The company

The Zurich Financial Services Group (ZFS) is a leading provider of financial protection and
wealth accumulation products and solutions for some 35 million customers in over 60
countries. Founded in 1872, ZFS has a well-established reputation for serving the insurance
and investment needs of individuals and companies worldwide. ZFSs industry stronghold
was confirmed in 1998 through the merger of the Zurich Group with the financial services
business of BAT Industries. Based in Zrich, Switzerland, ZFSs key markets are the USA,
UK and Switzerland. In addition, the company is growing businesses in select markets
around the world. UK subsidiary operations include Eagle Star Insurance, Allied Dunbar
Assurance, Zurich Insurance and Threadneedle Investments. The Group concentrates its
activities in four core businesses: non-life, life, Farmers Management Services and asset
management. These business divisions are organized into four regions Continental Europe;
UKISA(United Kingdom, Ireland and South Africa)/Asia Pacific; North America
Consumer/Latin America; and North America Corporate and one global asset management
business. Managing customer relationships effectively across this diverse customer base and
comprehensive product/service portfolio is an ongoing challenge for ZFS. Competitive
performance demands continuous innovation and dedicated attention to the ever-changing
requirements and aspirations of customers. In an effort to retain its high marketresponsiveness, entrepreneurialism and expertise, ZFS has centred its business focus on the
design and delivery of superior customer value propositions.
A formidable framework
To ensure a profitable customer base and high-quality outcomes, ZFS has devised a
framework for developing value propositions. The inputs to proposition development
constitute a description of the business opportunity and a detailed outline of the needs of the
selected customer segments concerned. The outputs comprise all the components required to
deliver the new value proposition, such as product literature, IT systems, business processes,
training and licensing and sales support tools. The value proposition framework, given in
Figure following, consists of a series of five processes.
1. Core proposition development function
The initial process is concerned with the detailed specification of the proposition to be
developed. It normally involves cross-functional collaboration and some or all of the
constituent sub-processes. For example, a major new product development may require
several iterations of all three subprocesses, whereas a simple re-pricing is unlikely to require
any testing.
(a) Define proposition turning the outlined business opportunity into an articulated
specification, covering (as appropriate): product, service, distribution, communication and
pricing. The amount of work entailed depends on the nature of the customer requirement.
Clearly, creating a new proposition is more involved than modifying an existing one.
(b) Business case evaluation determining the business rationale for the defined proposition,
incorporating a financial evaluation.This activity is carried out alongside other processes and
several iterations may be necessary before a viable proposition is reached.
(c) Research-led testing using various test methods, such as focus groups and customer
surveys, to examine one or more aspects of a prospective value proposition.For
example,testing the demand for specific benefits or investigating the degree of price

sensitivity. This process is invoked as and when necessary and is usually conducted in
partnership with third party specialists.
2. Develop proposition
The next process encompasses the cross-functional activities involved in actually creating the
deliverables of the planned value proposition. It will vary in scope and content, depending on
the proposition, but may include developing or amending business processes, IT systems,
training material, marketing material and product literature. The process may be carried out in
stages over a significant period of time. For example, a new product may have deliverables
that are not required for launch but are needed in time for the first anniversary of the policy.
3. Market testing
This process involves offering the developed value proposition to a representative selection
of target customers in a controlled way, in order to test specific aspects of it. The process is
applied where necessary and is generally more relevant in the context of a service-based
proposition than of a product-based proposition. As with step 1(c), third party specialists are
usually involved.
4. Launch solution
This is the process of making the value proposition available to customers on a full-scale
basis. Again, it covers a range of activities, not all of which will be relevant in every instance.
These include: training and licensing distributors; producing and distributing literature;
implementing IT systems; and equipping and managing administrators.
5. Review proposition
This review process is carried out once for each proposition at an agreed period of time after
launch. All aspects of proposition development are examined and performance is compared to
forecasts. Resultant learning acquired from the insights and analyses generated is then fed
back into management and decision-making processes to inform future activity in the areas of
Client Acquisition, Customer Segmentation and Proposition Development.
The early stages
ZFS is in the process of testing a couple of value propositions developed on this basis. Arvind
Malhotra, Director, Customer Strategy & Segmentation, explains: For each target segment
we seek to define a single value proposition which encompasses our offering to them over the
lifetime of our relationship with them. We then deliver this proposition through the solutions
we build to meet their needs. As an example within the small business segment, the
company has identified the customer need to manage personal finances and business
pressures concurrently as a key area of development. By centralizing expertise, ZFS is able to
offer an integrated solution that jointly addresses both concerns in a simple, straightforward
manner. Similarly for the family segment, recognizing that moving home is a key event in
the customers life stage and a very stressful one, Zurich is developing a readily available
solution which offers customized flexibility. The proposition to the customer is one of
convenience and choice.
The winning feature of the new methodology is seen as its emphasis on customer focus. ZFS
proactively asks its customers what they want. Customer feedback is intended to be used to
inform all decision making. Prior to the introduction of the framework, value propositions
were organized on product lines and the company delivered several individual products. The
catalyst for ZFSs refocus was learning that customers do not just want a whole range of

products, but require solutions that are pertinent to their lives and needs. Furthermore, this
customer intelligence is not self contained within Proposition Development, but is actively
channelled to sales advisers, customer communications managers and other functions.
Traditionally, we operated product silos. Now we work across these silos to create solutions,
comments Malhotra.
A promising approach
ZFSs approach to developing value propositions shows significant sophistication. First, the
framework recognizes the imperative of specificity the need to target the specific
requirements of specific customers. Experience has shown that a casual or broad-brushed
attitude to market segmentation and problem definition is inadequate. Secondly, the
framework emphasizes the iterative nature of value value can be tailored, augmented and
improved. Feedback points are evident at the top and sides of the framework, enabling
valuable ideas, learning and market intelligence to be integrated into future proposition
development activity. Thirdly, the framework considers time a fundamental prerequisite and
critical success factor of any strategic process. For the right value propositions to be created
for the right customers, decisions must be based on meaningful information and tested and
refined in a real environment. The investment of time is one of the most important resource
allocations, as inept or inaccurate decisions can be costly in both the short and the long term.
ZFSs renewed focus on building value propositions in a more formalized and strategic
manner is an effective means of tackling some of the competitive challenges that lie ahead in
the retail financial services sector. We are not badging the exercise as CRM, says Malhotra,
but regard it as part of a wider initiative to become more customer focused. ZFSs move to
elicit customer feedback and inject customer perspective into proposition development is
providing a powerful launch pad for that process.