Progressive 2005 Annual Report Download - page 14

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.14
While we are proud of our overall service and experience
delivery, we can do better. Friendly fire, as we have seen, can
result from process breakdowns, poor quality control, actions
that are generally applied that should be more targeted, failure
to communicate as effectively as the situation deserves, and the
like.
We are using more finely tuned statistical process control
tools, numerous cause analysis methods and a heightened atten-
tion to customer feedback in our efforts to take our customer
care focus to a level consistent with our expectations. To increase
the speed, completeness and intensity of our self analysis of
customer experiences we have created a participation benefit for
our employees to be both customers and critics. Eating our own
cooking, combined with the Progressive culture to be “Virtually
Perfect” in all we do, will unquestionably create some healthy
tension, but I have little doubt having more Progressive people as
Progressive customers will be an effective catalyst as we continue
to improve our product offerings and consumer experiences.
Technology Advancing our technology interface with agents and
consumers and increasing internal functionality is a routine part
of our individual business operations and is funded and managed
as such. Our plans in each area are directed at long-term
cost management and providing superior customer experiences.
2006 promises to be another productive year. To add to our
ongoing preparedness, we have two companywide initiatives
under way for which the next 18 months will be crucial. The first
is replacing the customer and policy management system that has
served us well but is not consistent with our views of future needs.
The second is adding a data center that will ensure that not only
is capacity not constrained but that a very high level of system
availability and disaster preparedness is assured.
Marketing 2005 was the first full year operating with two
distinct brand offerings. Providing consumers the choice of both
an agent-distributed product, now sold as Drive®Insurance from
Progressive, and a direct-to-consumer product, Progressive
DirectSM, is both exciting and important positioning for us. Each
brand presents distinct challenges in product design, pricing and
competitive focus. The power of this choice and positioning was
highlighted for me when we entered New Jersey in September
and were able to announce the availability of two top-ten
national brands, providing consumers with different and valid
choices in how to buy their auto insurance. Significant opportu-
nities exist for both brands to develop and improve but, with a
year behind us, the opportunities are starting to be realized and
we are encouraged by the potential.
A notable and welcomed development for Progressive Direct
during the year was the continued strong growth from customers
initiating and buying policies on the Internet. Our Web-based
activities celebrated their ten-year anniversary in 2005 with some
remarkable accomplishments, and as we look toward the next
decade, we expect the changes to be equally profound.
We are pleased with, and very committed to, our positioning
of Progressive relative to Internet consumers and see tremendous
potential in everything we do to leverage our leadership further.
The continuous enhancement of Internet features and capabili-
ties in Agent and Direct quoting, customer service and claims
management are all central to our preparedness plans.
Retention and Customer Service Last year in this letter, I wrote
that we are at our best when challenged and that improving
retention is a challenge we have accepted. During a period in
which price pressure appears to be a less significant reason for
consumers to switch, our overall retention measures have not ex-
tended at a rate we might have expected. This has forced us to
examine the customer experiences we provide at ever-increasing
levels of granularity. We have not always liked what we’ve seen.
Self diagnosis seems easy upon first blush, but to understand ef-
fectively the countless combinations of customer experiences
makes the effort a significant commitment. In more cases than
we would like, the cause of a less than perfect customer experi-
ence is what we have called “friendly fire.”