Case Study New York Life S E Business And Agents Live Happily Ever After

Making Leaders Successful Every Day

February 20, 2009

Case Study: New York Life’s eBusiness And Agents Live Happily Ever Afterby Chad Mitchellfor eBusiness & Channel Strategy Professionals

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For eBusiness & Channel Strategy ProfessionalsIncludes data from Consumer Technographics®

ExECutivE SuMMArYIn 2001, New York Life Insurance’s Web site, which was intended for communication, education, and service, was not meeting its customers’ or agents’ needs. Web analytics showed that customers were trying to use the Web site to connect with agents, yet agents were not receiving quality leads. New York Life crafted a new eBusiness strategy that focused entirely on its agent sales force to “sell the agent appointment,” generating quality leads at reasonable costs. Along the way, the firm developed a stable of eBusiness best practices around eBusiness strategy, agent adoption, marketing performance, and measurement. Above all, New York Life has proved that the eBusiness and agent channels can work together in a multichannel world.

tABLE oF CoNtENtSSituation: New York Life’s Web Site Wasn’t Helping Customers Or Agents

New York Life’s New eBusiness Strategy: Selling The Agent Appointment

Best Practice: Align eBusiness With overall Corporate Strategy

Best Practice: improve Lead Conversion With A Blend of Search And Display Advertising

Best Practice: Promote the value of eBusiness internally

Best Practice: use Measurement And Analytics to Fuel Lead-Generation Performance

Results: New York Life Achieves Success Through Multichannel Collaboration

Next Steps: Scan The Horizon For Emerging Opportunities

WHAt it MEANS

The Lessons Learned From New York Life

NotES & rESourCESForrester interviewed Ken Hittel, vice president of eBusiness for New York Life insurance.

Related Research Documents“trends 2009: insurance eBusiness And Channel Strategy”January 9, 2009

“How to Become An eBusiness Powerhouse” September 8, 2008

“is Your eBusiness team ready For Prime time?”August 21, 2008

February 20, 2009

Case Study: New York Life’s eBusiness And Agents Live Happily Ever AfterA revamped eBusiness Strategy Scores By Selling the Agent Appointmentthis is the second document in the “Best Practices in Multichannel Marketing, Sales, and Service” series.

by Chad Mitchellwith Benjamin Ensor and Courtney tincher

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http://www.forrester.com/go?docid=47736&src=48214pdf




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Case Study: New York Life’s eBusiness And Agents Live Happily Ever After For eBusiness & Channel Strategy Professionals

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SiTuATiON: NEW YORk LiFE’S WEB SiTE WASN’T HELpiNg CuSTOMERS OR AgENTS

As the oldest and largest US mutual life insurer, New York Life Insurance (New York Life) has been the envy of its competitors for the past decade.1 The company ranked No. 1 in customer loyalty for five consecutive years and won several eBusiness awards.2 We found that New York Life customers are very loyal and more likely to buy future products, versus policyholders from other life insurers (see Figure 1).

Despite these accolades, the company’s eBusiness strategy was not effectively serving customers or supporting the company’s lifeblood — the 8,000 career agents who form its primary distribution channel.3 We spoke with Ken Hittel, vice president of eBusiness for New York Life, to understand the firm’s eBusiness strategy. Hittel told us that New York Life’s site was originally used for customer communication, education, and service. However, analysis of Web site behavioral data revealed a problem: New York Life’s eBusiness strategy was broken because the Web site did not:

· Meet customers’ needs. Customers and prospects wanted to use the Web site to schedule a sales appointment with an agent, but the Web site was not built to generate leads. Content was geared toward education and service rather than connecting customers with agents.4

· Support agents’ sales efforts. Forrester has found that insurers rank prospecting as the most important service an agent provides, but many firms question their agents’ prospecting skills.5 Hittel echoes this sentiment, saying many agents regard prospecting as a less desirable aspect of their job. Contrary to the clichéd image of the persistent insurance agent, many agents take the first “no” from a customer as final and throw the lead away.

Figure 1 New York Life’s Customers Are More Likely to Buy Again, versus Competitors’ Customers

Source: Forrester Research, Inc. 48214

Base: US adults who consider each firm their primary insurer

Source: North American Technographics® Retail, Travel, Customer Experience, and Financial Services Benchmark Survey, Q3 2008

Among US consumers who consider each firm their primary insurer, the percentage who are likely to:

Purchase a future product from this firm

Switch their primary insurer

51%

2%

74%

5%

57%

6%

65%

5%

NY Life Prudential The Hartford MetLife

© 2009, Forrester research, inc. reproduction Prohibited February 20, 2009


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NEW YORk LiFE’S NEW eBuSiNESS STRATEgY: SELLiNg THE AgENT AppOiNTMENT

In 2001, New York Life began a four-year eBusiness transformation to resolve its Web site dilemma. The insurer’s new eBusiness strategy uses the Web to “sell the agent appointment” (see Figure 2). New York Life does not sell products online. Instead, it lets customers connect with agents while filling the agents’ sales pipeline with qualified leads. Our data mirrors New York Life’s new eBusiness strategy: Life insurance shoppers prefer the Web and agent (in-person) channels for product research (see Figure 3). Hittel says that “if an agent can get the appointment, he or she will sell. In a nutshell, that’s why we see our job as selling the appointment.”

New York Life’s eBusiness transformation is a success story filled with best practices. They include aligning eBusiness strategy with overall corporate strategy, improving lead conversion with a blend of search and display advertising, promoting the value of eBusiness internally, and using measurement and analytics to fuel lead-generation performance.

Figure 2 New York Life insurance’s No. 1 Site Goal: Selling the Agent Appointment




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Figure 3 New York Life insurance’s Site Allows research through the two Most Popular Channels


Base: US adults who researched life insurance in the past year

Source: North American Technographics® Benchmark Survey, 2008

Percentage of life insurance researchers who used each channel:

Branch/in-person

Internet

Mail

Phone

45%

42%

23%

20%

Best practice: Align eBusiness With Overall Corporate Strategy

A common challenge for eBusiness and channel strategy executives is solving the puzzle of successfully integrating online and offline businesses.6 New York Life faced this problem as the firm attempted to use the Web to support its agents. Hittel realized that the investment in a new eBusiness strategy meant a complete eBusiness transformation to use New York Life’s site as a lead generator for agents. Throughout this process, his eBusiness team executed several best practices in developing a new eBusiness strategy such as:

· Asking, is this the right strategy? Hittel had an outside fear, as any eBusiness executive does, that he may have guessed completely wrong about using the Web to support agents. At the time, John Patrick from IBM said the Web would disintermediate and disenfranchise agents. Hittel gambled and believed the Web could be used to reintermediate the agent with targeted prospects. New York Life vetted the strategy with third-party data from Forrester and insurance associations like LIMRA International, finally determining that it was worth the investment.

· Evangelizing eBusiness’ value and mission to all stakeholders. Hittel views his eBusiness organization as “half evangelists, half enablers.” He had executive buy-in from the chairman, yet there was minimal awareness of the eBusiness organization across the company. The success of the new eBusiness strategy relied heavily on adoption from the agent force and other lines of business. Hittel’s team evangelized how the Internet was growing and becoming more important in consumers’ lives.7 His team also shared with stakeholders how the Web was becoming an enabler for what people wanted to do. “People using the Internet are interested in reading about survivorship whole life — not the millions interested in reading about Britney Spears, but . . . a segment interested in reading the product collateral,” Hittel says.



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· Developing a strong relationship with IT. The eBusiness department led by Hittel was an important customer of IT. He says the relationship with IT was “extremely cordial” from day one, yet he invested a substantial amount of time and attention to further strengthen the bond. Hittel viewed the eBusiness transformation as an opportunity to let New York Life’s IT

“developers do what they love to do — develop new things.” He shared the end goal with the developers to turn newyorklife.com into a major lead-generation machine.

· Evaluating the build-versus-buy decision. Hittel initially evaluated buying off-the-shelf systems but changed his mind. He chose to build the system internally because he was concerned about connecting a “hodgepodge of outside systems that didn’t integrate.” Hittel moved forward with the strategy to build and integrate an ad management system to serve New York Life’s own advertisements, a campaign management system, an online customer service tool, a customer survey platform, and a lead distribution system. The company developed all of these elements on the backbone of the existing Vignette content management system.

Best practice: improve Lead Conversion With A Blend Of Search And Display Advertising

Targeted online marketing improves sales conversion and retention downstream.8 New York Life implements a variety of search and display advertising tactics to improve lead conversion. New York Life has:

· Found the right blend of search. New York Life experiments regularly with looking for the right balance of search engine optimization (SEO) and search engine marketing (SEM). The majority of New York Life’s SEM is pay-per-click advertising programs conducted through Google, although it complements that with programs through Yahoo! and MSN. “We also are experimenting with pay per lead and coregistration with about a half-dozen vendors. We improve conversion through continual iteration of our SEO campaigns [while] fulfilling SEO with appropriate, robust, persuasive content,” says Hittel.

· Focused display advertising on branding. New York Life’s display advertising is measured using traditional branding metrics including favorability, intent to purchase, and aided and unaided recall rather than lead-generation metrics. “We ran a month-long campaign earlier in 2008 on realage.com combining branding display ads and demographically targeted lead-generation email to test whether there [was] any lift to lead-generation results when combined with branding. And the campaign was very successful.” Hittel believes that these hybrid campaigns are more labor-intensive and can require coordination among multiple departments leading to an increase in overall cost per lead.



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· Collected the bare essentials from customers. New York Life tested several lead-generation forms, and conversion metrics proved that less was more. The firm captures the customer’s name, address, phone number, and birth date as well as the best time to call to generate a lead. The firm doesn’t collect the customer’s email address and asks for the birth date only optionally (see Figure 4). “We gave up asking for email several years ago when we saw it depressing our lead rate,” says Hittel. “There’s real value in being pristinely clear to prospects that you will be talking, not emailing, with a real live insurance agent.”9 Customers can enter their email address and sign up for a newsletter, but it is secondary in the lead-generation form.

Figure 4 Consumers Enter Minimal Personal Data, Leading to Higher Conversion




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Best practice: promote The Value Of eBusiness internally

Our data shows that the agent channel maintains the highest conversion rate for life insurance applications, versus the Web, phone, or mail.10 New York Life has 8,000 US full-time career (captive) agents. Every agent is an independent contractor and is not considered a New York Life employee. New York Life does not sell online or through call center agents, so it was critical to position the Web as the primary lead-generation channel for agents. Captive agent sales forces are homogenous, so implementing a corporate Internet lead-generation system was easier than it would have been for a firm with an independent agent force.11 For the new strategy to succeed, Hittel and his team had to persuade the agents to follow up on the leads generated online. To achieve that, they:

· Gave agents the same commission rates for online leads. New York Life’s agent program adoption and lead conversion rates are extremely high because New York Life’s agents receive full commission on whatever they sell, regardless of the lead source. This simplifies commission plans and calculation of cost-per-lead metrics. We believe that this strategy makes sense for life insurers like New York Life that do not sell insurance products online. Commission rate transparency and differential pricing strategies are more challenging for property and casualty insurers that quote and sell online because the Web is then a sales channel that competes directly with agents.

· Promoted the value of online leads to the agents. The eBusiness team has implemented several lead-promotion strategies to improve agent adoption, including promotion on the agency portal, videos on how Web lead generation works, instructions for creating personal folders for clients and prospects, and details about how customers can handle routine service in the online service center. In addition, the eBusiness team communicated the value of the program through articles in the New York Life agent magazine, direct mail newsletters, and email newsletters to lead coordinators in the field offices. The eBusiness team even developed commercials using one of their own team members as the New York Life agent. Finally, New York Life generated agent interest by calling lead coordinators and certain agents one by one on the phone. Later in 2009, Hittel will implement a dedicated network of agents earmarked to receive high-value leads.

· Were selective with lead distribution. The eBusiness team distributes existing customer leads to the agents of record, while lead coordinators deliver leads from new prospects. The lead coordinators distribute leads to a restricted number of agents, who are usually more experienced. Newer agents seldom get leads. As agents have watched the quantity of leads go up, they’ve started to pay more attention to the program and become more convinced of the leads’ quality. This best practice maintains an actual and perceived high lead value.

· Kept agents hungry with high-quality leads. We asked Hittel what else agents want from eBusiness. “Mostly they just want more leads. There have been requests for real-time delivery of leads and prequalification of leads by phone. We’re not convinced that real-time delivery offers any great benefit, especially when measured against the cost of building the capability. We do believe, however, that prequalification is worth testing, and we hope to do that in 2009.”



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Best practice: use Measurement And Analytics To Fuel Lead-generation performance

Many mature eBusinesses fall short in measurement and metrics. While many eBusiness executives routinely measure online customer retention or profitability, less than half of them measure online customer acquisition costs.12 New York Life bucks that trend with a laser-like focus on acquisition costs and data-driven analytics to demonstrate the power of the eBusiness channel. Internal comparisons of lead-generation metrics show the eBusiness channel outperforming traditional advertising and other channels like direct mail. eBusiness managers should follow these best practices from New York Life:

· Develop a scorecard. New York Life’s eBusiness team develops an annual scorecard goal with key success imperatives and performance metrics. The scorecard is recalculated annually based on expenses. The scorecard goal is shared within the team and with other stakeholders. It reinforces the value of eBusiness to senior management and other parts of the business such as the agents.

· Analyze search performance. New York Life closely monitors SEO performance by measuring the percentage of traffic to newyorklife.com and satellite Web sites. The firm also measures the percentage of sales lead conversions generated from organic search engine results. This focus on SEO performance allows the firm to optimize spending across various campaigns and Web sites. Currently, 33% of new qualified leads come from newyorklife.com and its satellite sites. Another 67% of leads are generated from external price-per-click and price-per-lead campaigns. “In 2008, through November, our organic search engine clicks increased by 18.3%, and our sales lead conversions from those clicks increased by 23.6%,” says Hittel.

· Focus on lead quality. Lead quantity is a key metric, but New York Life also invests in understanding lead quality. The formula Hittel uses analyzes the total number of leads converted to booked meetings and booked policies. “We’re developing this now. It’s the major consideration in judging the quality of our external leads,” says Hittel. Historically, New York Life has achieved conversion rates for booked policies that go up to 15% for newyorklife.com leads, with similar rates for affiliate campaigns. The firm was producing as many as 1,200 leads per day for a short time in October 2008 but ratcheted down to 450 per day in December 2008 to evaluate the quality of leads from certain advertising partners. Hittel improves lead quality by increasing and decreasing the leads-per-day metric.



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RESuLTS: NEW YORk LiFE ACHiEVES SuCCESS THROugH MuLTiCHANNEL COLLABORATiON

New York Life’s revamped eBusiness strategy to “sell the agent appointment” is a clear winner across several key metrics. Some of the results include:

· Lead quantities are growing. Newyorklife.com produces traditional sales leads for agents. The firm also initiated a portfolio of SEM experiments in January 2008, producing 11 leads per day that month and ending the year at 450 leads per day. The site is also the destination of job seekers and generates thousands of agent recruiting leads. “We’ll end 2008 at approximately 115,000 total sales and agent recruiting leads, compared with 76,000 in 2007,” says Hittel. New York Life’s goal is to produce 200,000 combined leads in 2009. The company continues to focus on lead quality and quantity and may increase production if the economy improves in 2009.

· Cost per lead is shrinking. The average cost per lead in early 2008 was $121 per lead. By year’s end, the eBusiness team lowered the average cost to $21 per lead. “We reached our scorecard goal of $37 per lead in April 2008 and have managed it downward since then to $21 per lead.” New York Life improved its costs per lead dramatically by bidding for better positions on search engine results pages. The company also invested advertising dollars in branding pay-per-click campaigns around the financial crisis. Hittel plans to generate more leads in 2009, raising the average cost per lead, but will keep it less than $37 per lead. The firm is also considering recalculating its scorecard goal in 2009 based on marginal versus fixed costs.

· New York Life is growing. eBusiness is playing a growing part in the overall success of the company. New York Life’s most recent annual report shows an increase in total individual life insurance of $198 billon from 2003 to 2008. The firm also shows strong growth in operating earnings, the company’s metric for evaluating profitability from ongoing operations, with an increase in operating earnings from $836 million in 2003 to a record $1.3 billion in 2007.13

NExT STEpS: SCAN THE HORizON FOR EMERgiNg OppORTuNiTiES

Hittel continually revises his annual strategic themes to improve the eBusiness organization and also develops a rolling three-year strategic plan. On the horizon, he is testing Web 2.0, email marketing, direct navigation, mobility, social media, and investment in rich media.14 His primary challenges in accomplishing these goals are hiring and staffing, which are common among mature eBusinesses, as well as improving underperforming agents.15 New York Life plans to evaluate several emerging trends such as:

· Social networking for agent recruitment. New York Life is developing a partnership with LinkedIn to build an official New York Life site for agents and managers. “Already, 60% of our managers have a LinkedIn presence that they use to recruit new agents, and about 25% of our active agents have a LinkedIn presence to generate sales leads. Use of other social networks, Facebook in particular, is much less and more purely personal and social in nature.”



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· Globalization through personal agent networks. New York Life is looking into how agents can create social networks of their own. The firm’s Global Connections proposal of connecting domestic Asian-Indian agents with their counterparts in Max New York Life in India is a likely test case.

· Evaluation of comparison sites. The firm is investigating price comparison Web sites and evaluating online quoting functionality. Hittel’s goal is to develop a “greater degree of transparency in respect to the cost of some of our core products.” Another strong possibility is local lead generation with a leading life insurance comparison site.

W H A t i t M E A N S

THE LESSONS LEARNED FROM NEW YORk LiFE

New York Life’s eBusiness continues to grow and support its agents. the firm proved that the Web cannot merely coexist but must thrive alongside a traditional insurance agent sales force. eBusiness managers across any industry should follow New York Life’s best practices in crafting an eBusiness strategy that aligns with overall corporate strategy. they should experiment boldly by challenging the perception that the Web can only disintermediate as Hittel did by using the Web to reintermediate customers and agents. they should also continue promoting the value of eBusiness to all stakeholders with support from data-driven analytics.

ENDNOTES1 Forrester interviewed Ken Hittel, vice president of eBusiness for New York Life, on December 15, 2008.

Hittel shared that the company currently has 4.5 million insureds supported by 8,000 captive agents in the US. Source: New York Life (http://www.newyorklife.com/cda/0,3254,2,00.html).

2 New York Life was the No. 1 ranked insurer in the US for customer loyalty from 2003 to 2008 in the annual Brand Keys Customer Loyalty Awards. Source: Brand Keys (http://www.brandkeys.com/awards/index.cfm). New York Life is the No. 1 rated Web site among life insurance/annuity Web sites by Dalbar and has been for the past four years. Source: Dalbar (http://www.dalbar.com/content/showpage.asp?page=webrank2008).

3 Despite its high eBusiness and customer loyalty marks, New York Life received low customer advocacy rankings in a recent Forrester survey. Life insurers overall fared worse than property and casualty insurers as sluggish stock markets hurt equity-based policies like annuities. See the June 23, 2008, “Customer Advocacy 2008: How US Consumers Rate Their Banks, Brokerages, And Insurers” report.

4 Forrester interviewed Ken Hittel, vice president of eBusiness for New York Life, on December 15, 2008.

5 In the past, our research found that finding new business and providing product recommendations ranked as the most important services that agents provide. But many of our interviewees have experienced little growth in new customers over the past few years. They question their agents’ prospecting skills and ability to make effective product recommendations. See the December 18, 2001, “Reinventing Life Insurance Sales” report.






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6 We believe that an eBusiness strategy must always complement — and never be divorced from — the overall corporate strategy. Another common problem that Forrester observes among eBusiness organizations is that the online operation is treated as its own set of business processes — isolated from the offline business. When business processes aren’t integrated effectively across the enterprise, the often-promised administrative savings from the Web channel will dissolve quickly, and in some cases, costs can actually go up. See the September 8, 2008, “How To Become An eBusiness Powerhouse” report.

7 Forrester found that the leaders of the most mature eBusiness organizations follow a common, albeit informal, methodology in which they centralize, align, recruit, and evangelize (CARE). See the September 8, 2008, “How To Become An eBusiness Powerhouse” report.

8 Forrester found that eBusiness executives who are responsible for online marketing can improve campaign conversion with better customer data. A global life insurance company that needed to generate qualified leads for its term life insurance selected digital marketing firm Datran Media for targeted display and email advertising. The insurer and Datran Media leveraged verified household customer information to improve targeting of display ads and email campaigns. The campaign generated a return on investment that was six times higher than that of nontargeted display ad campaigns. See the January 9, 2009, “Trends 2009: Insurance eBusiness And Channel Strategy” report.

9 Forrester interviewed Ken Hittel, vice president of eBusiness for New York Life, on December 15, 2008. Hittel shared that other life insurers were attempting to qualify the leads online, which required additional customer information. New York Life chose a different route and did not attempt to quality any leads. That was the agent’s job. Instead, the company measured customer behavior and realized that customer abandonment rates were in the high double digits when customers were required to enter additional information such as email address.

10 We found that 80% of online customers who researched life insurance applied through a branch or in person, versus through the phone (72%), mail (69%), and the Internet (54%). See the July 11, 2008, “Who’s Researching Life Insurance Online?” report.

11 Independent agents typically have access to three or more lead-generation systems from different insurance carriers.

12 Many eBusiness teams are less focused on tracking bottom-line impact than they should be. While just slightly more than half of eBusiness leaders agree that their teams regularly measure online customer retention or profitability, fewer than half of them — 48% — agree that they measure online customer acquisition costs. See the August 21, 2008, “Is Your eBusiness Team Ready For Prime Time?” report.

13 Source: New York Life’s 2007 annual report (http://www.newyorklife.com/file/pdf/0,2482,3908,00.pdf).

14 Many insurance eBusiness and channel strategy professionals are experimenting with emerging technologies such as mobile phones and social networking to connect with customers and support agents with lead generation via the Web. See the January 9, 2009, “Trends 2009: Insurance eBusiness And Channel Strategy” report.

15 We found that several of the eBusiness executives we interviewed cite staff recruitment as a key success factor. But it can be difficult to find top talent with the right mix of industry-specific business acumen, technology proficiency, analytical skills, and project management expertise. See the September 8, 2008,

“How To Become An eBusiness Powerhouse” report.











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Case Study New York Life S E Business And Agents Live Happily Ever After

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