspirational
strengths.
Moreover, the insurers are increasingly
using innovative online marketing tools to
promote their brands like:
Search engine marketing through
vendors like Google & Yahoo.
Opt-in email sponsorships with MSN
hotmail, Yahoo, and AOL.
Banner ad placements on relevant
websites such as WebMD, eDiets,
Careerbuilder,
Monster,
and
About.com.
Search Engine Optimization (SEO), a
long term approach to organic search
placement, rankings.
The brand can play a crucial role in
creating a strong market position.
Insurers should invest in marketing efforts
to create a distinct brand identity not only
at the company level, but more
importantly, the product level.
DIFFERENTIATING THROUGH
PRODUCT VALUE
Besides streamlining the internal and
external processes of the company and
designing a profitable product offering,
the product value model also enables the
insurers to develop a competitive
advantage.
An insurer must consider its own core
competencies and emphasize those
elements that best align with its own
current or aspirational strengths. While
deciding the focus area, it should
recognize that each element offers
varying degrees of competitive advantage
(see figure 4 summary).
PARAMETERS OF CUSTOMER
VALUE
Customer value creation is at the center
of the relationship between customers
and service providers.
Different
customers value aspects of service
differently. In the health care industry,
individual customers and employees
desire a coverage that provides high
value, access to good facilities, choice in
terms of facilities and plans, and faster
claim processing. On the other hand,
employers try to contain escalating costs
and improve health for employees. As a
result, health insurers need to strike a
balance between costs for employers and
creating a satisfying experience for the
employees and individual customers. At
the same time, they must compete
Figure 4: Degree of Competitive Advantage
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
9
The 6 Elements of Product Value
against carve out vendors such as disease
management and wellness companies.
BRIDGING PRODUCT WITH
CUSTOMER NEEDS
For Young Invicibles,
Insurers should
consider promoting
simple, prepackaged
branded offerings,
using new distribution
channels such as retail
stores and the
Internet, and providing
real-time application
processing and
underwriting.
In order to maximize acquisition and
retention, an insurer must match the 6
elements of product value to the
customer needs. Inevitably customer
needs and insurers’ aspirations will vary
for different customer segments. Thus
after determining its focus area and the
customer needs for a particular segment,
the insurer should consider and tailor the
most relevant elements of product value
to design a suitable strategy (see figure 5).
A few examples of tailoring the elements
of product value to the parameters of
customer needs follow:
INDIVIDUAL SEGMENT
The individual segment can be classified
on the basis of life-stages or demographics. The individual segment
represents a large opportunity for health
insurers; 47 million people are still
uninsured in the U.S. Each player is
looking to tap a large share of this
segment.
Young Invincibles
The Young Invincibles group consists of
people between the ages of 19 and 34.
The major concern for this segment is the
simplicity, affordability and ease of access
of products.
Consequently, insurers
should consider promoting simple, prepackaged branded offerings, using new
distribution channels such as retail stores
and the Internet, and providing real-time
application processing and underwriting.
Pre/Early Retirees
Pre/Early Retirees fall in the age group of
51-64 years. The biggest concern for this
segment is value and personal interaction,
particularly if this segment retires or loses
group coverage before becoming
Medicare eligible. Another major
requirement for this segment is flexibility,
ease of use and options in products.
Consequently, insurers should consider
highly flexible offerings to cater to the
various needs of this segment, including
the bundling of wellness benefits. Also,
live channels such as telephone and
brokers should be used to sell and service
this segment. Finally, insurers will most
likely find branding to be beneficial. For
example, Aetna recently launched 4 new
plans under the name ‘Retiree Health’, for
early retirees targeting the 55-to-65 age
group. The company’s objective is to
create long-term relationships with preretirees that can continue even after the
customers become eligible for Medicare.
Figure 5: Match Product Value Elements to the Customer Needs
Note: the parameters of customer value are representative, not all inclusive)
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
10
The 6 Elements of Product Value
About
Stonegate Advisors
Stonegate Advisors provides
research, strategic counsel,
business
advisory,
and
analytical services to medium
and large sized firms, including
venture, hedge, and private
equity funds within or targeting
the health and wellness
industry.
www.stonegateadvisors.com
Sightlinx,
a
proprietary
product of Stonegate, is an
industry first research solution
to rapid perspective, knowledge
and idea sharing across the
health and wellness industry.
Small Group Employers
Large Versus Small Brokers
All small employers should not be treated
equally. Like individuals, small employers
can by classified by life cycle, such as
start-up, rapid growth, mature, or
declining.
Depending on where a
company is in its life-cycle, a different
combination of product value elements
should be applied. An online sales and
service channel can be used with a startup, whereas a mature company may
prefer to deal with a broker. Similarly, a
start-up may only want one or two
products to choose from, whereas a rapid
growth company may consider a portfolio
of options, as well as access to wellness
and prevention programs.
Many insurers already vary the way they
treat brokers, considering dimensions
such as the size of the broker and what
percent of that broker’s premium is sold
with any one insurer. Key dimensions
such as the service channel, incentive
design and products offered can vary
based on the value of the broker to the
insurer.
For example, less valuable
brokers may be serviced through a call
center or receive on-line rather than inperson training. Highly valued brokers
may sit on a producer advisory council,
have access to customized training and
reports, and participate in cooperative
advertising and lead generation.
www.sightlinx.com
For more information, contact
Marc Pierce at
mpierce@stonegateadvisors.com
or 312 397 1111.
CONCLUSION
Traditional product features such as benefit coverage, pricing, and physician
network can no longer be considered differentiators in today’s highly competitive
market. The 6 Elements of Product Value: benefit design (speed to market),
network/quality (quality & transparency of the network), service experience
(customer service), operating model (back-office operation), distribution (new
innovative channels) and brand (product specific branding) have emerged as the
essential elements that are needed to develop a competitive advantage for
insurers. The health insurers have tried to differentiate and create their own niche
in different markets based on geographies, demographics and customer segments.
Customer needs have also evolved, and buyers look for better products at
competitive prices catering to their risk profile.
The key to success for a health insurance company lies in matching the Product
Value to unique customer needs, thereby creating a sustainable competitive
advantage.
© 2010 Stonegate Advisors, LLC / Proprietary and Confidential
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