Free Essay: Referral Program Analysis in the Example of the Insurance Company

Background and Problems

Marketing is the act of a business or franchise presenting itself to the customers or even potential customers in a particular way to create an impression that usually results in a long term buyer-seller relationship. Businesses in the course of promoting their products typically come up with strategies meant to make their core reason for existence a success as cited by (Yang & Debo, 2018). This involves taking bold steps some of them risky to stay ahead of the competition. Sometimes the moves made can go wrong and not necessarily because wrong projections had been made about the strategies, but because the market is dynamic hence keep on shifting. As noted by (Berman, 2016) a business or enterprise should, therefore, stay wake of such instances to avoid desperation when disaster strikes as it is inevitable. The case of AHL insurance company is no different from a business strategy gone wrong. The company is among the largest insurance firms in Vietnam hence giving it a massive reputation in the local market especially. This also puts the company under pressure to expand as it faces rivalry of equal magnitude to its influence; therefore the company fell victim of their strategy as they strived for achievement.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Insurance companies rely on a high market share; therefore one of their main priorities is to increase their customer base in the market. Having a lot of clients means positive yields in terms of gains as cited by (Haenlein & Libai, 2017) & (Wirtz et al., 2019). The bigger the market share means that it is easy for a firm to get other prospective clients to be part of it. AHL as an insurance firm needed to boost the number of clients who rely on the firm's products and services, and with target sections in mind, the company was sure of receiving a new and massive clientele. The company through the head of sales and marketing Nguyen Trung introduced a referral program that would use the friend recommendation initiative that meant those who recommended and successfully enrolled a new client to the company would be rewarded accordingly. There would first be a pilot program that was intended to take three months in which the already existing customers, those with highest ratings primarily would be used to launch the trial program. They would be grouped by the number of years they had been part of the company.

The program incorporated customers who had been with the firm for the past ten years, seven years and fewer years also known as the apostles, loyalist, and butterflies. Points would be awarded based on the number of clients or referrals an individual was able to successfully gunner. The scores would then be equated to gift value (Orsingher & Wirtz, 2018). That was the initial program setup and based on the reputation it had having been applied in other marketing sectors; its success was almost guaranteed; hence the company was already looking forward to massive results. The pilot program would pave the way for the main program hence the reason it was launched before the initial application. The firm's primary focus was the long term customers also known as the apostles and based of their ability to rely on the firm entirely and fully purchase the insurance policies without any form of doubt; it was expected that they would bring customers of similar magnitude. As noted by (Reimer & Benkenstein, 2016), a firm highly relies on customers who it has served for long since their ability to promote the company as well as stick with it is high compared to new customers. It was, for this reason, AHL insurance during the pilot program had put all their hope on the long term customers. The short term customers also are known as the butterflies were not of significant concern to the firm; hence their results were not highly anticipated.

After the three-month pilot program, the results were presents. Unfortunately, the results did not reflect what AHL expected. Nguyen Trung was surprised to find out that the short term clients had generated the most amounts of referrals while the long term customers had the least. This was shocking as the program seemed to have turned out to be a menace; however not a complete loss. The results meant that the program was working but would not generate the targeted profits making it not as significant as it should have been (Lobel et al., 2016). The following graph represents the results yielded by the AHL insurance company pilot referral program.

Identification and Evaluation of Possible Solutions/ Recommendations

The referral program was quite expensive, and despite having turned out as not expected, the sales director had to come up with various strategies to improvise it as quitting would mean losses hence no one would ever trust him with such an initiative ever. The firm had also taken some lessons from the pilot program; therefore full dismissal could portray a negative image of the company. This would also mean that the newest customers who mostly were students did not have a significant meaning to the company hence would say the future of the company would be put at jeopardy (Leone et al., 2015). The interviews conducted by the managers towards the clients based on their level in terms of the number of years they had been associated with the company helped shed some light regarding why the program had failed. Several discoveries were made especially those regarding the attitude customers professed about the referral idea. The developments helped in making recommendations.

The first discovery was most old clients viewed it as a time-wasting scheme. Therefore, the solution to this would be designing the program in a way the customers will not have to physically go hunting for friends as referrals (Yang & Debo, 2018). They would use other platforms such as online to reach to their desired people hence saving a lot of time.

The second recommendation was settled upon after realizing most apostle clients felt the program, forced to them with no much benefit to them. This meant that little or no briefing had been made to the customer's side before the program, launched. This led to many customers not understanding the essence of the program hence feeling as if they were being forced. Many customers did not also understand that their referrals stood to gain as much as they did; therefore, it would only mean well (Orsingher & Wirtz, 2018).

The third recommendation was based on the fact that a group of individuals felt that the company was failing hence the reason why they had settled upon introducing the program. This was not the case as the company was already doing well only that it felt the need to increase the client base. Most customers at this level felt their investments were at risk; therefore they would not risk introducing others (Berman, 2016). This meant that the company had presented itself in a wrong way through the program especially to the clients. The company should, therefore, make its records public as noted by (Yang & Debo, 2018) to prove that the company is in line of making more significant investments, not a failure. Provision of records to the public will also mean the company is self-sustaining hence building confidence to not only her customers but also prospective clients by giving them more reasons to be part of the company.

Finally, the company should embrace the fact that the butterfly level which mainly consists of students is yielding a high number of customers. This group as much as they do not have a more significant share now is the future of the firm. Therefore, their activities should be considered (Wirtz et al., 2019). The company should, therefore, introduce a scheme that is more rewarding for this group as the gifts highly motivate them. Secondly, the company should invest in small insurance packages and premiums as well as they have proven to be more dynamic from the results.

References

Berman, B. (2016). Referral marketing: Harnessing the power of your customers. Business Horizons, 59(1), 19-28.

Haenlein, M., & Libai, B. (2017). Seeding, referral, and recommendation: creating profitable word-of-mouth programs. California Management Review, 59(2), 68-91.

Leone, R. P., & Christodoulopoulou, A. (2015). 9. the power of customer referrals. Handbook of Research on Customer Equity in Marketing, 199.

Lobel, I., Sadler, E., & Varshney, L. R. (2016). Customer referral incentives and social media. Management Science, 63(10), 3514-3529.

Orsingher, C., & Wirtz, J. (2018). Psychological drivers of referral reward program effectiveness. Journal of Services Marketing, 32(3), 256-268.

Reimer, T., & Benkenstein, M. (2016). Altruistic eWOM marketing: More than an alternative to monetary incentives. Journal of Retailing and Consumer Services, 31, 323-333.

Wirtz, J., Tang, C., & Georgi, D. (2019). Successful referral behavior in referral reward programs. Journal of Service Management, 30(1), 48-74.

Yang, L., & Debo, L. (2018). Referral priority program: Leveraging social ties via operational incentives. Management Science.