Insurance has been slow to take up marketing, but as the industry responds to new demands it is becoming a matter of survival. Richard Croucher reports
A part from a few notable exceptions, it has taken a long time for marketing to become an integral part of the insurance sector, for a variety of reasons.
While sales techniques are well established in insurance, marketing has been less understood. The distinction between the two disciplines, however, is vital in understanding the different roles they each perform.
Paraphrasing a definition of the two, sales is about making the customer buy what the company wants to sell, while marketing is about making the company produce (at a profit) what the customer wants to buy.
As well as a lack of clarity regarding the role which marketing performs, the military-based terminology of strategy, targets and campaigns which surround it, does not help. This 'confrontational' aspect to marketing puts a lot of people off adopting a marketing-led approach, as it's just not the way they do things.
There is also less immediate motivation in the service industry, when compared to the manufacturing industry, where marketing first started as the economic response to over-supply and has since been widely adopted.
In the service sector there are no warehouses full of stock, there are no machines stood idle and you do not have your competitor's clearly superior and cheaper new product sat on your desk giving you sleepless nights.
Plus, in the insurance industry, where relationships and word of mouth are so prevalent and important, marketing can be seen as being only for those who aren't good enough to rely on referrals.
But recent years have seen a change in attitude, with more companies embracing marketing fully, or taking tentative first steps. And, with the door now firmly open, marketing will inevitably be taken up across the industry at an exponential rate.
Marketing provides an organisation with a balanced view, encourages an external outlook and seeks internal improvements. This is alongside marketing's traditionally accepted role of promoting the business and supporting the sales process.
As well as providing a different perspective, there are a number of specific reasons for a company to use a marketing-based approach, including:
The best way to illustrate the value of marketing in insurance is to examine the parallels in the farming and food industry. This industry is currently in a position that the insurance industry will move to over the next 5-15 years.
Even as they stand now, the similarities between the industries are considerable. Both are long established industries with a wide end-customer base and large-scale producers operating on an intensive basis, through a few powerful distributors and some specialist retailers.
There is also increasing threat from foreign competition, operating on different financial models with substantial subsidies, as well as periods of both under and over-supply.
Faced with these changes over the past few decades, many farmers and food retailers complained vehemently, but carried on much as they always had. Others took a much more innovative approach - a market-led approach. Yet others acted quickly and sold up, before sale prices were driven down.
The successful farmers took decisions on what to focus on, invested in technology to become more efficient and productive and worked out how best to get produce to the market. Some added value by going organic and creating their own products, working with specialist retailers and selling direct over the web.
Others increased field sizes and grew crops intensively by the container load, often creating unrest, but carried through due to the low prices this approach delivered to end customers.
The approach taken depended on what land they already had or could buy, what skills and equipment they had and what the people around them liked to consume.
It also depended on whether they could take a long-term view, or needed a quick cash crop. They also had to decide how hard they wanted to work and how much risk they wanted to take.
While the changes in the farming and food industry were generated by the industrial revolution, the same changes in the insurance industry are driven by the communications revolution. However, the communications revolution is demonstrating a much faster adoption rate, so there's less time to play with.
All companies in the insurance industry need to address this exact scenario by developing a marketing-based business approach. Marketing is all about taking control. Referrals are great, but they're not guaranteed and you can't control how many you get, or whether they're the type you really want.
Of course there are 'downsides' to marketing, in terms of changes to be made and costs incurred. Sometimes the costs do not add any immediate return - they just keep you in the game.
These downsides have to be borne - a marketing-led approach is vital and to not adopt one is to accept a less certain future.
Marketing also brings significant benefits for the end consumer, stimulating constant innovation, to meet needs more and more effectively. Supported by legislation to ensure sufficient ongoing competition it also brings choice, presenting an ever-increasing array of alternatives.
Some customers will make their selection based on simplicity, recognition or basic criteria, such as price. Others will base it on minimising risk, while still others will seek out someone to help them decide what best meets their more demanding requirements.
In a time-pressed world this creates opportunities for marketing-led organisations. The key to success is picking the right opportunities for your company and organising it to best meet these. IT
'Richard Croucher is head of marketing at Broker Network
