Beyond Price: The Rise of Customer-Centric Marketing in Insurance
Over the past decade, U.S. auto insurers have increased their marketing expenditure 15 percent each year. Spending totaled almost $6 billion in 2011 alone. A simple logic propelled this marketing “arms race.” As one carrier increased its level of spend to gain customer awareness, others responded in kind to keep up. But the equation omits a true reckoning of how effective the spending is. The explosion in marketing spend has had no measurable impact on industry premiums, which have remained stagnant. And more than half of the marketing dollars spent in the last 10 years came from carriers that did not gain share. Clearly, in their eagerness for top-of-mind consideration, auto insurers are missing something crucial about what their customers need, how they shop and how they make decisions. The disconnection of escalating marketing expenditure and the realities of consumer behavior raises fundamental questions for senior leaders of auto insurance carriers, as evidenced by the findings of recent McKinsey research: • Marketing spend in auto insurance is targeted disproportionately at the 30 percent of auto insurance buyers who are most price-sensitive and least loyal. Why have insurers aimed so much marketing firepower at this one segment? What determines whether the other 70 percent wil remain loyal or shop around? How can insurers reach this majority and motivate them to switch? • Consolidation of market share at the top of the industry appears set to accelerate, as shoppers typically consider only four or five brands as they begin their shopping journey. What sustainable options and models exist for insurers outside of the top five? What alternatives exist for insurers unwilling or unable to compete in the current spend-for-consideration model? • Digital and social media channels influence 40 percent of consumer decisions made during the consideration phase. Can auto insurers – especially those outside the top five – use digital channels to influence shoppers during the active evaluation phase in the consumer journey? • Car insurance retention hovers around 90 percent, yet virtually all marketing spend is focused on acquisition. Given escalating acquisition costs, and the fact that strength of loyalty within a carrier’s policyholder base varies significantly, how do carriers find the right level of marketing spend and the optimal balance between attracting new customers and holding onto their valued policyholders? The answers to these questions wil differ for individual insurers, based on their current position and business model. But they are questions that al insurers should address as they adapt to changes in how customers evaluate and purchase an auto insurance policy. This report is based on the results of McKinsey’s 2012 U.S. Auto Insurance Buyer Survey and numerous interviews with marketing executives. It highlights new research on auto consumer needs and behaviors, and describes the core marketing capabilities that will define industry leaders for years to come.
My question is this, given the findings of this report, why doe's the top five Insurance carrier's continue there focus and marketing efforts on shoppers who are only price driven? It seems to me like a waste of time and money; in which ultimately drives the premiums up. That's not to say that other factors don't drive the premium up as well.
