Advertisement

http://insurancethoughtleadership.com/wp-content/uploads/2014/04/bg-h1.png

facebooktwittergoogle_plusredditpinterestlinkedinmail Print

May 12, 2016

How to Turbocharge a Marketing Budget

Summary:

Insurers, especially in auto, should emulate Amazon and use their marketing to generate a new revenue stream ... from non-buyers.

Photo Courtesy of Jason Grose

Competition in the auto insurance industry is at an all-time high, with carriers engaged in an aggressive battle to acquire new customers and grow market share. Massive investments are being made in marketing and advertising to expand brand awareness and drive customer acquisition. This marketing arms race has led to annual ad spending growth of 15% to 20% per year, with total auto insurance advertising spending, by some accounts, eclipsing $8 billion per year.

These marketing investments are having a measurable impact at the top of the sales funnel. The total number of active shoppers looking for auto insurance quotes every year is increasing. Nearly 40% of all insurance policyholders are actively shopping to find a better deal. Likewise, brand-building efforts are having the desired effect on consumer behavior. Consumers are now more likely to begin their research by searching for brand names or visiting a brand advertiser’s site. This “brand shift” in search behavior from generic keywords (“auto insurance quotes”) to brand-specific keywords (“GEICO,” “State Farm”) is a trend. Many suspect that this trend was, in part, behind Google’s recent decision to eliminate ad placements from the right-hand side of the search results page. This move by Google increases the prominence of a few leading advertisers who can pay for premium positioning on generic terms, enabling Google to generate more revenue from the declining share of non-branded insurance searches.

See Also: From Marketing Myths to Truths

The corresponding impact of these marketing investments at the bottom of the funnel is not as clear. In fact, conversion rates across the industry are actually on the decline. J.D. Power’s 2015 U.S. Insurance Shopping Study summarized the market dynamics and customer acquisition challenges facing marketers:

  • 39% of current auto insurance policy holders are shopping, up from 32% in 2013. With close to 200 million policy holding households in the U.S., this translates into almost 80 million shoppers.
  • But only 29% of shoppers switch carriers, down from 37%.
  • And the average industry close rate for auto insurance carriers has declined to 13% from 18% in 2013.

So, on the one hand, 80 million active shoppers represent a large and attractive market of consumers that are engaging auto insurance brands. On the other hand, the total number of shoppers who switch to a new carrier is declining. And the average overall close rate across the industry is just 13%. In essence, the size of the haystack is growing, while the needle is seemingly getting smaller.

These are daunting statistics for insurance marketers and reinforce the importance of marketing efficiency. Additionally, the Google AdWords changes puts pressure on all but the largest brands to find creative ways to optimize budget and stay in front of shoppers. For larger brands, the increased competition for a smaller number of above-the-fold placements will likely inflate cost-per-click (CPC) pricing. In this challenging landscape, marketers need new strategies to optimize the entire sales funnel to get the most out of their marketing dollars and maintain competitive relevance.

Several innovative carriers have begun to embrace a creative solution to this challenge by recognizing that active shoppers on their sites are a highly valuable asset that can be monetized. These carriers are monetizing shoppers by presenting advertising listings for other carriers as part of the quote process. These carriers deliver a significantly improved and streamlined user experience – helping shoppers compare and find the right product more quickly – while also generating substantial incremental revenue.

This simple model has a dramatic effect on marketing efficiency by increasing the percentage of insurance shoppers who can be monetized from just the 5% to 15% (who buy a policy) to more than 50% (those who buy a policy or choose to compare rates on other carrier sites). The marketing departments at these carriers have found an entirely new revenue stream that can be funneled straight into the marketing budget to turbocharge advertising and customer acquisition.

This new way of thinking might sound radical for some auto insurance traditionalists. Yet nothing about this strategy is radical for today’s consumers. Quite the contrary, consumers have come to expect choice and comparison when shopping online. The convergence of several consumer trends is fueling this new monetization strategy:

Growth of Online Channel

The first major trend is the growth of the online channel for auto insurance. Andy Serowitz’s recent article, Demographics and P&C Insurance, did an excellent job highlighting several macro trends affecting the industry, including the growth of the online channel. The online shift that was initiated by direct carriers like GEICO and Progressive has helped establish the Internet as an important acquisition channel for all carriers; the number of policies sold online has increased 400% over the last eight years. Although agents still play a significant role, the online channel now represents 20% to 25% of total insurance sales transactions and influences more than 50% of transactions. Furthermore, the younger demographic found online tends to be more price-sensitive and less brand-loyal, seeking quick results with minimal friction. Marketers have the opportunity to develop creative solutions that are better aligned with the unique perspectives and preferences of this group.

Comparison Shopping

Comparison shopping has simply become a way of life on the internet. Auto insurance shoppers want the ability to compare. Shoppers evaluate an average of 4.5 brands and receive an average of 3.1 quotes, a figure that increases to 3.7 for online shoppers. Insurance carriers need to embrace this reality and deliver a better consumer experience.

Blurring Lines Between Commerce and Search

The last few years have seen a blurring of the lines between traditional search providers and commerce companies. Amazon is an excellent example of a commerce brand that has emerged as a viable search alternative. In 2009, Amazon was the starting point for 18% of shoppers searching for products. In 2015, that figure reached 44%.

Simultaneously, Amazon also built an impressive ad business. For several years, Amazon has been serving sponsored ad listings for other e-commerce sites alongside its own offerings. When Amazon cannot convert a shopper through a direct purchase, it earns ad revenue by sending the shopper elsewhere. Amazon’s ad business now generates an impressive $500 million per year that it reinvests in customer acquisition and other growth initiatives.

Insurance carriers could benefit greatly by taking a page from Amazon’s playbook and recognize that consumers are coming to their sites to initiate a more targeted or vertical-specific search. These shoppers have high purchase intent, which represents a highly valuable marketing asset with significant untapped value. For years, unlocking the media value of this type of search has been the exclusive domain of the search engines. But commerce brands now have the opportunity to play a leading role here that improves consumer experience and delivers tangible economic rewards.

So if the consumer need is there and the economics are significant, why haven’t more carriers already embraced this strategy? For most carriers, there are two common objections to overcome:

1) Cannibalization of policy revenue is an obvious concern for most carriers that consider monetizing more shoppers. The goal is not to replace policy revenue with ad revenue.

But performance results show that cannibalization can be minimized. To begin, most carriers start by monetizing low-risk, “non-served” customer segments, including non-covered geographies or consumers who fall outside of a carrier’s underwriting parameters. These non-served segments offer pure revenue upside.

Within “served markets,” carriers find the impact to policy revenue to be negligible. Many carriers, in fact, experience an increase in conversions as greater openness builds trust with consumers and translates into more policy sales. This is also where advertising technology providers like MediaAlpha play a critical role. Technology tools now exist that empower carriers to take full control of when and how ad listings are shown based upon internal metrics and desired audiences. This ensures that ads are only shown if the economic benefit of showing an ad significantly outweighs any potential impact to policy revenue. The result is minimal cannibalization that is typically offset 3-5X by corresponding ad revenue.

2) The second-most common concern is the perceived negative brand impact from showing ad listings for other carriers. Again, data collected on consumer reaction and preferences indicates no negative impact on brand perception. Shoppers are presented ads simultaneously with a quote (or instead of a quote), so the ad experience is in the context of shopping. This experience is in line with consumer expectations, and there is no data that suggests it creates confusion or negative sentiment.

On the contrary, brands get a powerful opportunity to deliver value where they previously could not. Without ad listings, 85% to 95% of shoppers visiting a carrier website will end their quote search unsuccessfully. The brand experience for that individual shopper is unfulfilled. The shopper is on her own to leave the site and restart a search elsewhere. By providing these shoppers with alternative listings, carriers now have a meaningful and profitable way to improve upon this poor consumer experience and lift their brand perception in the process.

For auto insurance carriers, the value proposition of monetizing shoppers is clear. In a competitive marketplace that necessitates strong marketing efficiency, the ability to generate significant revenue from non-purchasing consumers is a highly compelling economic opportunity. By unlocking this new revenue stream, incremental revenue can immediately be reinvested into more targeted, higher-value consumer segments. Brands can recapture a significant percentage of marketing inefficiency and redeploy those dollars to more effectively acquire the right customers.

description_here

About the Author

Jeff Navach is the vice president of marketing for MediaAlpha, where he is responsible for leading all marketing activities, including customer insights, brand development and demand generation. MediaAlpha operates the leading technology platforms for real-time buying and selling of high-intent, vertical-specific search media.

follow @ITLupdates for more stories like this

Send Jeff email

+ READ MORE about this author ...

To subscribe to articles by other authors or in other topic areas, or to manage your existing subscriptions, click here.
Like this Post? Share it!

Add a Comment or Ask a Question

blog comments powered by Disqus