Roadmap to marketing excellence

Survey among leading insurance companies in Germany

The trend is unstoppable: in all industries new media are giving consumers growing influence. Customers are better informed, analyzing offers critically and comparing them carefully. At the same time, their needs are growing and changing faster than ever. This is a trend the insurance industry can no longer ignore. To be successful in this transformed environment, insurance companies need to know their customers well and respond to their needs. This is the only way for insurers to differentiate their offerings and business models and position themselves in the market segments in question. It also throws the spotlight on marketing.

What role does marketing play today in insurance companies? How great is its influence and what level of competence has been achieved? To answer these questions Egon Zehnder surveyed thirteen leading insurance companies headquartered in Germany from the end of 2011 to the beginning of 2012. The survey results clearly show that the importance of marketing in the insurance sector is growing. They also suggest that insurance companies need to work on further developing the marketing function.

1. Boosting the status of marketing

Let us start by taking a look at the results on the status of marketing in insurance companies. The responses from the marketing and sales executives surveyed confirm once again that the insurance industry has recognized customer-focus as a key competitive factor. Insurers see marketing as responsible for representing the customer’s point of view, analyzing customers and markets and providing key customer information, which gives the function an increasingly important role. Although this transformation is clear, the findings below suggest that marketing has not yet been given the power that should accompany its new responsibilities.

Information provider with no decision-making power

All of the insurers that participated in our study reported that the marketing function is involved in decisions so that the customer perspective can be taken into account. When it comes to product innovation, sales channels and sales campaigns, marketing also has lively interaction with the sales and product department. Yet marketing’s influence nevertheless remains limited: when it comes to critical decisions survey participants say that the product point of view often still carries more weight than the customer perspective. In most cases the marketing function is limited to the role of an information provider when important company decisions are taken.

This means that marketing can inspire new products and is also involved in the product development process. The decision as to which product satisfies customer needs and at what price it should be offered, nevertheless remains with the line of business. How much the customer is prepared to pay has hardly played any role to date; and it is a similar story with the evaluation of the success of new products. Instead of using marketing criteria like accuracy of fit with the target group, the sole KPI when measuring product success is often premium revenues.

Quantifiable results, but no relevance to company success

Today’s marketing departments use a large arsenal of key performance indicators to measure success, which are determined using quantitative and qualitative success criteria. These include customer satisfaction, brand value or Return on Investment (ROI) of advertising measures. Key figures on marketing’s contribution to turnover and results, to growth and the profitability of customer segments or customer value, on the other hand, are hardly ever used. This is clear evidence that marketing remains purely a support function in several insurance companies and is regarded as a cost center, which explains why marketing is not seen to have any direct influence on business performance.

Marketing is no career driver

A function’s prestige and ability to implement ideas also depends heavily on the competence of its leaders. Against this background, searching for the cause of marketing’s limited influence in an industry boils down to the famous chicken and egg question: does marketing lack recognition because it is not yet as good as it could be? Or is it not yet as good as it could be because it cannot attract and retain the top talent that it needs due to limited recognition? Both would seem to be true.

Our survey results certainly indicate that moving into marketing does not necessarily accelerate an individual’s progress up the career ladder. Marketing’s status and ability to implement its ideas compared to other departments remains too weak in this respect. This is why top marketing executives in insurance often come up against a “glass ceiling”.

Approaches to strengthening marketing’s position

The findings outlined show that, despite clear progress, marketing has not yet achieved a status that would enable it to harness its full potential and make an optimal contribution to company success. Insurance companies can promote marketing by:

  • Giving marketing greater decision-making power in key corporate and product decisions commensurate with its role as a provider of key customer knowledge.
  • Setting quantitative and qualitative targets for marketing that directly influence profit and loss accounts to give the function’s contribution to turnover and results greater visibility.
  • Attracting exceptional leaders to marketing by developing a career path for marketing and establishing systematic talent development.
  • Rotating employees more frequently between lines of business/underwriting, sales and marketing to foster greater understanding of the marketing’s issues and approaches, to dispel prejudices and to raise marketing’s standing

2. Raising marketing's competence level

Let’s now analyze marketing’s competence levels. A look at the results of this part of our study quickly makes it clear that the strengths of the insurance companies surveyed primarily lie in the traditional areas of marketing like brand management and communication. Insurance companies are already playing at a very high level in these areas, although they generally do not reach best practice. In view of these results, companies urgently need to develop executive talent and boost benchmark talent in marketing more systematically.

Brand management and communication: room for improvement

In the field of brand management and communication, all of the companies surveyed rely on widespread approaches and tools. It is, for example, general practice to develop a brand strategy and the expected value contribution that can be derived from it. Brand strength, market value and the ROI of campaigns are regularly measured and analyzed. The success of campaigns is also precisely recorded. However, the survey participants’ assessments reveal starting points for improvements. Marketing departments often question their brand strategy and value contribution far too little and do not adapt to changed customer needs. Furthermore, communication campaigns are only seldom tested for customer acceptance and relevance prior to their launch. Finally, insurance companies with many brands often do not pursue any systematic multi-brand portfolio management, which means that there is no consistent positioning or clear differentiation.

Customer knowledge: a question of quality

Every insurance company is aware of the fact that customer knowledge is often basic. Regular market and customer surveys are indispensable tools for all of the companies surveyed. The critical question, however, is the quality of customer information collected. Only a few insurance companies conduct market research based on their own approaches; and if they do so, they mostly concentrate on retrospective polls. New concepts and expectations are hardly ever tested. The majority of insurance companies also make extensive use of secondary data from market research. However, this does not enable them to differentiate themselves in the market because their competitors also draw on this data. To stand out, they need primary data tailored to their own products and issues.

Customer lifecycle management remains rare

Customer segmentation also shows room for improvement. To date this is mostly derived purely from socio-demographic data such as age, number of children and family status. To make an informed decision about how much a company should invest in a customer, however, differentiated information is required: is price important to the customer? Is intensive sales support important? How does the customer want to be addressed? What kind of life concept does the customer have? And not least: how profitable is the customer and what is his/her value to the company?

According to the results of our study, approaches to value-oriented segmentation exist in all of the companies surveyed. However, hardly any insurance companies have established customer value management for the customer life cycle (Customer Life Cycle Management, CLM). Customer value is often decided based on the revenue achieved, and not using profit generated by the company during the duration of the customer’s contract (Customer Life Cycle Value). In addition to the fact that basic customer data is often incomplete, a standardized customer view over the lines of business is also lacking. Concepts for increasing customer value are also rare.

Approaches to increasing competence levels in marketing

The results outlined above suggest a series of measures that insurance companies can use to boost their marketing competence:

  • It is generally advisable to compare market and best practices approaches on an ongoing basis. This highlights potential opportunities and any adjustments needed to the competence profiles of marketing staff, for example.
  • Talent management in marketing should be more systematic. Specific development plans, for example, are important that make it possible to close potential qualification gaps and react fast to market trends.
  • A key starting point is the management competence of the marketing manager. To give their marketing executives first-class leadership competences, insurers need to focus on developing their competences in areas like customer and results orientation, team-oriented cooperation, market knowledge and change management.

Towards greater marketing maturity

On the way to greater customer orientation, insurance companies have expanded their marketing operations in recent years and strengthened the competences of the function. However, the highly critical self-evaluation of the insurance companies who participated in our study shows that marketing in this industry has not yet achieved the degree of maturity that it now possesses in other industries.

To be successful in the future, the insurance industry needs to focus more strongly on marketing excellence and to take marketing to a higher level. As our study shows, this requires changes both within the marketing department and steps at a corporate level. However, all of these changes will only prove successful on one condition: they call for clear, ongoing recognition of customer orientation and marketing excellence at board level.

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