Tag Archives: EOB

Compliance Challenge in Communications

The phone rings in a company’s human resources department. The caller explains he is from the IRS and is conducting an audit of the company’s use of consultants. The company may have wrongly classified employees as consultants. If the company did misclassify, huge fines will be coming. To clear up this misunderstanding, the caller from the IRS needs historical W-2 data from all employees. An HR employee knows the company did nothing wrong, so he exports digital copies of all W-2 documents and sends them to the specified email address.

By this point, alert readers should be horrified at both this obvious scam and the poor HR employee who will shortly be unemployed. Most people are familiar with the concept of phishing, which is targeting a specific person and using social tactics to elicit private information. From the clinical perspective of this article, it is easy to dismiss this approach as useful only against the unsophisticated. It would be much harder to dismiss if your phone rang from a Washington, D.C., number and the caller already had your company’s tax identification information.

See also: Payoff From Great Customer Experience?  

In other scenarios, there is no ill intent, only poor oversight. A health insurance company is preparing explanations of benefits (EOB) mailings, which include sensitive and private information about healthcare services. This company generates millions of EOBs each month and saves a copy in each member’s account on the company’s website. A batch process reads the member account number from the EOB and places the document into the correct website location. Recent regulatory changes forced the IT department to perform a series of last-minute adjustments to these documents, and the process updated the format of the account numbers. No one told the batch team, and the process that posts these documents was not updated. Millions of EOBs are posted to the wrong account, revealing everything from drug test results to cancer treatments.

In both nightmare situations, digital communications have exposed a company to huge fines as well as public embarrassment and customer attrition. These dangers are not new. Traditional paper communications could have had the same effect. What is different in a digital environment is the speed with which a small mistake can reach millions of customers. With digital communications, no one can rush down to the mailroom and stop a stack of envelopes from going out. Automated processes massively increase efficiency, but these same processes, by their very nature, lack human oversight. This transition from traditional forms of communication to digital communication is critical for customer experience, but companies must update processes and procedures along with technology to avoid these dangerous situations.

What can a company do to modernize communications processes while also remaining compliant with regulations? There are two considerations: prevention and recovery. Prevention is the more important approach. Recovery requires recognizing that, eventually, someone will make a mistake — and a proactive company will have the technology in place to minimize the impact of that mistake.

See also: The Human Resources View Of Health Care Benefits Needs To Change  

Prevention is not an exciting topic. Communications and customer experience professionals generally do not enjoy working with compliance departments. Compliance reviews can slow projects and sometimes prevent exciting new communications from even being launched. Because of this aversion, what often happens is that, at the end of a project, someone will remember to call compliance for a last-minute review. Compliance is upset because its schedule is disrupted; those responsible for customer experience are anxious because their project is delayed; and IT is angry because its work might have been wasted. The key to avoiding this situation is internal communication. Compliance should be an integral part of any new communications project, especially one that involves new technology or new delivery channels. Reviewing compliance challenges early keeps projects on schedule, and integrating compliance knowledge into communication design reduces the chances of an expensive mistake.

Recovery is also an important consideration. In the first scenario above, every employee, current and past, was affected. Contacting current employees is easy; contacting former employees is not. Even with addresses on file, does the company have the technology in place to generate the appropriate notifications and follow-ups? Manual processes are slow and labor-intensive. Proof of notification is also critical to show that the company did everything in its power to inform the affected people. Creating this automated notification and auditing system after a breach has taken place is generally not feasible.

Digital communications bring huge benefits to organizations, but they also bring new data privacy challenges. Any company that is in the midst of a digital transformation cannot afford to ignore these concerns. By focusing on prevention and recovery before a breach occurs, organizations can minimize the financial and legal effects and reputational risk. Spending the time and money now can prevent a much larger problem later.

Want to Enhance Your Customer Experience?

Faced with maturing markets and increased competition, many companies are seeking to differentiate themselves by enhancing their customer experience — but those efforts might be misguided.

That’s not because customer experience is a poor source of competitive differentiation (on the contrary, it appears to be a compelling driver of shareholder value). Rather, it’s because companies tend to overlook key components of the experience — elements that may appear mundane but actually exert a meaningful influence on customer perceptions.

Documents often represent one of the most frequent and prominent touchpoints that companies have with their customers.

Part of the problem is that executives are easily enamored with customer experience improvement tactics that are buzz-worthy: big data predictive analytics, artificially intelligent chatbots, transformational customer relationship management (CRM) or mobile-friendly digital engagement, just to name a few examples. Less “glamorous” initiatives — such as billing statement redesigns, correspondence rewrites or sales proposal reformatting — struggle to garner much attention. That’s an issue, because these static documents often represent one of the most frequent and prominent touchpoints that companies have with their customers.

See also: Payoff From Great Customer Experience?  

Many businesses, however, view such documents as mere administrative communications. From the customer’s perspective, though, these documents are the experience — or, at least, a significant part of it. A classic example of this dynamic comes from the “explanation of benefits (EOB)” statements sent out by health insurers. Every time an insured receives medical care, an EOB is triggered. In theory, EOBs are meant to explain what a practitioner charged, what insurance covered (and didn’t cover), how much the insured is responsible for paying and why. In practice, many EOBs are practically indecipherable (just look at this example, which was recognized by the Center for Plain Language as one of the most confusing customer statements on the planet.)

EOBs confound rather than clarify, generating more questions than they answer. They make IRS tax forms look like the most elegant communication pieces ever devised. EOBs are widely ridiculed and deservedly so.

What’s fascinating, though, is that for most consumers, the EOB is the face of their health insurer. It is, by far, the most frequent touchpoint they have with the company that covers their medical expenses. Yet few insurers treat it as such and, instead, continue to issue EOBs that cement health insurers’ position at the bottom of most customer experience industry rankings.

Businesses discount the power that the written word has in shaping customer perceptions.

This is an issue that transcends any one industry. Businesses in virtually all verticals simply discount the power the written word has in shaping customer perceptions. As a Yale and Stanford study documented, something as simple as the readability of a font in product marketing materials can drive significant changes in consumer purchase behavior. Subconsciously, people see a difficult-to-read font as a cue that the purchase decision itself is difficult, so they defer making a decision.

See also: How to Redesign Customer Experience  

Yes, you read that right: Use a clean, readable font in your marketing materials and you’ll start converting more prospects into customers. However, it goes beyond font choice. It’s about overall cognitive fluency in written communications. The way our brains are wired, we prefer things that are easy to think about rather than things that are difficult to think about. When faced with a printed document, an email or even a webpage that exacts a high cognitive load, our brains essentially get paralyzed — and just tell us to walk away and not deal with it. That’s hardly a good recipe for engaging prospects or customers.

Conversely, when written information is easy to interpret (meaning it’s clear in visual design, language and architecture), people are attracted to it. We’re more inclined to trust it (and the company sending it). We’re more likely to view the communications experience as a positive one.

Clarity also means we’re less likely to have questions about the communication, which helps lower operating expenses by reducing stress on a firm’s infrastructure. Imagine how many unnecessary phone calls companies could preempt if their correspondence, bills, and statements were so clear that they actually obviated the need for customers’ inquiries.

The development of crisp, clear and cognitively fluent communications should be a central component of any customer experience improvement strategy. Excelling in this regard enables companies to not just deliver a better brand experience but to do so at a lower cost. While these communication projects might appear mundane, monotonous, perhaps even boring, don’t be misled. They are an extremely practical and effective means of differentiating what may be one of the most common touchpoints you have with your customers.

With every letter, email or document, companies have a chance to either enhance customer loyalty or erode it. Don’t squander this opportunity to shape your organization’s brand experience, capitalize on it by focusing on the “write stuff.”

This article was originally published by Document Strategy.

How to Avoid Commoditization

How can a company liberate itself from the death spiral of product commoditization?

Competing on price is generally a losing proposition—and an exhausting way to run a business. But when a market matures and customers start focusing on price, what’s a business to do?

The answer, as counterintuitive as it may seem, is to deliver a better customer experience.

It’s a proposition some executives reject outright. After all, a better customer experience costs more to deliver, right? How on earth could that be a beneficial strategy for a company that’s facing commoditization pressures?

Go From Commodity to Necessity

There are two ways that a great customer experience can improve price competitiveness, and the first involves simply removing yourself from the price comparison arena.

Consider those companies that have flourished selling products or services that were previously thought to be commodities: Starbucks and coffee, Nike and sneakers, Apple and laptops. They all broke free from the commodity quicksand by creating an experience their target market was willing to pay more for.

They achieved that, in part, by grounding their customer experience in a purpose-driven brand that resonated with their target market.

Nike, for example, didn’t purport to just sell sneakers; it aimed to bring “inspiration and innovation to every athlete in the world.” Starbucks didn’t focus on selling coffee; it sought to create a comfortable “third place” (between work and home) where people could relax and decompress. Apple’s fixation was never on the technology but rather on the design of a simple, effortless user experience.

But these companies also walk the talk by engineering customer experiences that credibly reinforce their brand promise (for example, the carefully curated sights, sounds and aromas in a Starbucks coffee shop or the seamless integration across Apple devices).

The result is that these companies create something of considerable value to their customers. Something that ceases to be a commodity and instead becomes a necessity. Something that people are simply willing to pay more for.

That makes their offerings more price competitive—but not because they’re matching lower-priced competitors. Rather, despite the higher price point, people view these firms as delivering good value, in light of the rational and emotional satisfaction they derive from the companies’ products.

The lesson: Hook customers with both the mind and the heart, and price commoditization quickly can become a thing of the past.

Gain Greater Pricing Latitude

Creating a highly appealing brand experience certainly can help remove a company from the morass of price-based competition. But the reality is that price does matter. While people may pay more for a great customer experience, there are limits to how much more.

And so, even for those companies that succeed in differentiating their customer experience, it remains important to create a competitive cost structure that affords some flexibility in pricing without crimping margins.

At first blush, these might seem like contradictory goals: a better customer experience and a more competitive cost structure. But the surprising truth is that these two business objectives are actually quite compatible.

A great customer experience can actually cost less to deliver, thanks to a fundamental principle that many businesses fail to appreciate: Broken or even just unfulfilling customer experiences inevitably create more work and expense for an organization.

That’s because subpar customer interactions often trigger additional customer contacts that are simply unnecessary. Some examples:

  • An individual receives an explanation of benefits (EOB) from his health insurer for a recent medical procedure. The EOB is difficult to read, let alone interpret. What does the insured do? He calls the insurance company for clarification.
  • A cable TV subscriber purchases an add-on service, but the sales representative fails to fully explain the associated charges. When the subscriber’s next cable bill arrives, she’s unpleasantly surprised and believes an error has been made. She calls the cable company to complain.
  • A mutual fund investor requests a change to his account. The service representative helping him fails to set expectations for a return call. Two days later, having not heard from anyone, what does the investor do? He calls the mutual fund company to follow up on the request.
  • A student researching a computer laptop purchase on the manufacturer’s website can’t understand the difference between two closely related models. To be sure that he orders the right one for his needs, what does he do? He calls the manufacturer.
  • An insurance policyholder receives a contractual amendment to her policy that fails to clearly explain, in plain English, the rationale for the change and its impact on her coverage. What does the insured do? She calls her insurance agent for assistance.

In all of these examples, less-than-ideal customer experiences generate additional calls to centralized service centers or field sales representatives. But the tragedy is that a better experience upstream would eliminate the need for many of these customer contacts.

Every incoming call, email, tweet or letter drives real expense—in service, training and other support resources. Plus, because many of these contacts come from frustrated customers, they often involve escalated case handling and complex problem resolution, which, by embroiling senior staff, managers and executives in the mess, drive the associated expense up considerably.

Studies suggest that at most companies, as many as a third of all customer contacts are unnecessary—generated only because the customer had a failed or unfulfilling prior interaction (with a sales rep, a call center, an account statement, etc.).

In organizations with large customer bases, this easily can translate into hundreds of thousands of expense-inducing (but totally avoidable) transactions.

By inflating a company’s operating expenses, these unnecessary customer contacts make it more difficult to price aggressively without compromising margins.

If, however, you deliver a customer experience that preempts such contacts, you help control (if not reduce) operating expenses, thereby providing greater latitude to achieve competitive pricing.

Putting the Strategy to Work

If your product category is devolving into a commodity (a prospect that doesn’t require much imagination on the part of insurance executives), break from the pack and increase your pricing leverage with these two tactics:

  • Pinpoint what’s really valuable to your customers.

Starbucks tapped into consumers’ desire for a “third place” between home and work—a place for conversation and a sense of community. By shaping the customer experience accordingly (and recognizing that the business was much more than just a purveyor of coffee), Starbucks set itself apart in a crowded, commoditized market.

Insurers should similarly think carefully about what really matters to their clientele and then engineer a product and service experience that capitalizes on those insights. Commercial policyholders, for example, care a lot more about growing their business than insuring it. Help them on both counts, and they’ll be a lot less likely to treat you as a commodity supplier.

  • Figure out why customers contact you.

Apple has long had a skill for understanding how new technologies can frustrate rather than delight customers. The company used that insight to create elegantly designed devices that are intuitive and effortless to use. (Or, to invoke the oft-repeated mantra of Apple co-founder Steve Jobs, “It just works.”)

Make your customer experience just as effortless by drilling into the top 10 reasons customers contact you in the first place. Whether your company handles a thousand customer interactions a year or millions, don’t assume they’re all “sensible” interactions. You’ll likely find some subset that are triggered by customer confusion, ambiguity or annoyance—and could be preempted with upstream experience improvements, such as simpler coverage options, plain language policy documents or proactive claim status notifications.

By eliminating just a portion of these unnecessary, avoidable interactions, you’ll not only make customers happier, you’ll make your whole operation more efficient. That, in turn, means a more competitive cost structure that can support more competitive pricing.

Whether it’s coffee, sneakers, laptops or insurance, every product category eventually matures, and the ugly march toward commoditization begins. In these situations, the smartest companies recognize that the key is not to compete on price but on value.

They focus on continuously refining their brand experience—revealing and addressing unmet customer needs, identifying and preempting unnecessary customer contacts.

As a result, they enjoy reduced price sensitivity among their customers, coupled with a more competitive cost structure. And that’s the perfect recipe for success in a crowded, commoditized market.

This article first appeared on carriermanagement.com.