EIM For Insurance, Retail Banking, and Retail There is a 34 percent growth prediction in the insurance industry, where EIM solutions are primarily driven by bonus and commission payouts, but there is also a projected increase of insurance sales agents through 2014 that should boost EIM expenditures. Distribution channel management has become a key differentiator for insurance companies in the current difficult investment and claims environment.
Namely, the insurance industry has become increasingly focused on brokers and alternative distribution channels over the past twenty years, leading to complex and often convoluted distribution chain relationships. Insurers require channel flexibility and support for an ever-widening portfolio of products to meet broker and consumer expectations, while concurrently demanding process efficiency, data accuracy and transparency, and information technology (IT) cost savings. Recently, insurer�broker relationships have come under close regulatory scrutiny, requiring insurance companies to provide detailed information about broker behavior and compensation. Unfortunately, most insurance companies are unable to show a consistent and consolidated view of the insurer�broker relationship, due to the multiple roles brokers play in the insurance industry, and the legacy technology used to manage them.
As regulators continue to examine the insurer�broker relationship, consolidated distribution information transparency becomes critically important, while the nature of the insurer�broker relationship will likely evolve rapidly over the next several years. Insurance companies are thus expected to implement enterprise-level processes and technology to manage distribution information and incentives, thereby ensuring proper compliance with existing and new industry regulations. They seem to have several main business challenges:
* managing a shifting portfolio of traditional and alternative distribution channels covering a variety of markets;
* driving cross-selling initiatives within the existing customer base through both existing channels and multi-channel team structures;
* satisfying an increasingly stringent financial regulatory environment through accurate payments, transparent information, and clear, auditable processes; and
* reducing the operational and IT costs associated with distribution management, and reducing the risks associated with outdated, inaccurate and inflexible systems.
Consequently, an EIM package for insurance must be designed to meet the needs of today's insurance distribution management, supporting complex distribution channel hierarchies and the expansion of existing distribution channels, and more roles within in each channel (meaning brokers and consultants). Such a package must also support flexible, effective-dated compensation plans; detailed information about all incentive and fee-based payments; and multi-tiered compensation plans, including commission, incentives and management and wholesaler overrides. It must help distribution management respond to changing channel and market demands quickly and efficiently through user-configurable compensation plans and web-enabled, secure compensation reports, while remaining compatible with both current and legacy insurance architectures, and enabling easy integration with multiple policy administration systems, as well as downstream financial systems.
This combination of controlled processes (via auditable, accurate payment of incentives in compliance with established corporate guidelines); flexible modeling and implementation of plan changes (new incentive plans to meet the needs of a changing regulatory environment); and distribution information transparency, should help insurance companies meet the challenges of a rapidly changing insurance marketplace
Somewhat related to insurance (under the financial institutions segment), retail banking is widely regarded as the growth engine for the banking industry today, whereby branch offices are becoming more valuable as a prime face-to-face selling environment. In order to capitalize on this opportunity to maximize customer share of wallet (SOW), banks are paying incentive compensation to branch managers, tellers, and other customer-facing employees. In addition, mergers and acquisitions (M&As) offer their own challenges—as banks merge and offer a wider array of products and services to clients, the sales structure becomes more difficult to track, audit, and analyze. The pace of M&As within banking, and across all financial services businesses, demands a more focused view of sales strategies and their impact on corporate goals. Thus, a banking EIM package must help manage incentive compensation for branch and call center employees, successfully motivating them to raise the value of customer interactions. They must also integrate easily and quickly with other business process systems, smoothing the way for effective compensation plan management in a complex multi-product, multi-channel sales environment.
Evalueserve also reported a 26 percent expected growth in the retail industry for EIM solutions, owing to increasingly complex supply chains, a large number of transactions, and the growing number of retail salesperson jobs. Lately, big-box retailers such as Wal-Mart and Tesco have dramatically changed the business environment for all retail businesses. The ability of major chains to cut costs and improve distribution allows them to dominate multiple retail segments, making them a powerful competitive juggernaut that other retailers must contend with in the marketplace. In tandem with competitive pressures, retailers are also grappling with increasing rates of employee turnover—as high as 87 percent in some segments. At the same time, increased pressure to comply with labor regulations is complicating store operations for many retailers.
Retailers' common business challenges are to align store operations to achieve bottom-line results and improve store productivity, while concurrently focusing on customer experience and increasing transaction amounts. To that end, a retail-oriented EIM package has to help retail executives analyze real-time sales performance, and change compensation strategy in order to react quickly to changing market conditions. It should also automate many compensation management processes that drain away staff resources, allowing retail employees to focus more on selling, and less on administrative tasks. Forecasting tools also help sales executives perform what-if scenarios for labor dollars across the company.
A projection of 11 percent growth in the telecommunications industry is resulting from increased sales forces, retail outlets, and a variety of tariff plans complicating incentive payment management. As telecommunications companies have increased the number of products and services they offer to the market, competition has intensified, resulting in lower prices for the consumer. Given these declining prices for products and services, telecommunications companies must increase their total number of customers to drive revenue and profit growth. The value of each customer has risen, indicating that customer retention (reduced customer churn) is imperative. Sales teams and retail outlets are compensated not only for signing up new customers, but for signing customers who keep their services activated for at least six months or longer. In addition, sales representatives and distributors are rewarded for up-selling and cross-selling additional products and services to customers. Other notable business challenges include improving customer service capabilities to bolster customer satisfaction, developing new products and services and business models to protect against competitive threat from new technologies (such as voice over Internet protocol [VoIP]), and implementing strategic partnership models to expand distribution capabilities
An EIM solution for telecommunication should thus provide the flexibility such companies require to keep compensation plans in line with continually changing, competitive market conditions. Using the process model, telecommunications providers must be able to quickly and easily implement compensation plans with multiple performance measures to address business issues such as customer retention and product mix. Stepping-stair matrices can be used to reward sales teams for selling product bundles, where each additional product included results in a higher commission rate. The alerting and reporting applications should enable providers to share performance and compensation payment data with sales teams and retailers, securely and frequently via the web, thereby motivating the sales force and distribution channels to reduce service deactivations, and to up-sell additional products and services.
Last but not least are the life sciences industries, with great EIM growth projections of about 30 percent. Life sciences sales representatives are offering more products to their sales targets, but are spending less time with each physician. Sales representatives must continually sharpen their go-to-market strategies and product pitches to stay ahead of the competition, whereas sales teams have to deepen their knowledge of each medication or medical device, while learning how to communicate the benefits more crisply. In the future, life sciences companies may better use longitudinal data, such as patient demographics, in addition to traditional EIM data when devising sales and marketing plans. Incentive compensation programs are critical to the sales efforts in this industry, since rewards and contests are commonly used to supercharge a new product introduction and to drive competitive wins and market share gains. Territory management is vital to ensure the proper coverage models for categories of medications and groupings of physicians. Often, as many as seven different sales representatives from one company call on the same doctor, which makes managing territorial splits and account reassignments crucial. Another business challenge stems from the need to maintain an auditable record of drug sales to comply with government regulations.
With detailed visibility into business activities and sales performance, an EIM package should allow life sciences companies to create and implement compensation plans that meet their unique corporate goals. Sales and compensation staff should thereby also be able to drill down into performance for specific plans and sales sectors, customizing and refining strategies for precise target markets, while an automated rule-based system should allow compensation staff to easily manage programs for many product lines across complex territories, meeting the demands of fluid sales structures.
The full-blown EIM and incentive compensation management (ICM) systems discussed in this series are not without their challenges. There is a general realization that although the upper-range EIM solutions are designed to roll out new plans to the largest sales forces in a matter of weeks, the downside of a full-grown EIM solution is its hefty costs. However, designing a homegrown solution for sales teams of over a few hundred is irrational, whereas the chances are a tool offered by a customer relationship management (CRM) or enterprise resource planning (ERP) provider will not have the functionality to handle the complex sales plans and transaction volume. In general, full-blown EIM solutions can amount to a few hundred thousands of dollars in license fees, but one should also account for the supporting technology, since most large EIM deployments require the customer to purchase a scalable back-end database server and a reporting tool to support it. Then there is the customary software maintenance and support agreement, which typically adds an additional 15 to 25 percent of the software and hardware expenses, depending on the vendor.
Finally, companies must consider solution upgrades, and when one is upgrading a technology that involves an organization's payroll and direct deposits, there is a great deal of parallel testing that needs to be done. For more pertinent information, see Is There a Panacea for Enterprise Software Pricing Yet?. These complicated environments also lead to major implementation costs, since the rollout of a complex EIM solution can cost another few hundreds of thousands of dollars and take up to a year, having some pundits suggesting that companies should in principle consider upper-end EIM solutions only when they have the financial assets and requirements for a solution capable of handling the multitude of sales complexities needed to go to market.
Namely, the insurance industry has become increasingly focused on brokers and alternative distribution channels over the past twenty years, leading to complex and often convoluted distribution chain relationships. Insurers require channel flexibility and support for an ever-widening portfolio of products to meet broker and consumer expectations, while concurrently demanding process efficiency, data accuracy and transparency, and information technology (IT) cost savings. Recently, insurer�broker relationships have come under close regulatory scrutiny, requiring insurance companies to provide detailed information about broker behavior and compensation. Unfortunately, most insurance companies are unable to show a consistent and consolidated view of the insurer�broker relationship, due to the multiple roles brokers play in the insurance industry, and the legacy technology used to manage them.
As regulators continue to examine the insurer�broker relationship, consolidated distribution information transparency becomes critically important, while the nature of the insurer�broker relationship will likely evolve rapidly over the next several years. Insurance companies are thus expected to implement enterprise-level processes and technology to manage distribution information and incentives, thereby ensuring proper compliance with existing and new industry regulations. They seem to have several main business challenges:
* managing a shifting portfolio of traditional and alternative distribution channels covering a variety of markets;
* driving cross-selling initiatives within the existing customer base through both existing channels and multi-channel team structures;
* satisfying an increasingly stringent financial regulatory environment through accurate payments, transparent information, and clear, auditable processes; and
* reducing the operational and IT costs associated with distribution management, and reducing the risks associated with outdated, inaccurate and inflexible systems.
Consequently, an EIM package for insurance must be designed to meet the needs of today's insurance distribution management, supporting complex distribution channel hierarchies and the expansion of existing distribution channels, and more roles within in each channel (meaning brokers and consultants). Such a package must also support flexible, effective-dated compensation plans; detailed information about all incentive and fee-based payments; and multi-tiered compensation plans, including commission, incentives and management and wholesaler overrides. It must help distribution management respond to changing channel and market demands quickly and efficiently through user-configurable compensation plans and web-enabled, secure compensation reports, while remaining compatible with both current and legacy insurance architectures, and enabling easy integration with multiple policy administration systems, as well as downstream financial systems.
This combination of controlled processes (via auditable, accurate payment of incentives in compliance with established corporate guidelines); flexible modeling and implementation of plan changes (new incentive plans to meet the needs of a changing regulatory environment); and distribution information transparency, should help insurance companies meet the challenges of a rapidly changing insurance marketplace
Somewhat related to insurance (under the financial institutions segment), retail banking is widely regarded as the growth engine for the banking industry today, whereby branch offices are becoming more valuable as a prime face-to-face selling environment. In order to capitalize on this opportunity to maximize customer share of wallet (SOW), banks are paying incentive compensation to branch managers, tellers, and other customer-facing employees. In addition, mergers and acquisitions (M&As) offer their own challenges—as banks merge and offer a wider array of products and services to clients, the sales structure becomes more difficult to track, audit, and analyze. The pace of M&As within banking, and across all financial services businesses, demands a more focused view of sales strategies and their impact on corporate goals. Thus, a banking EIM package must help manage incentive compensation for branch and call center employees, successfully motivating them to raise the value of customer interactions. They must also integrate easily and quickly with other business process systems, smoothing the way for effective compensation plan management in a complex multi-product, multi-channel sales environment.
Evalueserve also reported a 26 percent expected growth in the retail industry for EIM solutions, owing to increasingly complex supply chains, a large number of transactions, and the growing number of retail salesperson jobs. Lately, big-box retailers such as Wal-Mart and Tesco have dramatically changed the business environment for all retail businesses. The ability of major chains to cut costs and improve distribution allows them to dominate multiple retail segments, making them a powerful competitive juggernaut that other retailers must contend with in the marketplace. In tandem with competitive pressures, retailers are also grappling with increasing rates of employee turnover—as high as 87 percent in some segments. At the same time, increased pressure to comply with labor regulations is complicating store operations for many retailers.
Retailers' common business challenges are to align store operations to achieve bottom-line results and improve store productivity, while concurrently focusing on customer experience and increasing transaction amounts. To that end, a retail-oriented EIM package has to help retail executives analyze real-time sales performance, and change compensation strategy in order to react quickly to changing market conditions. It should also automate many compensation management processes that drain away staff resources, allowing retail employees to focus more on selling, and less on administrative tasks. Forecasting tools also help sales executives perform what-if scenarios for labor dollars across the company.
A projection of 11 percent growth in the telecommunications industry is resulting from increased sales forces, retail outlets, and a variety of tariff plans complicating incentive payment management. As telecommunications companies have increased the number of products and services they offer to the market, competition has intensified, resulting in lower prices for the consumer. Given these declining prices for products and services, telecommunications companies must increase their total number of customers to drive revenue and profit growth. The value of each customer has risen, indicating that customer retention (reduced customer churn) is imperative. Sales teams and retail outlets are compensated not only for signing up new customers, but for signing customers who keep their services activated for at least six months or longer. In addition, sales representatives and distributors are rewarded for up-selling and cross-selling additional products and services to customers. Other notable business challenges include improving customer service capabilities to bolster customer satisfaction, developing new products and services and business models to protect against competitive threat from new technologies (such as voice over Internet protocol [VoIP]), and implementing strategic partnership models to expand distribution capabilities
An EIM solution for telecommunication should thus provide the flexibility such companies require to keep compensation plans in line with continually changing, competitive market conditions. Using the process model, telecommunications providers must be able to quickly and easily implement compensation plans with multiple performance measures to address business issues such as customer retention and product mix. Stepping-stair matrices can be used to reward sales teams for selling product bundles, where each additional product included results in a higher commission rate. The alerting and reporting applications should enable providers to share performance and compensation payment data with sales teams and retailers, securely and frequently via the web, thereby motivating the sales force and distribution channels to reduce service deactivations, and to up-sell additional products and services.
Last but not least are the life sciences industries, with great EIM growth projections of about 30 percent. Life sciences sales representatives are offering more products to their sales targets, but are spending less time with each physician. Sales representatives must continually sharpen their go-to-market strategies and product pitches to stay ahead of the competition, whereas sales teams have to deepen their knowledge of each medication or medical device, while learning how to communicate the benefits more crisply. In the future, life sciences companies may better use longitudinal data, such as patient demographics, in addition to traditional EIM data when devising sales and marketing plans. Incentive compensation programs are critical to the sales efforts in this industry, since rewards and contests are commonly used to supercharge a new product introduction and to drive competitive wins and market share gains. Territory management is vital to ensure the proper coverage models for categories of medications and groupings of physicians. Often, as many as seven different sales representatives from one company call on the same doctor, which makes managing territorial splits and account reassignments crucial. Another business challenge stems from the need to maintain an auditable record of drug sales to comply with government regulations.
With detailed visibility into business activities and sales performance, an EIM package should allow life sciences companies to create and implement compensation plans that meet their unique corporate goals. Sales and compensation staff should thereby also be able to drill down into performance for specific plans and sales sectors, customizing and refining strategies for precise target markets, while an automated rule-based system should allow compensation staff to easily manage programs for many product lines across complex territories, meeting the demands of fluid sales structures.
The full-blown EIM and incentive compensation management (ICM) systems discussed in this series are not without their challenges. There is a general realization that although the upper-range EIM solutions are designed to roll out new plans to the largest sales forces in a matter of weeks, the downside of a full-grown EIM solution is its hefty costs. However, designing a homegrown solution for sales teams of over a few hundred is irrational, whereas the chances are a tool offered by a customer relationship management (CRM) or enterprise resource planning (ERP) provider will not have the functionality to handle the complex sales plans and transaction volume. In general, full-blown EIM solutions can amount to a few hundred thousands of dollars in license fees, but one should also account for the supporting technology, since most large EIM deployments require the customer to purchase a scalable back-end database server and a reporting tool to support it. Then there is the customary software maintenance and support agreement, which typically adds an additional 15 to 25 percent of the software and hardware expenses, depending on the vendor.
Finally, companies must consider solution upgrades, and when one is upgrading a technology that involves an organization's payroll and direct deposits, there is a great deal of parallel testing that needs to be done. For more pertinent information, see Is There a Panacea for Enterprise Software Pricing Yet?. These complicated environments also lead to major implementation costs, since the rollout of a complex EIM solution can cost another few hundreds of thousands of dollars and take up to a year, having some pundits suggesting that companies should in principle consider upper-end EIM solutions only when they have the financial assets and requirements for a solution capable of handling the multitude of sales complexities needed to go to market.
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