• News
  • SAN DIEGO
  • Finance

Rodgers Clashes With Flo as McKinsey Questions ‘Arms Race’ (1)

Jan. 30 (Bloomberg) -- U.S. auto insurers, a group that has enlisted Hollywood actors and professional athletes to pitch their coverage, failed to boost sales even after spending billions of dollars on advertisements, McKinsey & Co. said.

The industry has been in a “marketing arms race” during the past decade, boosting spending 15 percent a year to almost $6 billion in 2011, the management-consulting firm said in a report released today. Sales have been stagnant for the group over 10 years and more than half of the advertising outlay has come from insurers that didn’t gain market share, McKinsey said.

Progressive Corp. and Berkshire Hathaway Inc.’s Geico unit added customers by advertising low prices. That pitch may not be the most effective for all insurers as they compete for part of a mature market, said Tanguy Catlin, a partner in McKinsey’s insurance practice and a co-author of the report.

“When Nike advertises shoes, people can buy more shoes,” he said in a phone interview. Spending more on auto insurance marketing doesn’t necessarily translate into higher sales, because consumers “don’t buy multiple insurance policies.”

Geico led insurers in ad spending in 2011 with an outlay of almost $1 billion, according to data compiled by SNL Financial. The insurer’s spots have featured a talking pig and comedian Gallagher to highlight savings customers can realize by switching to its policies.

State Farm Mutual Automobile Insurance Co., the largest U.S. auto insurer, has used sports stars such as Green Bay Packers quarterback Aaron Rodgers in ads. It was second with more than $800 million in spending in 2011. Allstate Corp. was third, followed by Progressive and Farmers Insurance, which has a management relationship with Zurich Insurance Group AG.

Top Five

That spending has helped the top five advertisers pull away “in terms of brand awareness” from rivals including Travelers Cos. and Liberty Mutual Holding Co., McKinsey said. Buying more ads may not be the best strategy for all insurers, since only about 30 percent of policyholders focus on the cost of coverage.

“The other 70 percent -- the ‘silent majority’ of policyholders -- appears to be difficult to reach,” the authors wrote in the report. “This is likely because they are unresponsive to marketing messages based solely around price.”

Auto insurers have been bolstering marketing teams to compete. Northbrook, Illinois-based Allstate hired Sanjay Gupta from Ally Financial Inc. as chief marketing officer last year as the insurer seeks to build Esurance, a unit that sells policies direct to consumers over the Internet.

Krasinski, Haysbert

Allstate hired actor John Krasinski as a pitchman for TV spots and radio ads that began airing in 2011 to supplement campaigns it already runs using Dennis Haysbert and actor Dean Winters playing a character named Mayhem.

Progressive, known for its spunky saleswoman Flo, spent $536 million on ads in 2011, SNL Financial data show. The Mayfield Village, Ohio-based insurer hired Jeff Charney from Aflac Inc. in 2010 to be chief marketing officer.

“We’re not going to outspend anybody, but we definitely are going to out-create people,” Charney said at an investor presentation in June 2011, referring to the company’s strategy for online advertising.

The surging cost of winning new customers has made retaining policyholders even more important, McKinsey said. Insurers can benefit if they tailor messages to specific customer groups as carriers have done in the U.K. by developing so-called micro-brands, according to the report.

“Auto-insurance shoppers are not as single-minded as the advertising aimed at attracting them would indicate,” the authors said. “There are multiple segments, and the consumers in each of these segments are driven by different needs and preferences, and respond to distinct messages at distinct touch points in their shopping journey.”

Leave Your Comment

Comments are moderated by SDDT, in accordance with the SDDT Comment Policy, and may not appear on this commentary until they have been reviewed and deemed appropriate for posting. Also, due to the volume of comments we receive, not all comments will be posted.

SDDT Comment Policy: SDDT encourages you to add a comment to this discussion. You may not post any unlawful, threatening, defamatory, obscene, pornographic or other material that would violate the law. All comments should be relevant to the topic and remain respectful of other authors and commenters. You are solely responsible for your own comments, the consequences of posting those comments, and the consequences of any reliance by you on the comments of others. By submitting your comment, you hereby give SDDT the right, but not the obligation, to post, air, edit, exhibit, telecast, cablecast, webcast, re-use, publish, reproduce, use, license, print, distribute or otherwise use your comment(s) and accompanying personal identifying and other information you provide via all forms of media now known or hereafter devised, worldwide, in perpetuity. SDDT Privacy Statement.

User Response
0 UserComments

Leave Your Comment

Comments are moderated by SDDT, in accordance with the SDDT Comment Policy, and may not appear on this commentary until they have been reviewed and deemed appropriate for posting. Also, due to the volume of comments we receive, not all comments will be posted.

SDDT Comment Policy: SDDT encourages you to add a comment to this discussion. You may not post any unlawful, threatening, defamatory, obscene, pornographic or other material that would violate the law. All comments should be relevant to the topic and remain respectful of other authors and commenters. You are solely responsible for your own comments, the consequences of posting those comments, and the consequences of any reliance by you on the comments of others. By submitting your comment, you hereby give SDDT the right, but not the obligation, to post, air, edit, exhibit, telecast, cablecast, webcast, re-use, publish, reproduce, use, license, print, distribute or otherwise use your comment(s) and accompanying personal identifying and other information you provide via all forms of media now known or hereafter devised, worldwide, in perpetuity. SDDT Privacy Statement.

Subscribe Today!