Is it better for Naked Insurance to focus on acquiring new customers or increasing retention of current ones?

Introduction

The trade-off question at hand is whether Naked Insurance should focus on acquiring new customers or increasing retention of current ones. This scenario involves balancing growth strategies for an insurance company, weighing the benefits of expanding the customer base against strengthening relationships with existing clients. In my response, I'll analyze the context, identify key metrics, design an experiment, and provide a strategic recommendation.

Step 1

Clarifying Questions (3 minutes)

• Looking at Naked Insurance's current market position, I'm thinking they might be in a growth phase. Could you give me an idea of their current market share and how saturated their target market is?

Why it matters: Helps determine if there's more room for new customer acquisition or if retention should be the focus. Expected answer: Moderate market share with room for growth. Impact on approach: Would influence the balance between acquisition and retention strategies.

• Considering the insurance industry's typical customer lifecycle, I'm curious about Naked Insurance's average customer lifetime value (LTV) and customer acquisition cost (CAC). Can you share any insights on these metrics?

Why it matters: Helps evaluate the relative value of new vs. existing customers. Expected answer: LTV significantly higher than CAC, but exact figures unknown. Impact on approach: Would inform resource allocation between acquisition and retention efforts.

• Regarding Naked Insurance's product offerings, I'm wondering about their diversity and cross-selling potential. Could you tell me about the range of insurance products they offer and how successful they've been in selling multiple products to individual customers?

Why it matters: Influences the potential value of focusing on existing customer relationships. Expected answer: Multiple insurance products with moderate cross-selling success. Impact on approach: Would affect strategies for increasing customer value through retention.

• Thinking about Naked Insurance's technological capabilities, I'm curious about their current customer relationship management (CRM) systems. How sophisticated are their tools for tracking customer behavior and personalizing interactions?

Why it matters: Affects the feasibility and potential impact of retention strategies. Expected answer: Moderately advanced CRM system with room for improvement. Impact on approach: Would influence the types of retention strategies we could implement effectively.

• Considering the competitive landscape, I'm interested in understanding how Naked Insurance's customer acquisition and retention rates compare to industry benchmarks. Do we have any data on this?

Why it matters: Helps identify areas of strength or weakness relative to competitors. Expected answer: Acquisition rates slightly above average, retention rates near industry standard. Impact on approach: Would guide where to focus efforts for maximum competitive advantage.