Best Foot Forward

In the last issue of Claims Canada, Education Forum looked at how to analyze your firm’s stakeholders and assess the depth and breadth of your network of relationships. In this article, we look at the interplay between stakeholder relationships and a firm’s brand and reputation.

As discussed in the last issue, stakeholders are the individuals and groups that are affected by a firm’s performance or that have a claim (a stake) in its performance. They include employees, customers or clients, suppliers, shareholders, partners, regulators and the broader community.

A firm’s standing with its various stakeholders is reflected in the firm’s reputation. A firm with a positive overall reputation is meeting or exceeding the expectations of most of its key stakeholders. A strong brand can contribute to a firm’s positive reputation and at the same time remind stakeholders, especially customers and clients, about that reputation.

Customer values

Marketers often describe a firm’s relationships with its customers in terms of reach (the range and volume of customers a firm can access), richness (the depth and detail of the flow of information between firm and customers) and affiliation (the level of customer loyalty created).

Firms with branded services or products seek to create brand equity: a situation in which potential purchasers are familiar with the brand and have favourable, strong and unique mental associations with it. An effective brand needs to be rooted in a solid customer value proposition, which requires understanding what the customer values. This in turn requires market segmentation: determining which customers to serve and which of their needs to meet.

Branding

Brand equity can be distinguished from value equity (an objective assessment of the quality, price and convenience of a product or service) and relationship equity (loyalty to a specific product or service based on factors such as the comfort of familiarity). These three kinds of equity can exert differing levels of influence on purchasing decisions.

A chief purpose of marketing programs is to increase brand awareness and establish strong, positive brand associations in the minds of potential purchasers of the product or service. Brand associations can involve attributes (such as product features or price), benefits (how the product or service works, what it’s like to use it, what it means to use it), and attitudes (positive or negative evaluations of the product or service).

Brands may also evoke secondary associations connected with the company, its distribution channels or a specific event. Direct experience can create particularly strong associations. For example, experiencing a loss of insured property and going through the claims process can form a strong impression for a policyholder and either improve or damage the person’s opinion of the insurer. So, the performance of independent adjusters can have an important impact on their insurer partners’ brands.

Brands also tend to share some associations with other competing brands and with the product category as a whole. A policyholder who has positive or negative associations connected with one p&c firm or with the industry in general will likely have a similar attitude toward other firms in the industry.

Reputation

Reputation is another factor that influences customers and clients: outsiders can’t know as much as they would like to about how a firm will perform, so reputation helps them make choices. Reputation is very important for service providers such as adjusters, whose offerings can’t be evaluated before purchase. It is also critical for insurers, whose service is purchased far ahead of delivery and is not always well understood by the purchasers.

Brand and reputation are closely linked. A firm’s overall reputation reflects its past actions and results, but its reputation with customers also reflects the success of its brand. A firm’s individual reputation can be affected by the reputation of the industry as a whole. In turn, the industry’s reputation is affected by the actions of its member firms, particularly in times of crisis.

In dealing with a loss on behalf of an insurer, an independent adjuster can potentially influence reputation on three levels: the insurer’s reputation in the eyes of the policyholder; the reputation of the industry as a whole in the eyes of the policyholder; and the adjusting firm’s reputation in the eyes of the insurer. In the case of catastrophe situations, the large-scale handling of losses can also influence the industry’s reputation with regulators and governments.

For any firm, benefits of a positive reputation can include increased sales, the ability to command higher prices, access to talent and higher stock market valuations. A poor reputation can lead to loss of clients, loss of key staff, an increasing cost of capital and an increased regulatory burden.

At the firm level, reputation can be influenced through tools such as corporate philosophy (a commitment to defined values), corporate governance structures (for implementing the values through procedures and rules of behaviour), and compliance rules (to ensure employees adhere to the values in day-to-day activities). Communication is also a critical tool.

Communications

Effective communications and issue management can help firms to present themselves as reliable and authoritative, emphasize the industry’s contribution to economic and social progress, and identify common ground with key stakeholders. All of these effects can contribute to a positive reputation.

Large firms may have an extensive issue management process that draws on a mix of internal and external resources over a sequence of stages, such as:

• research and analysis

• deciding how to respond to an identified issue

• implementing a response – drafting a contingency plan, communicating with stakeholders or issuing a position paper

• evaluating the process and any evolution of the issue

Smaller firms can also benefit from communications and issue management activities. For example, developing relationships with local media can allow a firm to highlight the work it does, improve the public perception of the industry and increase credibility with policymakers.

Communication principles that can be scaled for use by firms of any size include:

• scanning the environment for information about potential threats and opportunities

• communicating regularly with stakeholders using messages that are consistent in content and timing

• meeting face to face with key stakeholders occasionally, especially in times of change or uncertainty

• developing networks of relationships with external organizations for exchanging information and opinion

Word-of-mouth and social networking communications can play an important role in shaping brand and reputation. Social media can also be a means for organizations of various sizes to communicate with stakeholders, build networks and establish relationships.

This article is based on material used in the Insurance Institute’s FCIP program, the pinnacle of learning in Canada’s p&c industry. Focusing on strategic leadership and advanced management principles, the program blends academic business theory with practical insurance application.