AHL Insurance Company: Background, Referral Incentive Program, Problems, And Solutions

critical thinking and problem solving skills in relating services marketing theory to a real-world situation in which a problem(s) needs to be solved for the service organisation in the case.  You are encourage to take a service consultant approach in identifying the problem(s) and providing actionable recommendations to the service organisation on how the problem(s) can be rectified and/or managed. We need to follow up the file that i mentioned below. We are gonna write about the managing word of mouth:The Referral incentive program that backfired.

Background of AHL Insurance Company

The AHL Insurance Company is a well-established insurance company operating in the capital of Thua Thien Hu province in Vietnam. The company has been in existence for several years now and recently introduced a referral incentive program in order to expand its customer base. The referral incentive program was a brainwave of the company’s sales and promotion manager, Ngyuen Trung Hung, who believed firmly that the program would successfully help the company in building its list of customers, since it had done the same for banking and mobile companies. The referral program backfired however, with even long term clients and customers having recommended very few of the company’s insurance policies and programs to friends, acquaintances or people known to them. This report provides a background history of the company and identifies the problems that arose while implementing the referral incentive program. The report identifies and evaluates possible solutions to the problems and recommends a number of measures that could be introduced to make this referral incentive program a success.

The AHL Insurance Company came into existence in the year 1985 and it grew from very modest beginnings. The company’s owner was himself an insurance salesman who took the decision to start his own enterprise one day, believing firmly while doing so, that the insurance market was a niche market that contained within it a good deal of untapped potential. The company has since then grown in leaps and bounds and has managed to expand its product lines and its presence in the insurance market of Vietnam in general by continuously adapting to the changing needs and requirements of customers. Today, the company has as many as thirty thousand independent insurance agents working for it in Vietnam. The company aims at the provision of quality services and in building long term relationships with its customers that are based on integrity and mutual trust. It hopes to be the first and foremost choice for its customers where insurance products and services are concerned. The most important strength of the AHL Company’s insurance products is the diverse range of products made available by the company. Customer services provided by the AHL Insurance Company are also of a top notch standard with insurance agents being fully dedicated to meeting the requirements of its customers at any and every time of the year. The company spends a considerable amount of money in training all of its employees and insurance agents, and it also encourages its customers to expedite insurance claims for disbursement as and when they feel the urgency or the need to do so.

Referral Incentive Program

The referral incentive program of the AHL Insurance Company was introduced by Nguyen Trung Hung. He is the sales and promotions manager of the company. The objective of the referral incentive program was to expand the customer base of the company. He believed that the referral incentive program would work wonders in developing the company’s customer base owing to how intensely competitive the insurance industry is in Vietnam and also because of the fact that similar programs produced very good results for banking and mobile companies as far as expanding and developing client base was concerned. The AHL Insurance Company decided to carry out a three month field test prior to launching the referral incentive program on a large scale. The three month field test did not go well at all with the results of the field test being much lower than what the company’s expectations had been from it. While referrals had been made, these had been made from the low yield segments of the company’s customer base. The customers who generated higher revenue for the company had initiated very few recommendations while the referral trial period was in progress.

Upon analyzing the referral incentive program by reading the mentioned case study it appears that the first mistake made when introducing such a program was to make the points system a transparent one. Referrers could actually see how many points they would accumulate if they recommended or referred insurance policies of the AHL insurance company to friends and associates. It is more than likely that many of the high revenue customers were not satisfied with the number of points that were being awarded to them for referring friends to buy the AHL Insurance Company’s policies and programs, and in lieu of which they could receive prizes and gifts offered by the company. Also, the results of the in depth personal interviews carried out with AHL’s high revenue customers it seems more than evident, that these customers were not happy with the gifts that were being awarded to them for referral. Some actually alluded to these gifts as junk. Others who were interviewed appeared not to be happy with the idea of pushing their friends and associates to buy products that they may not be interested in, in the first place. A few customers did not feel  that the gifts that were being given were worth the time and energy that would be spent in referring the insurance products and services offered by the AHL Insurance Company to people known to them. Hence the problem lies in the reward system being transparent, and in the quality of rewards or incentives offered to customers not being good enough. That is why the program failed.

Problem Identification

One well-known solution that maybe put into place immediately in order to make the referral incentive program more attractive for customers is, to not keep the points system transparent anymore (Arora et al., 2018). Customers do not have to know how many reward points that they will be likely to accumulate if they recommend insurance products to friends and associates. Berman (2016), states that if they do know and are not satisfied with the figure, then they will not want to recommend the products to their friends. Hence, it is best that they do not get to know how many points they are awarded for every referral they make, in the first place. As argued by Chica and Rand (2017), another possible solution is to of course make the rewards given to customers far more appealing in quality. The gifts and rewards given to customers should be those that have excellent market value or brand value and should not be those that are viewed by customers as junk (Haenlein & Libai, 2017).

The following recommendations ought to be implemented in order to make the referral incentive program of the AHL Insurance Company a success –

• Mondal et al. (2017), believe that it is important to introduce grand prize money or cash awards. Instead of just offering a bouquet of flowers or gift cards to those who refer insurance products and services, the AHL Insurance Company should introduce cash prizes that may be won by customers depending on the number of referrals they make.
• Orsingher and Wirtz (2018), state that the reward points must be kept discreet at all times. Customers should not know about how many reward points they earn when they refer the insurance services and products.
• As argued by Lobel et al. (2016), customers should be encouraged to make extensive use of social media for the referral incentive program. By doing so, they can reach out to a larger number of people in a limited period of time and while not spending any energy or resource at the same time.
• Yang and Debo (2018), argue that the target customer base needs to be clearly identified if the referral program is to be a success. In the view of Castilla and Fernandez (2017), the company should be specific about the age group and category of customers that it wants to reach out to for the sale of its products and services and encourage its high revenue as well as low revenue customers to refer such products and services to the same.

Conclusion: 

Thus, by not keeping the rewards allocation system as transparent as it is, by opting for the use of social media for customer referrals and by offering high quality prizes and cash prizes as incentives, the AHL Insurance Company can certainly make a huge success of its referral incentive program and develop its customer base upon doing so.

References:

Arora, M., Nagdev, K., Singh, R. P., & Rajesh, A. (2018). Educing the referral power to tap potential customer segments–a study in Indian perspective. International Journal of Public Sector Performance Management, 4(2), 133-145.

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

Castilla, E. J., & Fernandez, R. M. (2017). How much is that network worth? Social capital in employee referral networks. In Social Capital (pp. 85-104). Routledge.

Chica, M., & Rand, W. (2017). Building agent-based decision support systems for word-of-mouth programs: a freemium application. Journal of Marketing Research, 54(5), 752-767.

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

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

Mondal, S., Dhamal, S., & Narahari, Y. (2017). Two-Phase Influence Maximization in Social Networks with Seed Nodes and Referral Incentives. In ICWSM (pp. 620-623).

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

Yang, L., & Debo, L. (2018). Referral Priority Program: Leveraging Social Ties via Operational Incentives. Management Science.