In twelve days we will graduate.  Pending our grade in this independent study, of course.  (Have we mentioned how much we value our Professors?  They are utterly fantastic!)  We sought out this independent study after, as we noted in our first blog post, having “fallen in love with an emerging idea that fuses the ideals of consulting with the analytics of operations, all the while focusing on the consumer.  In all, we have found, hope to define, and ultimately build our careers around: The Customer Experience.”

Since our first post, we have both become more conscientious consumers and more analytical customers.  We both find ourselves standing in lines at stores thinking “this experience would be better if the execution was better,” and mentally redesigning the processes that seem inefficient or to be causing the bottleneck.  We sat at a food court together, enjoying a falafel and a subway sandwich, geeking out about how we mutually agree that service recovery is the MOST important part of customer service and the entirety of a customer experience.  “A service could be amazing,” we contend.  “If it goes wrong, however, and the fix is non-existent, the whole experience is blown.  By the way – are you going to finish those chips?”

All in all, the blogging experience was refreshing, though not without drawbacks.  In an exciting, yet limiting way, committing to such a small piece of writing was difficult as each sentence, phrase, or idea opened up new avenues to explore.  With a smaller venue for our thoughts, however, and less of an idea of how to structure continuous, yet abridged, thoughts, we had to limit the depth of our exploration and move on to new breadth.  In order to stay in a linear fashion with our research, we both wrote offline so as to focus on logically sequencing our thoughts.  This made it harder for our smaller posts to be indicative of the depth of research that we actually sought out.

On the flip side, however (as Safi always asks us to consider), the smaller posts forced these two generally long-winded writers to condense our points and get across in 500 words what we might have used 1500 to, in the past.  As we now head out into the world of corporate emails and to-the-point executive summaries, this is a great pilot program for our real world lives.

The bottom line is, with some added professorial structure, we both feel that blogging can be a viable platform for sharing articles, contentions, and overarching ideas between professors and students.  If we had a longer timeline we both think that it would have been fun to have “guest posts” by both professors and potentially other experts in the field.  Looking long-term, I think we both feel that we’d like to keep this up even if our posts become more sporadic.

Our mutually favorite moment of the class was the session we spent discussing two agreed upon articles one afternoon in April with our professors.  We all allowed the conversation to wander and ended up delving into seriously interesting topics.  An afternoon to freely think with great minds is one of the greatest gifts of an MBA program.

And so we thank you – Safi and Kay – for allowing us to blog for a semester every now and then.  But we thank you more for giving us the opportunity to THINK; to take the time to analyze an everyday situation and leave our mark on it in this safe space.  To get to the heart of an issue by scouring the internet and asking our friends and family about seemingly inane moments of their service-based lives.  For getting excited about reading case studies… for FUN… for once, instead of for “work.”  We specifically sought you out for the knowledge and experience that you have to share and we were not disappointed.  Ultimately, our roles as “customers” and our views of “experiences” have been forever changed.  We could not be more grateful.

Ali & Amy


Another Arguement Against Price-Sensitive Customer Acquisition Focus

by Amy

Luxury car sales are on the rise – 18% since 2009, to be exact. This high end automobile group is also projected to comprise 13% of the auto industry in 2013.* This customer segment of automobile owners are not looking for the cheapest policy on offer. Rather, they are seeking to protect the investment they’ve made in their high end vehicles by insuring properly. Much as their automobile purchasing focused on finding the highest value for dollars spent in terms of driving experience, so goes the search for auto insurance. These consumers are willing to pay for perceived value, and the relationship formed with an insurance agent. Acquiring these customers and forming that interpersonal relationship will undoubtedly lead to higher retention rates of these high value customers.

*“Accelerate High End Auto Insurance Sales,” American Agent and Broker, October 2012

The Untapped Opportunity in Auto Insurance Customer Acquisition

by Amy

In designing the customer experience for acquisition, insurance companies have to ask themselves: Why are people shopping for insurance?

The easy answer is: these customers are looking to switch insurance carriers. This simplifies the matter a bit too much – WHY are these customers looking to switch? For some customers, this is an exercise that takes place every six or twelve months and is inspired by price sensitivity, and not all “shopping” leads to switching. Auto insurance companies have a 90% retention rate for policyholders. 90%! So many companies in the world can’t even see 90% on the horizon.

Much of auto insurance marketing is directed at these price sensitive buyers. In fact, advertising for lower priced premiums began a price advertising war. The ironic thing is, the “ideal” customer for an insurer to acquire is NOT a price sensitive buyer, which comprise approximately 30% of the insurance market and account for 50%* of policy requests. While there are a host of reasons to paint this customer segment as less attractive, the most elementary reason is that these customers are inherently likely to jump ship for the next great low-priced offer. So, the Customer Lifetime Value (CLV) is potentially significantly lower than the acquisition cost.

Auto insurer marketing expenditures would be better targeted in two ways. The first is retaining the remaining 70% of the market – customers who place a larger value on the brand, and won’t be likely to stray for a prettier policy price tag. The second tactic focuses more on customer acquisition, but targets the same brand loyal segment. By determining what these segments truly value in an insurance policy and company, marketing can target specific customer segments and try to lure them away from their current insurers. Some of these customers are also shopping and willing to move due to unsatisfactory service with their current insurer. JD Powers identified that 75% of these insurance shoppers will continue comparison-shopping until they find a policy with a new company. This investment in customer acquisition has several benefits, including acquiring customers with a higher CLV. This is a prime opportunity in the market, as most advertising and marketing is still focused on the low CLV, price sensitive customers. While this notion bucks the current status quo, there is a distinct first-mover advantage to be captured.

* Beyond Price: The Rise of Customer-Centric Marketing in Insurance

Hospital Rooms Part 3: Room Design

By Ali

So what should a hospital room look like?

In a perfect world, I’d prefer that my hospital room look and feel like my bedroom in my home.  This would make me feel most comfortable which I’m certain would benefit my healing.  Surgeons will not operate in my home, however.

The next best case would be in a fancy, closely monitored hotel room; a five-star establishment with plush amenities, great room service, a fantastic view, on demand movies, and luxurious bathroom products.  Even better, I could have looked at this hotel’s reviews first and make sure it was the place for me based on my most important criteria.

Of course, in the real world, we currently choose the highest level of specialty doctor that we can afford, wherever he or she may be.  Patient feedback and ratings are starting to get out to the public outside of marketing messaging, but we have a long way to go.  Imagine being able to vet all aspects of your care against past patient’s experiences on an online, searchable database.  Doctor ratings, success rates, food quality, pain management, private vs. shared rooms, television programming, remote controls for patients… the list of possibilities is endless!

In the interim, it is important to get the ball rolling.  To harken back to an earlier post, patients need to be looked at as customers.  Most patients with extended stays at hospitals these days are in for serious heart problems, neurological issues, sever trauma, and/or risky or complicated maladies.  They need monitoring and medication.  Hospitals should be thinking not only how can we cure them and make them most comfortable, but what will make them happy?  How can we delight them in a time of severe anxiety, stress, confusion, and pain?

I came across an article in Fast Company that inspired the idea for this series of posts and the rest of this entry focuses largely on, what I believe to be, the coolest findings in that article about hospital rooms.  The La Jolla, CA Scripps Prebys Cardiovascular Center and the Kaiserslautern Military Community Medical Center in Germany are two great examples of health centers that are starting to get it.  They are taking a step back from the day to day needs of their employees and combining those needed efficiencies with the best experience of the customer.

In La Jolla, they have implemented the following:

  • Painted rooms sky-blue and acqua-green, trimmed with cherrywood panels
  • Windows fill entire outside wall
  • Rooms are private and the goal is to evoke nature and invite sunlight
  • More space for friends/family
  • Easier access for staff
  • Safer pathways for patients
  • Toilets are big enough for walkers and wheelchairs

In Germany, they have made similar changes, offering an interactive video screen that takes up the entire wall opposite the bed.  This replaces the requisite TV hanging off of the wall.  Patients can use this screen to add their own photos of their friends, family, or grandkids.  They can stream Netflix or surf the web.  They can Skype with friends.  They can even see their daily schedule for their doctor’s visits, read staff bios, and hold video chats with their physicians.

The University Medical Center of Princeton at Plainsboro in New Jersey took it one step further and actually physically redesigned the room.  In a fascinating study, the group determined the main issues to be that:

  • Nurses wanted clear sight lines into the rooms
  • Patients wanted a view out of the window
  • The Toilet often got in the way of benefiting both of these wants due to the placement of the patient’s head and the architectural limitations of a square room.  Closest to the patient was the safest.  That unfortunately obstructs the nurse’s view.

As a result, the folks at Princeton determined that a shape change was key.  They designed a room that was a parallelogram instead of a square or rectangle.  A parallelogram-shaped hospital room!  What innovation!  This creative thinking allows for three sections of the room.  One for family by the window, one for the patient in the center with easy access to a toilet and a view of a media wall, and one for the staff which includes a separate sink, computer, and medicine supply cabinet refillable from the hall.  Each of these changes, based on a simple little shift of some straight lines, minimizes patient exposure, allows for more timely deliveries, gives the patient more control over their surroundings, and creates an easier repertoire for the customer and his or her doctors.

It is small innovation such as this that needs to be considered to completely change the experience.  Structured employee training can quell bigger experience issues but nothing can beat feeling as comfortable as possible in your surroundings.


Hospital Rooms Part 2: Private or Shared Rooms?

By Ali

I’ll reiterate that I have not personally needed a hospital room for many years.  However, due to recent events, I have found myself in multiple hospital rooms over the past three weeks.  As a result, this topic has been thrust into the forefront of my mind in a very personal and, at the same time, analytical way.  I had hoped to do some primary research on this topic and though I wish the situation had been different, I am thrilled to have experienced significantly more positives than negatives.

Hospital rooms are intense.  There are wall monitors, computers, cords upon endless cords, beeps, drapes, sinks, a bathroom, doctors, nurses, specialists, visiting family and friends, the patient’s bed, a visitor’s seat, at times a visitor’s bed, trays on wheels, and the patient.  All of this is in a private room.  In a shared room you can double it.  In the US, there has been a push for more private rooms.  At a glance, I can see why.

Patients have more privacy in their own room.  They get better sleep.  Nurses and other doctors still have to check in on the patient and rouse them from sleep from time to time, however settling back into slumber is infinitely easier when your roommate isn’t watching late night television at an abhorrent volume level.  There are proven lower infection rates which make for shorter stays and better results.  Overall, patients feel they have more dignity and are just plain happier people.

Private rooms do cost more to build, however the ROI over a short period of time due to increased capacity utilization is positive.  Think about it.  Shared rooms have two beds which require a bit of a roommate puzzle.  Age, gender, inpatient reason and other issues can prevent certain patients from staying in a room together.  As a result, some hospitals only utilize 75% of their beds.  Hospitals have a 95% occupancy rate for private rooms.  Clearly this is a positive for hospitals with enough staff to effectively support these patients.

Shared rooms, however, still hold a benefit for some. Consider the older patient, in for a longer stay with no local family.  Sure, sons, daughters, and grandchildren might visit at the outset, but some have to get back to their own lives.  This leaves Grandpa or Dad alone in a private room, staring out a window while he is treated.  A shared room offers the opportunity for bonding and healing, if paired correctly.  Private rooms might not be the only answer – roommate criteria might also be a consideration.

Sources: ,

Hospital Rooms Part I: Admitting A Change is Needed

By Ali

The last time I was in a hospital room as a patient was when I was roughly 3 years old.  I had a couple surgeries to put tubes in my non-hearing ears (they hear fine now though my family might disagree – I call it selective hearing).  I recall little except for the fact that a mask was placed over my face, a stuffed elephant with a bandage around his head greeted me in recovery and never left my side, and I got two, count ‘em TWO orange double sticked popsicles post-op.  I’ve been informed the elephant didn’t really exist.  This leads me to believe that pain meds work just as well on a 3 year old.

That anecdote aside, hospital rooms and the greater hospital experience (popsicles included) are becoming quite a relevant topic.  Traditionally, hospitals were paid by Medicare and Private Insurers in a fee-for-service model.  Each procedure a hospital performs is paid for.  Makes sense.  More procedures, more money.  Efficiency is key.  As a result, create a hospital that is optimal for medical staff to turn over patients right and left.  Of course consider safety.  But make sure those considerations keep patient turnover up.

As you’d imagine, this opens up two flaws.  Whether or not procedures are necessary has become a mere talking point versus a valid consideration point.  If a hospital can rack up a procedure total, why not?  Secondly, if a hospital were to unintentionally create a situation in which a patient contracted an infection at the hospital and had to undergo further procedures, these are also paid for by insurance.  Procedure.  Paycheck.  And so on.  As a result of our shifting healthcare laws, however, this model is on the out.

(I feel compelled to mention at this point that obviously I put every faith in my local hospitals – especially in light of recent events – and those hospitals that treat the ones I know and love.  My cavalier attitude is merely aimed at a juxtaposition versus those that work so hard every day in our hospitals.)

As a potential patient at any fateful moment, I am personally thrilled.  The new model is flat-fee payments for the duration of care.  Meaning if you do have an operation, recover in the hospital, and contract an infection that requires a second operation, the end-to-end care that you have received is viewed as ONE procedure.  Not two separate procedures.  Even better, because this infection was acquired as a result of your hospital stay, Medicare will penalize that hospital with a fee.  On the flip side, if your end-to-end care is fabulous and you are chosen to provide positive feedback on your stay, Medicare will pay a bonus to hospitals providing effective and high-quality treatment.

This, in turn, provides hospitals with a decision to make.  Do we stay as we are, incur annual penalty fees (that will rack up with exponential percentage increases over the next several years) or do we change who we are?  Do we become not just a hospital, but a truly unique, special, and nurturing customer experience for those that we help?  In my personal opinion, the answer is clear.  It starts with the people; the patients – those that are no longer simply patients with procedures on a white board, but actual customers.


Auto Insurance Customers: Not Segmented by Information or Purchase Channel

by Amy

In McKinsey’s Beyond Price: The Rise of Customer-Centric Marketing in Insurance, consultants identify a rise in customer-centric marketing for auto insurance. The most interesting piece of this article, to me, is that insurance customers are using multiple channels to gather information about insurance policies and brands, and are also exposed to different brands though these channels. Additionally, consumers are using different channels to gather information at the same step in the insurance shopping process. McKinsey identifies that customers may consult up to three channels between digital, online and personal (in office or phone) interactions to find the same information.

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This notion of digital channels playing an equally important role in customer marketing is interesting when paired with the fact that this behavior is consistent across customer segments. This leads to the conclusion that the information channel utilized does not define customers by segment. Rather, these segments are defined by the value these segmented customers place on various attributes, which presents a unique challenge to insurance companies during acquisition marketing and sales. This also highlights that Esurance and Allstate customers might not be all that different.

Each channel and touch point a consumer experiences must deliver a consistent brand message and deliver on brand promises, based on the attributes that each customer segment values. It’s of the utmost importance that insurance companies align messaging, as well as the delivery of those messages. Online systems used to generate policy pricing requests must mimic call center personnel generating the same policy proposal, as customers may seek that information in both places. This will impact the amount of flexibility allowed to personnel responsible for customer interactions, and also place a lot of pressure on maintaining consistency across each channel. Messaging must be aligned across all pieces of the customer journey  map, utilizing internal cross-functional communication and cooperation.

The cross-functional nature of acquisition marketing initiatives can allow for insurance companies to capture efficiencies by allocating the management of this messaging to a customer experience manager or similar position, rather then depending on siloed management in each functional group.

A Tale of Two Business Models: Online and Interpersonal

by Amy

There seem to be two prevalent business models in direct to consumer auto insurance: through a company sales agent (via phone or in person), or through an online platform. These two models appeal to a wide array of customers, as customers place difference values on varying aspects and touchpoints throughout the insurance purchase process. For instance, some customers seek an interpersonal connection or conversation with a real live sales agent on the phone or in a physical office. Others may hope to complete the entire process online and quickly (“15 minutes or less!”).

While these two methods of customer acquisition seem at odds with each other, Allstates’s acquisition of Esurance indicates that both methods are necessary to appeal to a broader array of auto insurance shoppers. Allstate bought 4% of the online, direct to consumer insurance market, rather than building the online platform as several competitors have done. This move leapfrogged several competitors in the space, allowing Allstate to have an immediate presence in that market.

While this seems to be a sounds business decision (looking only at growth and not the particulars of this business deal) it also presents some operational issues. The halo effect of “Esurance an Allstate company” lends immediate credibility to the online site. However, there is also the possibility of a reverse halo effect if the service provided does not live up to the expectations that Allstate has elicited in the past. Lucky for Allstate, with Esurance’s policy growth at over 35% for the first quarter, this appears to be a synergistic union.

Auto Insurance Customer Acquisition

by Amy

In deciding what industry to focus on for the duration of this semester, I lit upon the insurance industry, specifically auto insurance. Insurance fascinates me for several reasons, the most prevalent being that this is a service consumers purchase in the hopes of never having to actually use it. In most cases of auto insurance use, the customer is under duress. Therefore, the delivery of the service and the customer experience is of the utmost importance in the claims process. A satisfied customer might stay with the company forever after a single great experience. A bad experience, however, may well lead to a permanent customer defection. Even more interesting to me than the claims process, however, is the customer acquisition process.

In general, customers do not have the opportunity to try and insurance company’s service before committing to a policy. Thus, how the customer experiences the insurance purchasing process greatly impacts a customer’s decision to purchase. Insurance companies must take great care to design the pre- and during purchase process to emulate the level of service the customer can expect in the event that an insurance claim is made. I am planning to explore HOW insurance companies may design these processes to facilitate customer acquisition.

The Homerun

by Amy

Today I had a customer experience that is worth noting, as efficient and customer-centric operating/payment systems will (I believe) result in higher revenues for the town of Brookline, Massachusetts.


Generally, I pull up to a parking meter, calculate my estimated need for the spot and cross reference that with the number of quarters I have available. From there, I judge the amount of risk I am willing to assume – how often I judge the meters to be monitored, the likelihood that I will overstay my meter time, the amount I assume I will have to pay if I do receive a ticket. I subsequently check the time compulsively, counting down the minutes until the meter expires or I have to reload, through dinner, an appointment, a job interview, etc. It can be nerve wracking, but is just a way of life in the Boston area.

Yesterday, I paid for my parking meter with my credit card, rather than with the quarters I so diligently collect and stash in my car. I paid the maximum amount ($2 for 2 hours), even though I only anticipated parking for an hour. No risk assessment, just a negligible $2 spent and seemingly all the time in the world in the parking spot. What a luxury.


So why did I feel like I had won the lottery, knowingly and gladly overpaying for the use of this parking spot? For me, it came down to the perception of value, AND the perception of value of the payment method. Two dollars on a credit card is a drop in the bucket, and hardly nudges the needle. However, eight quarters would put a serious dent in my stash of parking change. I couldn’t possibly collect eight quarters in a day, so spending eight quarters in a day seems beyond extravagant. But $2…well, I don’t think twice about spending $2.

So, you say, I overpaid by $1. Not exactly millions. If I had not overpaid and overstayed, Brookline might have earned an additional $25 from me by issuing a parking ticket. But the cost of that ticket to Brookline renders the dollar amount almost null. Brookline employs the meter maid, buys the parking ticket books, pays the data entry employees, incurs processing costs, and potentially deploys man hours to track me down if I don’t send in my payment. That starts to add up. A dollar less credit card fees sounds like free money for the bottom line compared to issuing a ticket.

So kudos to you, Brookline! I will forever overpay for my parking spots since you offer the payment system that provides the most value to me, your customer. I will save my quarters and continue to underpay the meters in Newton. And I will visit Brookline more often.