New deliveries

Despite its reputation for speed, LBC Development Corp. is diversifying into the pre-need business slowly but surely. "We didn’t jump in. We crawled and took small steps, just like a baby," said vice-president for marketing Javier Mantecon.

LBC, which handles the delivery requirements of an estimated 600,000 individuals and companies every month, has been exploring a co-branding effort with sister company, The Professional Group, for the past few years.

The result is an all purpose pension plan, which was piloted last year outside Metro Manila and which will be formally rolled out nationally next month under the brand name, "Guaranteed Pension Plan."

Viewed as a win-win partnership, the pension plan will be a TPG product with LBC acting as a general sales agent. The pension plan’s market will be LBC retail customers, the bulk of whom are repeat and/or second or third generation customers. By segment, many of these repeat customers belong to the B-C-D markets who send and receive money and packages to and from family members.

"Selling a pre-need product require a change in the mind-set of our 1,700 employees or associates nationwide," said managing director Janet Tayag-Ong. "In the courier business, our associate waits for the customer. In the pre-need business, our associate has to look for customers."

Initially, product specialists will push the pension plan in all of LBC’s 512 branches nationwide. Eventually, other branch staff will be able to pitch in as they gain confidence. "We’re a very lean, multi-skilled organization. Our people are highly motivated because we give very generous incentives," said Mantecon.

Admittedly, LBC employees will not have to go far to look for customers. In the next five years, it estimates revenues from pre-need products at a conservative P500 million, the equivalent of selling premiums to 5% of its customer base.

Simple products

Given its market, LBC has simplified the pension plan and has reduced the paperwork for its customers. Up front, a minimum plan worth P50,000 translates to a monthly payment of P650 over the next five years, which LBC is willing to pick up from the customer’s home. Upon the pension plan’s maturity or five years after the last payment is made, the customer gets his P50,000 plus P38,000, which is the equivalent of his forced savings earning an interest rate of 7% a year.

(Right now, a savings account in a bank earns a 2% interest a year.)

An innovative feature of LBC’s pre-need product is the no-lapse provision. "In a traditional pre-need product, the buyer loses everything if he doesn’t complete the five-year payment plan," said Achilles Reyes, associate for local operations of the specialized financial services group. "We didn’t want to do that to our customers. Whether or not he completes payment, our customer will get something five years after his last payment. If our customer decides to go on with his pension plan after non-payment for several months, he doesn’t have to start from zero but at that point in time when he stopped payment. "

The pension plan is just the first of LBC’s pre-need products. Next month, an educational plan will be piloted, against outside Metro Manila. Based on fixed values or amounts, the plan is also transferable.

For an annual benefit of P20,000 to put a child through a four-year college course, a customer must pay a monthly premium of P700 over the next five years. Like the pension plan, the annual benefits will be released five years after the last payment is made. Unlike the pension plan, however, the annual benefits will be paid over four years instead of in a lump sum.

Core businesses

Theoretically, LBC’s pre-need products are not the company’s first venture in financial services. Remittances are.

"Like pre-need, we got into remittances because it complemented our delivery business. There are many who would rather not go to the bank because they feel they have to dress up and because they are intimidated by standard bank procedures such as the asking of an ID," said Mantecon.

Remittances currently account for 30% of LBC’s total revenues. The bulk of the money still comes from the courier business, which was started 50 years ago by the Araneta family as an alternative to the post office. Not surprisingly, 80% of its total deliveries are within the country.

"Our operations philosophy is to control as much of the process as possible," said Mantecon. "This way, there’s no pointing of fingers when there’s a slip up. Because we handle other people’s money and other valuables, security is another factor."

LBC operates its own fleet of bikes which are manned by regular employees. Ninety percent of its deliveries are, however, done by air because of the time element.

It has a 98% record of delivering on time. "In the delivery business, you can’t have a 100% delivery record. You don’t have control when an airplane carrying your packages cannot take off because of the weather or because of a technical malfunction," he said.

Going one step further, LBC is seriously studying leveraging that delivery track record into a value added service where the company absolutely guarantees that delivery will be made on time or the customer gets a free delivery on LBC.

Investments in technology, which totaled $3 million in the last four years, has been a key factor in LBC’s more aggressive stance. "With technology, we can enhance our core business and develop new products," said Mantecon. Technology might eventually encourage LBC to jump now, instead of later.