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How Marketing Analytics Help Home and Auto Insurers Skirt The Ad War


To win the multimedia ad battle for the hearts and pocketbooks of consumers, home and auto insurers will need to embrace an array of marketing analytics tools and techniques to lift returns, sales and the new product design process.

The numbers are staggering. Home and auto insurers spent $6 billion in advertising last year. Geico alone spent almost a billion1.

Was it worth it? Not really. For all the money spent, the majority of insurers experienced annual growth between -1% and 1% over the last 10 years. And the revenue-to-advertisement ratio is significantly lower than the even thin margins of retail giant Walmart.

Figure 1

The strikingly similar insurance ads further complicate their effectiveness. "Call us and save $300 by switching from the same company that told you 30 minutes ago it could save you $300 by switching to them," they all seem to say.

Due to lack of differentiation, shifting customer preference towards popular brands, and self-directed online purchases, however, the above marketing strategy will not survive the next decade. In all probability, the advertising war will escalate before dying down. But the winners will ultimately be crowned by not only how much they spend, but how smartly they spend it.

This is where marketing analytics come into play. It's how insurers can avoid questionable marketing spend, help predict customer demand, and even supply more fitting and profitable products.

Seven Marketing Analytics Benefits

To gauge the emerging importance of marketing analytics, we commissioned InformationWeek to survey 150 insurance executives from the biggest American firms. What we found is that 86% of respondents believe that marketing analytics will be "significantly or somewhat more important" in the next five years, making it a top strategic initiative. Not only that, but upwards of 46% of insurers are already investing in marketing analytics, according to a 2012 report.

The reason: Marketing analytics can provide tremendous benefits, as much to marketing as the business on the whole. For example, when done right, marketing analytics can:

Reduce waste on fruitless campaigns.

 Amid ongoing ad bombardments, some carriers are differentiating their campaigns in search of new eyeballs. State Farm's "Born to Assist," Allstate"s "Mayhem" and GEICO's "Maxwell the Pig" were likely designed to resonate with different customer groups, and an analytics-driven approach can measure the impact of such campaigns. When used properly, analytics can help carriers kill unproductive campaigns sooner than later.

Eliminate spend on ineffective targeting channels.

Similar to the above, analytics can also help prioritize add channels. For example, millennials could be more responsive to online display advertisements and social platforms, whereas direct mail might be more effective for baby boomers. Given the increasing media placement options now available, marketing analytics lets carriers gain a better understanding of customer preference and placement strategy.

Generate more qualified leads.

Using marketing analytics, carriers can profile their leads based on origin, suitability, and engagement, and then direct those leads to the appropriate sales channel at the opportune time. This helps achieve a higher percentage of well-qualified leads as well as improve sales efficiency and the buying process.

Expedite product design.

Marketing analytics can also provide personal lines carriers with psychographic information on what customers want so that innovative products can be quickly created and offered. For example, an insurer could highlight effective bundling strategies such as an expensive motorcycle with a high-value home policy before setting pricing without all the facts.

Design more fitting products.

Developing new ideas is difficult. Defining preemptive strategies is even more difficult. But with marketing analytics, carriers are better able to offer discounts from a roof replacement partner for a home-owner policy or integrate with payments services such as PayPal based on existing customer behavior and preferences (a form of Code Halo™ thinking).

Improve cross-selling.

Using the above segment insights, analytic-driven carriers can approach customers at a time when they are most likely to buy new products. For example, carriers can track events that spawn new insurance needs — such as marriage, childbirth, and children turning 16 — and then engage in cross-selling and higher-close ratios.

Enhance retention with genuine loyalty pricing.

Currently, most carriers offer the same discount to all personal lines customers, regardless of loyalty. This means an individual who could potentially become a long-term customer and yield higher lifetime value receives the same discount as a customer with a propensity for switching carriers. Based on these insights, carriers with marketing analytics can improve the returns from discounts by offering greater incentives to customers who belong to the "loyal" segment, and reduce discounts to the rest.

Making Those Benefits a Reality

To realize the above benefits, home and auto insurers will need to address several important factors, including:

  • Key performance indicators. You can't identify new insights unless you know what you're looking for. In fact, our research indicates failure to define KPIs as one of the top three barriers carriers face when implementing marketing analytics.

  • Skilled resources. In addition to defining KPIs, our research indicates a lack of well-defined strategy as the top challenge to marketing analytics. To overcome this, carriers need proven and skilled guides (whether external or internal) with the ability to interpret data in the context of insurance. (See also: The Value of Signal and the Cost of Noise)

  • Marketing analytics platform. After defining triggers and hiring the right people, finding competent technology to collect, store, and analyze data across different media channels—including television, radio, billboard, online portals, and event banners—is another crucial step to implementing marketing analytics. Good talent can help here as w

  • Data-driven decision making. Gaining organizational consensus from analytics to make marketing decisions is, perhaps, the most powerful aspect of successful marketing analytics. Amazon is a notable example of this, making decisions around pricing, supply chain, and product promotions based on consumer analysis and predictive demand. To drive more discipline in this regard, insurance carriers should establish new policies for making fact-driven decisions, rather than "gut-feel" ones.

  • Linkages with other business functions. Improving marketing reach is one thing. But analytics can be fully harnessed with strong ties to distribution, product development, underwriting, and claims. Doing so ensures that marketing works with other business functions, and that whatever decisions are made as a result of marketing analytics are in sync with other business units

Closing Thoughts

As insurer commoditization continues to rise, so, too, will unprecedented marketing spend. As such, marketing analytics are imperative to forward-thinking carriers interested in improving effectiveness, efficiency, and returns. Simply put, the winners will be defined not only by how much they spend on marketing, but how smartly they spend it.

For more information, read the full white paper, Marketing Analytics: A Smarter Way for Auto and Home Insurers to Gain Competitive Advantage, or visit Cognizant's insurance practice for additional insights.

1 Kantar Media report on Advertisement Spending, 2011.

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