Key Takeaways:
- Drivers who switch insurance companies bring higher risk than "equivalent own" customers.
- Only 50 percent of the risk gap between switchers and non-switchers can be accounted by the difference in observable drivers characteristics
- Even drivers with excellent driving records that switch insurers carry higher risk.
CATONSVILLE, MD, July 15, 2019 – Researchers from the United States published new research in the INFORMS journal Marketing Science (Editor's note: The source of this research is INFORMS), which sheds light on just how much it may take for the companies to profitably "steal" customers from their competitors. Frequently, the managers focus on customer acquisition cost when deciding if to poach customers from the competitor. To that extent, the managers may downplay the other factors, such as future cost to serve of poached customers. The researchers demonstrate that switchers can generate as much as 21 percent higher cost to serve as equivalent own customers. This brings an important caveat when designing marketing strategy.
The study to be published in the July edition of the INFORMS journal Marketing Science is titled "Skimming from the Bottom: Empirical Evidence of Adverse Selection When Poaching Customers," and is authored by Przemyslaw Jeziorski from the University of California at Berkeley, Elena Krasnokutskaya from Johns Hopkins University, and Olivia Ceccarini.
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Ashley Smith
INFORMS
Catonsville MD
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