MARKETING ACTIVITIES & STRATEGIES

Product-Driven Organizations: place great emphasis on selling sound products at competitive prices through strong distribution systems without focusing on the public’s needs, tastes & preferences.

Market-Driven Organizations: shaped by and responds to the needs of the marketplace and the customers who make up the marketplace.

A Market is a group of individuals or organizations within the total population who are the actual or potential buyers of a product.

Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. Marketing operations involve

• Determining organizational marketing objectives and customer needs.
• Designing. Developing, and pricing products to meet these needs.
• Establishing and executing methods of promoting and distributing products to prospective buyers.

The Marketing Mix

To perform marketing tasks effectively, marketers manage four primary variables – product, price, promotion and distribution collectively known as the marketing mix.

Basic Marketing Activities for Life Insurance Companies

• Market Identification
• Collecting & Evaluating marketing information
• Planning & Controlling
• Product Development
• Pricing
• Promotion
• Distribution

Positioning

Involves creating a unique market identity for product or a company in the customer’s mind and then using promotion and other elements of the marketing mix to support that position. An insurer may position itself on the basis of

• Company or product attributes
• Types of products offered
• Price & Quality of products
• Target markets served
• Distribution characteristics

Market Identification

Before beginning to develop & market its products a life insurance company typically

• Identifies and evaluates the total market for the products the company is capable of offering.
• Selects the segments of the total market on which the company will focus its marketing efforts.
• Develops and implements a marketing mix strategy.

Market Segmentation

            Is the process of dividing large, heterogeneous markets into smaller more homogenous submarkets that have relatively similar needs known as market segment.

Although the first step in market segmentation is dividing the entire product into consumer (individuals) market & organizational/business markets (groups, companies), life insurance companies divide these markets into smaller, more narrowly defined submarkets based on variety of characteristics as

• Geographic location of participants
• Variables such as age, sex, marital status etc.
• Types of customer response to a particular product.
  

Target Marketing

Is the process of evaluating the attractiveness of each market segment to the company and selecting one or more of the segments on which to focus the company’s marketing efforts.

Some factors that an insurer typically considers when selecting its target markets are each segment’s size, growth potential, and distribution & service costs.

Target Marketing Strategies

Undifferentiated marketing: also known as mass marketing, is a strategy by which a company defines the total market for a product as its target market & designs a single marketing mix for the entire market.

Concentrated marketing: company focuses all of its marketing resources on satisfying the needs of one segment of the total market for a particular type of product. Example of concentrated marketing is offering mortgage protection life insurance policies to new homeowners. It allows a small insurer with limited resources to enter & compete in a particular market segment.

Differentiated marketing: company attempts to satisfy the needs of different segments of the total market by offering a number of products and marketing mixes designed to appeal to the different segments. Ex. Whole life, universal life.

Marketing Information

Insurers need marketing information about target markets and customer needs to help them determine which new products to develop. Most of the information needed for marketing decision making comes from

• Internal Database – computerized collection of internal records and reports from sources throughout a company. These contain detailed information about a company’s sales, expenses, profitability, products, and promotions.

• Marketing Intelligence – systematic collection & analysis of publicly available information about competitors and ongoing developments in the marketing environment.

Some Sources include

·         Databases & reports available through the internet.

·         Business, financial services, and insurance periodicals.

·         Industry & professional association meetings.

·         Input from the company’s own sales force, employees, and customers.

• Marketing research – method of collecting, interpreting & reporting information related to specific marketing problems or opportunities.

Marketing Information helps an insurer identify and define marketing opportunities and threats; determine which consumers to pursue, what products these consumers need and are most likely to purchase.

The marketing environment consists of all of the elements in the company’s internal and external environments that directly or indirectly affect the company’s ability to carry out its marketing activities. A company’s internal environment consists of those elements within the company that affect the company’s business functions and over which the company has control. The external environment consists of those elements they’re outside the company and over which the company has little or no control.

Internal Marketing Environment

Primary internal factors that affect an insurer’s marketing operations include the company’s

• Product Mix
• Also called product portfolio is the total assortment of products available from a company. An insurer’s product mix and its experience with different types of products have a significant impact on its marketing strategy.

• Target Markets

• Distribution Channels
• Also called a distribution system, is a network of organizations and people that performs all the marketing activities required to deliver products to customers. Each distribution channel requires its own sales techniques and its own types of products.Ex. Career agents, insurance brokers, salaried sales staff.

• Corporate Ownership
• Whether the company is stock company or mutual company, affects the ability of the insurer to obtain additional sources of funds to use the growth, expansion, acquisition, or financial stability.

• Size & Resources
• A company’s size can either limit or enhance the number of marketing opportunities it can pursue.

External Marketing Environment

Economic Environment – Economic conditions can significantly affect the way life insurance companies operate and market products, the spending habits of customers, and availability and cost of employees to work for the company.

Economic Factors that concern the insurer:

·       Business Cycle which is process of cumulative change in the total economy of a nation over a time span longer than a year.

·         Level of Interest Rates which reflects the cost of borrowing in an economy.

·         Rate of Inflation

·         Rate of Unemployment

·         Level of Stock prices

Social Environment consists of the various groups of customers who make up a population, their demographic characteristics, their values and beliefs, and their shared norms of behavior.

Technological Environment Portable Computers, CD-ROMs, Internet allow insurance companies to develop websites, personal policy illustrations almost instantly and virtually anywhere.

Competitive Environment An insurer’s marketing mix and marketing strategies are influenced by its competitor’s approaches to products, target markets, prices & marketing strategies.

Regulatory Environment Laws and regulatory requirements specify the permissible and prohibited activities of a life insurer’s operations, including its marketing activities.

The US Unfair Trade Practices Act defines certain practices as unfair and prohibits those practices in the business of insurance if they’re committed 1) flagrantly in conscious disregard of the Act 2) so frequently as to indicate a general business practice.

The Marketing Plan

 Market-driven life insurance companies plan & control their marketing activities with a marketing plan, which is a written document that specifies the marketing goals for a particular product or product line and describes the strategies and the implementation and control efforts the company intends to use to achieve those goals.

Elements of the Marketing Plan

Most plans include

·         Executive Summary A brief summary of the plan’s purpose and recommendations.

·         Situation Analysis  An evaluation of the environmental factors

·         Marketing Objectives

·         Marketing Strategies

·         Tactical/Action programs Description of the marketing activities that are to be performed.

·         Budgets

·         Evaluation & Control Methodology The controls that the company will use to analyze the progress & success of the marketing plan.

Marketing Strategies for Company Growth

Insurers seeking growth commonly implement one or more of the following marketing growth strategies:

·         Increasing sales of existing products to current or potential customers.

·         Increasing sales of existing products to new geographic locations.

·         Increasing overall sales

·         Developing new distribution channels.

·         Purchasing a line of business from another insurer as a way of increasing its share of a market or entering a new market.

·         Selling an unprofitable line of business and using the proceeds to pursue other growth opportunities.

·         Increasing sales by expanding operations to other countries.