Don’t Let ROI Alone Drive Customer Communications Technologies Choices

Success in the Age of the Customer will require a new mindset, one in which consideration is given to technology investments in terms of “return on maintenance” (ROM).

 

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Insurance industry communication experts face unprecedented pressure to ensure they are meeting rapidly evolving customer expectations. According to Forrester Research, success for CIOs and CMOs in the “Age of the Customer” will require “embracing the technologies that make customer obsession real and actionable.” In the researcher’s view, companies in every industry, including insurance, must systematically re-orient every element of their organization toward customer experience in order to succeed. However, insurers need to re-evaluate how they think about the economic rationale for their customer communications investments. Once justified from a return on investment (ROI) viewpoint, customer communications systems often avoid having to demonstrate their continuing value as they are looked upon simply as existing infrastructure or assets. Ongoing maintenance costs are mistakenly ignored.

Getting a handle on the complete cost of your systems

In most organizations, there are many moving parts that must be optimized to deliver the excellent customer experience the marketplace demands, making it a difficult task. Those responsible for customer communications typically have to work with—or around—an infrastructure full of technology acquired for particular projects or channels. Once justified from a return-on-investment (ROI) viewpoint, customer communications systems often avoid having to demonstrate their continuing value as they are looked upon simply as existing infrastructure or assets. Ongoing maintenance costs are mistakenly ignored.

The problem is that software maintenance expenses associated with these systems are often considered “support costs,” rather than as a critical component in achieving exceptional customer experience. However, these expenses and the associated “support” that they deliver can have a significant impact on the value of the technology investment when it comes to improving customer experience. Success in the Age of the Customer will require a new mindset, one in which consideration is given to technology maintenance investments in terms of “return on maintenance” (ROM).

When evaluating customer communications technologies, ROM is not a commonly used key performance indicator (KPI), unlike ROI. The way to think about ROM is to compare the amount of benefits you receive from a software solution to the amount of money you pay over time for maintenance services. The truth is that many technology providers will find this notion unsettling because they aren’t delivering the ROM their clients should expect.

Typically, an industry average for software maintenance expense is about 20 percent per year of the original purchase price. Assuming that average, after five years you have paid an amount equal to your initial purchase price for maintenance, which generally comes with upgrades and support. In the initial 24 months, your organization will likely remain pleased with the software’s operation. The value of maintenance during this period is largely provided by support. Once your system is up and running, your team will learn the application’s boundaries and you will encounter few surprises. In other words, the ROM is high for the first two years, when uptime and time to value are the benchmarks.

However, when this initial two year period is over, maintaining a high ROM will require the technology provider to deliver increased capabilities that provide continued benefits to your business. Long upgrade cycles (more than 24 months), failing to offer innovative features as part of upgrades and investment in new product innovation rather than upgrades are all ways that technology providers fail to deliver ROM. The latter is the worst outcome for your business, because you are paying to develop a solution you will have to pay for again to use.

In contrast, a high ROM is provided when technology providers reinvest in the continuous improvement of their solution at market speed, delivering the incremental value of innovations that enhance capabilities without requiring investment in new solutions.

Effective assessment

Those charged with developing strategies that can deliver holistic communications with multichannel capabilities for their insurance organization are very likely to uncover multiple pieces of redundant technology. Giving careful consideration to the ROM of each of them may very well lead to beneficial software consolidation that can result in not only gaining innovation to meet the speed and scale needed improve an organization’s ability to communicate, but also reducing long-term operating costs.

If you are responsible for one or more customer touch points, you need to be ready to make the case for strong and steady ROM from your technology providers. Talking about return on maintenance moves the discussion beyond return on investment, or simply the cost of support, and will help ensure your solution providers are committed to delivering innovation over a long period of time.

It makes good sense to talk with your prospective and existing technology partners about how much investment will be dedicated towards new functions for existing products. You should gain a clear picture of how much this investment represents in terms of a percentage of innovation. Inquire about the number of staff dedicated to support versus innovation-focused engineers. Questions like these will help ensure that you receive the high ROM from your customer communication management solutions that will enhance innovation while reducing overall costs.

Scott Draeger // Scott Draeger is vice president at GMC Software Technology, and has been a leader in the customer experience realm for nearly 20 years.  Draeger has helped household-name companies in 20 countries to strengthen customer relationships by improving communications. He is a speaker, published author and recognized authority on the topic.  Reach him at [email protected] or connect with him on Twitter @scottdraeger.

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