Marketing in the insurance industry
Over the last ten years, advertizing spending rose significantly but the spend slowly shifted from the traditional print and broadcast media, to niche marketing and the internet. This general growth was fueled by competition for market share and, because the insurance industry was highly profitable, more money could be diverted to the marketing budget. Today, the level of spending cannot be maintained. In fact, it has slowed quite significantly over the last eighteen months. There are two reasons for this. The market for insurance has peaked and is starting to contract in all segments as a looming recession forces policy holders to trim their budgets. Secondly, the price competition between the major insurers has reduced the level of profitability at a time of slowing revenue growth.
Despite this, the four leading insurers – Allstate, GEICO, Progressive and State Farm – have maintained brand awareness and their marketing activities pressure their smaller rivals to maintain their marketing momentum to avoid losing market share. However, there is a potential problem. The growth of the internet has turned the standard policies of auto, health and homeowners into commodities. It has become easy for policy holders to obtain comparative quotes through sites like this. Policies can be written over the internet without the parties ever having to meet (whether directly or through an agent). So the advertising has to shift to differentiate the insurers and their policies. Price on its own is not a key feature given the ease with which prices can be compared. That means a focus on other elements such as claims handling and customer service. The internet is not passive. There are now customer sites which carry stories of poor service. The insurance industry is therefore having to spend less on marketing and more on actually delivering better service.
This has serious implications for media that have traditionally relied on advertising revenue from the advertising industry. Newspapers in particular have seen a dramatic drop in their insurance ad revenue. The new campaigns focus on market segments where growth is predicted. More speciality products are being offered and Spanish language advertising to the Latino market has been growing. We can therefore expect to see a further reduction in marketing spend as the reality of a recession bites into consumer confidence.
August 6, 2008
You can follow any responses to this entry through the RSS 2.0 feed.
or leave your response.
Tags: advertising, insurance, insurance industry, insurers, internet, market share, marketing, policies, policy holders
Leave a Reply
|
