E-RELATIONSHIP MARKETING BY CLOSED MEMBER AREAS

IN THE GERMAN HEALTH INSURANCE INDUSTRY

Salmi Said

Multimedia Campus, International Graduate School of Multimedia Management, Boschstr. 5, D-24118 Kiel, Germany

Dirk Frosch-Wilke

University of Applied Sciences Kiel, Sokratesplatz 2, D-24149 Kiel, Germany

Hilke Spoerel

IKK-Direkt, Kaistraße 101, 24114 Kiel , Germany

Keywords: e-Business, Customer relationship management, online closed member area.

Abstract: German compulsory health insurance companies are in intense rivalry and for most of these companies

customer loyalty is a critical success factor. E-Relationship marketing as a basic concept in business field is

constantly on improving new means of managing customer relationship. The marketing departments in the

health insurance industry have developed different tools of attracting their customers.

One of the new strategies that are used today by industries in general and compulsory as well as private

health insurances in particular is the implementation of an online closed member area that offers exclusively

some benefits for their customers in order to create a long term customer relationship.

For this reason we have benchmarked different national and international closed member areas of some

health insurances. Using these results, we have developed a concept of an effective closed member area for

a German health insurance as a part of the customer loyalty policy of this company. In fact, implementing

this closed member area by a health insurance company will be very helpful in enhancing a long-term

customer relationship and maintaining the competitive policy of that company.

1 INTRODUCTION

The appearance of the Internet has been a revolution

in the economic field; companies have found in it a

source of support to their offerings. Furthermore the

Internet is increasingly used as a tool to enhance

relationship marketing between companies and their

customers. Companies find in this new technology

some characteristics that are new, unique and more

efficient with less cost than what they were using as

technologies before this invention (Brock, 2000).

In fact, a striking characteristic about the Internet is

that it has opened the path toward a new form of

companies, namely the virtual companies. These

companies are rather functioning at the level of

marketspace than marketplace (Stapleton et al,

2001). However, maintaining customer relationship

in the virtual market requires from companies

developing strong marketing policies. Hence, this

paper will be devoted to the development of an

online closed member area as a new tool of E-

marketing for virtual health insurances. For this

reason, our current investigation will go through the

following steps:

• The German health care system and the need of

developing a new e-marketing policy.

• The role of online closed member areas in the

strategic approach for health insurance

companies (national and international).

• The process of developing an effective online

closed member area for health insurance

companies.

This analysis shall provide a conclusion for the

usefulness and the effectiveness of implementing an

online closed member area by health insurance

companies.

135

Said S., Frosch-Wilke D. and Spoerel H. (2007).

E-RELATIONSHIP MARKETING BY CLOSED MEMBER AREAS IN THE GERMAN HEALTH INSURANCE INDUSTRY.

In Proceedings of the Third International Conference on Web Information Systems and Technologies - Society, e-Business and e-Government /

e-Learning, pages 135-140

DOI: 10.5220/0001276501350140

 SciTePress

2 THE GERMAN HEALTH CARE

SYSTEM

2.1 An Overview about the German

Health Insurance Market

The German health care system maintains two

different ways of citizens’ health protection; namely,

the private health insurances (PHIs) and the statutory

or public health insurances (SHIs). About 90 % of

German inhabitants are statutorily insured, whereas

only 9 % are privately insured (Joecks and Ribhegge

2004).

Germany contains about 70 PHI providers (Spoerel

2003) and about 283 SHIs (Herles 2004). SHIs are

part of the German social system and form the core

of public rights. Their tasks are to secure the health

of their customers (Herles 2004). Their main

characteristic, on the contrary to PHIs, is that all

members are equally treated; in the sense that,

although there are some differences concerning the

fees paid by different members, all customers have

the same health benefits. Moreover, SHI members

do have a free choice of their health insurance

company and every SHI company has to accept all

membership inquiries received.

In fact, each German citizen has the right of being a

member of the health insurances in the country; but

the choice of being private or statutorily insured

depends on the personal income of each member

The German health care system has set the market

segment for all SHIs. This segmentation includes the

mandatory and the voluntary members and depends

on the yearly income of a person (Schmidt 2005).

2.2 The Intensity of Competition in the

Health Insurance Market in

Germany

The intensity of rivalry among existing competitors

is very high. The fact that almost everybody has to

be statutory insured and only some few people can

leave to have a private insurance increases the

number of clients and simultaneously enhances the

competition between different parties. This intensity

among SHIs is very high due to different factors.

The first one is that about 95% of the companies

duties are already regulated by the German health

care law (Spoerel 2003); this means that all

competitors offer almost the same basic benefits for

the customer and that there is almost no difference

between the performances of the different

insurances; only almost 5% which is free for further

management for statutory health insurances. The

second one is related to the exit barriers that are high

for most competitors because of economical and

governmental reasons (Dess and Lumpkin 2003).

Economical reasons are the result of the companies’

high fixed assets that is represented in the different

shops and other real estates; whereas, the

governmental reason is related to the government

discouragement of exit out of concern for job loss.

This strong market competition has brought with it

the difficulty for customers to differentiate between

competitive offers. In fact a leading price position

can be one factor but not be the only way to retain

customers. For this reason, the quality of after sale

services and image of the insurance company can be

of crucial meaning. This image is only attained by

implementing some effective loyalty programs.

3 THE ROLE OF ONLINE

CLOSED MEMBER AREAS IN

THE STRATEGIC APPROACH

FOR HEALTH INSURANCES

The technological development and the intensity of

competition have helped in the appearance of new

concepts in the marketing field. Relationship E-

marketing as a new paradigm in marketing field was

the result of this intensity. Its main task is

developing adequate marketing instruments for

enhancing and maintaining relationships with

customers. One of these instruments is developing

online closed member areas as a new form of

customer loyalty programs. Studies have proved that

the success of health insurances today depends on

their success in implementing effective loyalty

programs. According to Reichheld and Sasser

(1990), loyalty programs lead to customer loyalty

and the latter increases the firms’ profitability

through cost savings and revenue increase. The

importance of the customer’s loyalty depends on the

extent of its ability to increase customer retention.

Reichheld (1993) reported that an improvement of

customer retention by 5% leads to a profit between

25% and 85% for the company. Hence, when a firm

increases its customer retention rate, the competitive

advantage of that firm increases. This is because that

the expense of acquiring new customers is higher

than retaining existing ones.

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3.1 Characteristics of Online Member

Areas

Member areas are a new form of marketing

instruments that most companies are using today to

maintain a long-term relationship with their

customers.

Sandler & Tischirhart (1997) described a member

area as a group of people sharing members’

characteristics and excludable benefits. Sällberg

(2004) suggested that member area is a form of

access program that provides customers with

exclusive events to which they otherwise would not

gained access. Helmke & Dangelmaier (2001) argue

that a club area shall improve a psychological

relationship with customers since the latter choose

this membership voluntary and as a result they shall

be rewarded by some exclusive services. Helmke &

Dangelmaier further suggested that there are two

types of member areas; namely an open member

area and a closed member area. In the case of health

insurances, a closed member area is characterised by

extensive services and refers to membership allowed

only for customers; whereas an open member area

allows a pseudo membership for anyone who wants

to login and is characterised by limited services.

Further more, Butscher (1995) stated that a member

area is a loyalty program strategy initiated by the

company to unify existent and potential customers.

Similarly, Holz (1997) tried to identify a club area

through six elements:

• A marketing instrument.

• Initiated and organized by the company.

• Unifying target segments

• Offers exclusive services to the members of the

community.

• Its prior aim is attracting and maintaining

customers.

• Based on a permanent contact with members to

strengthen the relationship.

To sum up what is stated so far, we can say that a

closed online member area is a social context that

forms an exclusive community where members have

the privilege of some benefits offered by company

over the Internet, which differentiate them from

other non-member customers; this area is based on

mutual communication that is necessary in analysing

members’ needs and developing a company strategy

that enhances an emotional relationship with

customers.

3.2 The Purposes of Online Member

Areas

We have already stated that a member area is a form

of loyalty program. But there are some more

purposes of member areas, which has been identified

by Butscher (1995) and Holz (1997):

• Customer retention through some exclusive

benefits for loyal customers.

• New customer attraction

• Building and optimizing a customer database,

which is necessary for implementing services

that suit customers’ needs.

• Profit maximizing of the company

• Supporting the core product and market research.

• Enhancing a better image of the company.

• Implementing a communication tool for the

company.

Hence, membership areas are organized around

important goals and this is why developing such

areas takes a considerable effort. We have defined a

process for developing such member areas and have

used this process exemplarily for a health care

company.

4 DEVELOPMENT PROCESS

FOR CLOSED MEMBER

AREAS OF HEALTH

INSURANCES

4.1 Important Characteristics

We start with benchmarking of different closed

member areas of health insurance companies that

shall identify the design of these areas from the

registration until the log-out (Puscher, 2005).

Further, we make use of the Seven Cs framework by

Rayport & Jaworski (2003), which is intended to

provide an extensive method to understand the

different choices to implement a user interface of an

e-business mode. This framework includes: context,

commerce, connection, communication, content,

community, and customization.

4.2 Benchmarking of Online Closed

Member Areas of Some National

and International Health

Insurances

By applying the models above, we have tried to

define the main characteristics of some online closed

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member areas of some health insurances in Germany

and USA.

4.2.1 Online Member Areas of Some

German Health Insurances

The German health insurances that are analysed are

compulsory health insurances. For the sake of

avoiding any kind of advertisement to any of these

health insurances, we will rename them with

company “A”, “B” and “C” which are

representatives for the evaluated companies.

The Company “A” provides a well-organized

member area for its customers, but the offered

content is only limited to detailed information about

reward programs. The closed member area of the

company “B” is more a functional than an aesthetic

area. Members have not only reward benefits but

they have access to many extra services such as

reworking profile or printing health certificates and

other issues. They have also the possibility to

participate in forums and chat rooms. Member data

are more protected as in case of company “A”,

because the confirmation of membership takes place

through e-mail and post and an activation key is

necessary. Company “C” offers a functionally based

member area with an obscure design. Different to

the other companies, this one offers an open and a

closed area. The difference between both areas is at

the level of content, connection and some technical

characteristics. In the open member area, there is no

connection with other websites; similarly the content

of the open area is very limited.

A common characteristic among all evaluated areas

is the design of the member area; actually there is no

difference between the design of the member area

and the starting web page of the insurance. As a

result, the user does not have the feeling of being

inside the closed area and in this case he may loose

the trust that was supposed to be achieved by the

4.2.2 Online Member Areas of Some Health

Insurances in USA

The study of some examples of membership areas

from the USA can be of great help in developing a

sophisticated member area. With regard to this issue,

we will investigate two health insurances. These will

be referred to as company “X” and company “Y”

that proved to have different marketing strategies.

• Company “X”: The website does not clearly

present the membership area; still this closed

area is generally well organized and user

friendly. Besides the richness of the design, this

closed area offers its users many benefits such

as: printing different types of certificate forms,

special advices from doctors, detailed

explanation of different issues such as drugs and

their usage, different sickness, special therapies,

and summary about last doctor visits.

• Company “Y” offers a closed area that is easy to

use and rich in information; most of the

information is similar to the previous discussed

area, in addition to some other features such as

printing and requesting cards, complaint form

and other issues. After the login, members

quickly notice that they are inside the closed area

because the layout of the closed area is different

from the layout they have seen before the login.

The fact that enhances in members a feeling of

belonging to an exclusive area.

So generally, more importance is given to content,

design, communication, connection, and

customization. Moreover, health insurances in the

USA are using a positive method of customer

loyalty that is based mainly on developing positive

attitudes by attracting customers through the use of

free services than using economical incentives as in

the case of bonus programs.

4.3 Implementation of an Online

Closed Area

Our development of a closed member area for a

health insurance will take three different aspects into

consideration; namely, the initiation, the offerings,

and the maintenance. Our focus on these three

aspects indicates the life cycle of this marketing

instrument.

4.3.1 The Initiation of the Closed Member

Area

The initiation refers to the set of procedures that are

necessary to be undertaken at the beginning in order

to attract customers to the closed user area. These

procedures can be managed through the fulfilment of

the following characteristics: advertisement,

placement of the login button in the home page,

registration data, and steps of registration

Advertisement should making customers aware of

the existence of an online closed area.

Placement refers to the positioning of the

membership area button on the home page. An

effective place of the membership button is just in

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the middle left side of the home page because in this

way, it is put at the eye-level once the user is

directed to computer screen.

Registration data refers to the data that customers

need to fill in to get access to the membership

benefits. To avoid violation of privacy here it is

crucial that the health insurance goes beyond the

insurance number to check the authenticity of the

user. In fact, increasing authenticity data reflects the

value of the content provided in this area.

Registration steps: Refers to the steps that customers

shall go through from the registration to the login in

the membership area; the usability of these steps

must be simple and must give customers a

convincing feeling of being lead to an exclusive

membership area.

4.3.2 The Offerings of the Closed Member

Area

With offerings, we refer to whatever shall increase

customers’ retention. In fact, immediately after the

context, the connection, communication, and content

of the closed member area. The context refers to the

design of the closed member area. When customers

well-designed area to easily find what they are

looking for; otherwise, they may leave the area

discontented. For this reason, we have developed for

sample membership area the following example of

the features description right after the login. This

will be divided into three main parts that we will

discuss in detail later on: on the left side, we will put

the general offerings of the closed member area; in

the middle a reminder service; and on the right we

will put quick links (see Fig. 1)

In the quick links section we have implemented

issues that are of urgent importance for customers;

these quick links commonly tend to enhance

communication, connection and customization in the

closed member area. The quick links section can be

seen as a necessary support that the customers would

jump to whenever they feel lost or have an urgent

need to get some information.The quick links

section is further divided into several subsections

which include the following:

“Find a Provider” subsection that will offer

information about some providers such doctors,

hospitals, or pharmacies, “Newsletter”, “Call-Back

Service”, “E-mail”, “Telephone”, and “Search

Tools”. These subsections are crucial for the closed

area because they complement each other and offer

customers all possible means that are required to

fulfil their needs.

Reminder Service: This will provide customers with

the infrastructure to plan their daily appointments.

Some customers often forget their next visit to

dentists or other health checks. So, offering them

this service will be very helpful because they will

always get an e-mail in advance that reminds them

about the next appointment. This can be very crucial

for saving extra costs for the health insurance since

customers go to check their health status regularly;

this helps them to stay in good health.

The overview is supposed to offer an idea about the

content of the membership area. We have tried to

develop content for the closed area of a health

insurance that will focus more on services than

bonus programs to maintain a positive customer

loyalty that leads to long term customer retention.

The content of the health insurance will be divided

into three parts; these include the “what can you do”

which will include the possibility of getting

important preventive guide lines to lead a healthy

life, managing the account, checking the medical

history of the user, downloading some forms, and

getting other extra benefits. The “information”

section presents various kinds of information for

enhancing the learning ability of customers and

helping them in developing a skilful background

Figure 1: Features Description of the Sample Membership

Area.

concerning some medical issues that are related with

human health; this will include information about

prescription drugs, medical treatment, and medical

policies.

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139

The “help” section includes both a glossary that

offers the explanation of some medical terms and a

feedback sub-section that is used as a tool that

allows the closed member area to be developed in a

way that meets customers’ requirements.

4.3.3 The Maintenance of the Developed

Closed Member Area

The maintenance of the closed member area is the

third part to be taken into consideration by the

management of the health insurance; it is not enough

just to offer customers the privilege of this closed

area without any constant maintenance procedures

that serve content revision and services updating.

The maintenance tasks that have to be performed

can be divided into technical maintenance and

content maintenance.

Technical maintenance involves all necessary

technical issues that support the access to and use of

the closed member area. Content management is

related mainly to the different offerings that we have

integrated in the closed member area and should

guarantee that all content is not out of date.

5 CONCLUSION

In this paper, we have described the process of

developing an online closed member area in general

and exemplarily for a health insurance company. We

have described first the intensity of competition in

the health insurance market in Germany advantages

and the necessity of loyalty programs in general and

the membership area in particular. Further more, we

discussed the main issues of some national and

international online closed member areas and on the

basis of these we have tried to develop an example

of an effective closed area in the health insurance

industry. The implementation is relying mainly on

services that are crucial to enhance positive attitude

toward the health insurance and hence lead to a

long-term relationship with their customers.

In fact, we identified three main steps that are of

strategic importance in implementing a closed

member area; these are the initiation part, the

offering part, and the maintenance.

In our future research we will evaluate the

contribution of the implemented closed member area

of the health insurance to company’s customer

loyalty.

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