Here’s a provocative statement – today’s most powerful growth engine is Users – people who interact with your company through digital media and technology, even if they’ve never bought anything from your brand.
Customers are people that derive value from your company, but they’re paying you for it, whereas Users are anyone that’s interacting with your product, regularly or intermittently, but they don’t pay you anything for it – they don’t contribute to your revenue in any way. Many examples exist including Spotify, Facebook, Google, Skype, TripAdvisor, Money Savings Expert, among others.
Why do this? By focusing on Users, according to Aaron Shapiro in his book ‘Users not Customers,’ companies leapfrog past the transactional stage to focus on what a person needs and becoming the solution to that need in the person’s life. If people think of your product as the best tool for meeting their needs, then they must have it on hand to use. Also, the theory is that, if that can become indispensable to Users, they will become Customers in some way and revenue and profit will follow. With an ever-increasing number of people buying their insurance through digital channels, it’s possible that unless a value is added, people will choose to buy based solely on price – it becomes a commodity. User community development can help to de-commoditize insurance lines.
How can insurers develop large User bases with the thought that Customers will result?
There seem to be three different business models. Let’s call these; Freemium, Marketplace, and Community-based.
Freemium
The Freemium model works when you provide the basic functionalities of a product for free. This model attracts a large user base if the free offer is compelling. The premium version(s) must be even more compelling so that users are willing to pay for it and so some will become paying customers. An example is Dropbox with 500M Users, but only 2.4% of those pay for their service at $450 per user per annum. Slack has 4.5M users and 38% pay for the service.
Could there be a Freemium basic insurance offer? Maybe term insurance that is free, e.g. £10,000 12 months free life insurance for the under 40s with no chronic health conditions?
Marketplace
The Marketplace model facilitates indirect or direct interactions between two or more parties that are affiliated to the platform and the company running the model gains revenue by charging commission on any transactions that occur. An example is TripAdvisor, who, having gained a large user base with ratings, are providing holiday and car rental options through the platform. Another is Open Table who display restaurant information and enable bookings.
Price comparison sites are obvious examples in insurance.
Community-based
The Community-based model builds a community around a shared interest, or passion, or profession. Their revenue is then created by selling products or service that are intended to give value specifically to that community. An example is Mumsnet – a community for parenting advice and health questions. They then have shopping links, jobs, etc.
Various insurers have knowledge centers online. An example is Direct Lines for Business whose center can help small business owners and landlords answer their business management questions. However, it has no real engagement with that community, e.g. a forum and it is not the primary purpose of the site.
Business-model commonalities
What are the common traits of these models and what advantages could they create for an insurer? A list of common characteristics would include; emotional engagement, motivation, shared interest, a sharing of experience, frictionless involvement, generated content, activity and participation, rich data about User preferences, commercial angles which often come later, a captured audience, long-term thinking, and a communication channel.
These traits offer numerous apparent advantages to an insurer, but insurers need to understand that the focus is growing a User base not selling insurance to Customers. This behavior can be challenging due to a short-term focus on quarterly results. It is a different world.
