Archive for July, 2014|Monthly archive page

Optimizing the insurance broker’s channel

Gone are the salad days for many P&C (property and casualty) insurers, the companies that insure our cars, homes and belongings. The sector is facing many headwinds including rapidly changing consumer needs, increased risk (particularly around climate change) and rising costs. One vital component of the P&C insurer value chain, the independent insurance broker, is at the centre of change. Insurers that can deftly navigate this transformation will deliver higher consumer value, increased revenues and enjoy better relationships with their broker partners.

Historically, most insurance carriers distributed their products through local insurance agents or brokers. However, times have changed as new distribution channels emerged. Web-based technologies now allow customers to quickly and directly deal with insurance companies and get around-the-clock peer feedback. Insurers now have better predictive tools, advanced pricing algorithms and straight-through underwriting data that allow them to offer quotes instantly while minimizing risk and cost. Finally, providing a differentiated customer experience has become more challenging when consumers can deal either with brokers or with insurance companies that offer their products directly to consumers and influencers. These changes have important implications for the provider-broker partnership.

Contrary to the hype of a decade ago, the Internet is not dis-intermediating channels like insurance brokers even when consumers have a direct-provider option. To wit, a 2012 McKinsey study of the U.S. auto insurance sector found 59% of consumers dealt with a broker and directly with an insurance provider through their customer journey. For the foreseeable future, good brokers will continue to play an important role in the marketing, selling and servicing insurance products by providing choice and advice to consumers.

While marketing through this multi-channel world can complicate an insurer’s business model, it also presents opportunities to outflank competitors and deliver more consumer value. How can insurance companies work better with their brokers and deliver on joint goals?

In our client work and research we have found that P&C insurers share similar channel issues as other sectors including banking, travel and industrial goods. Leaders in these markets have thrived in a multi-channel environment by using strong, intermediary relationships to deliver an omni-channel brand experience — a compelling value proposition consistently delivered through every online and offline channel. Some best practices to enhance the broker relationship include:

1. Align around the consumer

Many factors — social media, mobile computing and a continuing recessionary mindset — are affecting the way most consumers research products and want to deal with brokers and insurers. Successful providers and brokers are embracing these trends through: an integrated, customer-centric model; the capture and utilization of partner knowledge of local markets and sub-segments, and; sophisticated, qualitative Big Data analytics that enable insurers to better understand customer needs wherever they are in the purchase or support journey so they can provide the brokers with the right products, tools and information. Failure to stay abreast of consumer needs can result in a compromised value proposition and lower market share.

2. Get closer to the channel

Smart providers understand that partnership is the foundation of a high performance broker channel. The way to achieve this is through multi-level communication, common goals and ongoing collaboration — not conflict. This partnership mindset includes understanding its entrepreneurial brokers, aligning everyone’s business interests and giving the broker a differentiated reason to favour them over other providers. Market leaders seek to embed this cooperation into their cultures as well as management practices.

“Insurance companies who rely on brokers for the sale of their products will succeed only if brokers are successful,” said Monika Federau, chief strategy officer for Intact Financial Corporation. “This is why we aim to be the insurer that is the most conducive to their growth by providing them with financial, technological, and marketing support.”

3. Enabling the broker’s business

Making significant investment in technology, innovative products, joint marketing and capabilities are needed to reinforce verbal commitments. For example, Intact has invested millions of dollars in technologies that make it easier for brokers to deal with it and allow them to focus their efforts in better serving their own customers. Furthermore, Intact provides differentiated products and services that meet the bespoke needs of its 2,800 brokers and their customers.

Intact’s strategy has paid off. Today, the company is the leading P&C insurer in Canada with a market share that is nearly double its nearest competitor. Furthermore, Intact has consistently outperformed the industry in terms of revenue growth and profitability. Clearly, working with — not against your channel — can pay significant dividends.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Advertisements

Iron Dome innovation lessons

The old ditty ‘when Mother Nature gives you lemons you make lemonade’ tells us a lot about about being creative, particularly when innovation is critical to your corporate strategy — and survival. In the current conflict between Israel and Hamas, the lemons in questions are the hundreds of rockets being fired into Israel on a daily basis. Israel’s ‘lemonade’ was the development of the Iron Dome anti-missile system, which has quickly become one of the most impressive weapon-defence systems of the past 20 years. What lessons can businesses glean from the development of this world-class technology?

The Iron Dome was developed by Israeli defence contractor Rafael Advanced Defense Systems. Its development from ideation to deployment took about seven years, hundreds of workers, dozens of suppliers and more than $200M in investment (much of it supplied by the U.S.). The Dome’s purpose is straightforward and exceedingly difficult; the system is designed to track and intercept incoming short-range missiles with its own missiles before the attacking missiles strike their targets. Missiles that would have hit an unpopulated area are ignored, in order not to waste munitions. To date, the system has been very successful, intercepting approximately of 90% of the threats it faces. Rafael is currently looking to sell the system to a variety of countries.

Aside from its military success, the Iron Dome is a model of innovation commercialization under tight constraints. Below are seven lessons gleaned from a variety of public sources. The quotes below are from project team members and were anonymously cited (for security reasons) in the Times of Israel newspaper.

1. Create urgency

Contributing to the protection of your nation can be motivating. However, Rafael’s leaders put wood behind the arrow by making the Dome a strategic priority. The project’s constraints — tight timelines, technical challenges, and cost limitations — were clearly articulated so there were no role misalignments or executional misunderstandings.

2. Assemble the best people

Having the right mix of capable people is vital. Rafeal’s management assembled a technical dream team. According to one engineer, “The best people in the field came together for this project.” Patriotism was not the only motivator: “Many engineers were inspired by the technological challenges and … fought to participate in the project.” As it turned out, much of the team was, through design or chance, made up of very curious and creative individuals able to sustain a high workload and quickly solve problems.

3. Optimize the team size

Given the constraints, management decided that using a “lean, mean” team of motivated experts was the right tack. The modestly sized core development team — numbering in the dozens — was much smaller than what you would typically see on major initiatives in bigger organizations. The payoff was faster project speed, less politicking and reduced management complexity.

4. Quickly evaluate issues

One pressing issue was how to collate and evaluate the numerous conceptual and technical ideas, and technology fixes. The team developed excellent screening tools to help analyze options and decide when to let go of an idea and move on. These methodologies avoided analysis paralysis, and accelerated the pace of experimentation and prototype development.

5. Experiment regularly

A culture of risk taking and continuous learning permeated the project team. Part of this culture involved running many experiments to test ideas and technology. Successful experiments were studied to distill technical shortcuts and share best practices. Failures were also systematically analyzed to avoid repetition. These practices minimized technical risk, avoided duplication and maximized speed.

6. Collaborate closely

The Iron Dome was developed in close collaboration with the users and other stakeholders to reflect real-world needs. One team member said, “Our relationship with the people in the field was unprecedented; this was essential for adapting the system to all the constraints in the field.” Given the need to quickly deploy the system, the Dome was designed with simplicity in mind so as to improve manufacturability and ease of transport.

7. Be entrepreneurial

For a prolonged period, the Iron Dome faced criticism from many circles — vested institutional interests, the media and military experts — around cost, potential effectiveness etc. The team used these concerns as a personal challenge, and to further refine their plans. According to one engineer, “Maybe we should thank the media, because when you read a cynical article, you say to yourself, ‘Let’s show them’ and you tackle the project, invigorated.” Another said, “In retrospect, it was the constraints, which seemed almost insurmountable, that led us to develop creative and successful solutions,” including engineering lower-cost parts from scratch and using components that were discovered in a toy car sold at Toys ‘R’ Us.

The development and effectiveness of the Iron Dome teaches companies that innovation success can be more about attitude, common sense and collaboration — the intangibles — than investment and size of R&D teams. Managers would be wise to consider these lessons.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

3 ways to maximize sponsorship ROI

If you followed the World Cup, you would have noticed the many corporate sponsors of the event, the teams and players (i.e. the properties). Sponsoring the right property can give a brand a major boost in awareness and appeal. However, having the wrong approach or property could waste the investment and compromise the firm’s brand image. Fortunately, there are some best practices to follow to maximize a sponsorship’s potential.

Corporate sponsorship is big business. Annual global investment exceeds $25-billion, growing at almost 10% each year. Sports — teams, events and athletes — make up the majority of spend. Growth is being driven by an increase in the number of new properties like rock bands, festivals and charities, the rising value of some properties as well as the growing practice of tiering sponsorship support (think platinum, gold, silver levels).

Sponsorships are an important way for many companies to get their brands in front of elusive, skeptical and mobile consumers who are regularly bombarded by numerous marketing messages. Opportunities can range from naming rights on a stadium and client relationship events to limited edition products and custom advertising programs. Sponsorships can significantly build a business (think Michael Jordan and Nike) or hurt a brand image, as was the case when Kate Moss’ personal issues led to major problems for Chanel and H&M. How do you ensure you get the most value from this powerful but risky marketing tool?

The best programs get three things right:

1.  Align the opportunity to business objectives

Given the range of properties, you need to use a thorough process to filter and analyze the sponsorships to find strategic congruence between the property, brand and target audience. When affinities are lacking, the opportunity and investment could be wasted. In a high-profile program we studied, a mismatch between the firm’s customer base (women, 18-49) and the properties’ core audience (men 18-24) led to a lower than expected ROI.

2.  Promote the sponsorship

Companies often spend a lot of money acquiring sponsorship rights but very little on the promotional support that would magnify its impact. Various studies suggest that underperforming programs spend less than $1 on promotion for every $1 spent on sponsorship rights. The lack of marketing support may trace back to management neglect or the need to limit spending after paying for the rights. In one case, a client of ours believed that becoming a concert sponsor alone would drive their business. Though the sponsorship was deemed a success, management acknowledged that a lack of promotional support resulted in the firm missing out on millions of dollars in merchandise sales. Conversely, higher performing companies spend more than $1.50 in promotion for every $1 in sponsorship. Not only do these firms magnify their sponsorship investment but they also integrate their properties within their marketing mix.

3.  Evaluate performance

Despite the importance of sponsorships, many firms do not effectively quantify the impact of their expenditures. This is not surprising given the difficulty of linking sales directly to sponsorships. Successful companies use a variety of approaches. The simplest way is to survey customers, partners and employees on program impact and lessons learned. Firms can also tie total program spending to key metrics such as unaided awareness or purchase intent, and then link them to sales using regression analysis. The most sophisticated approach uses econometrics to ascertain links between programs, awareness and sales, and then isolate the impact of sponsorships from other marketing and sales activities.

Maximizing sponsorship value can be a challenge, especially when firms have multiple properties, customer segments and marketing tactics. BMO Financial Group is a major sponsor that has figured this out. The bank successfully operates a North American-wide program with dozens of properties and partners including: NBA Basketball (Toronto, Chicago), NHL Hockey (St. Louis, Chicago) Major League Soccer (Toronto, Montreal), amateur sports and the Calgary Stampede.

The Bank looks at sponsorships strategically, with a proven approach to identifying, evaluating and managing sponsorship deals. Each property — whether it is in sports, arts or regional events — aims to reach diverse customer segments within local communities as well as appeal to broader national audiences. The bank magnifies the impact of its sponsorships by integrating its elements with other marketing activities. For example, BMO was able to quickly maximize its sponsorship of the Toronto Raptors during their 2014 playoff run by increasing media advertising and launching a new Twitter campaign.

Finally, BMO sees a deal signing as the beginning of an iterative win-win relationship between the parties and not an end in itself. Justine Fedak, senior vice-president and head of brand, advertising and sponsorships for BMO, emphasizes the importance of long-term partnership. “Similar to marriage, a sponsorship begins with a mutual understanding of shared values and then evolves over time. Gone are the days when you slap a logo on something and walk away.”

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Improve your sales close rates

Selling excellence has never been so important as it is in this low-growth world. In our experience, high performing sales representatives employ simple but powerful techniques to overcome buyer reticence and differentiate their offering. Some of these methods have been the subject of academic research, recently published in the Harvard Business Review, and summarized below.

Ask for advice

High performers pursue two important objectives in a sales relationship: 1) gain vital information on the customer’s business and personal needs, target price and decision criteria. Securing this information allows sales reps to link their products with high value and justify their price points and; 2) build trust with the buyer, especially when the seller has no previous sales relationship with the organization. Satisfying these objectives is not easy when buyers are reluctant to share information or are not accessible.

Successful sales people secure key information and develop trust using a simple approach: they ask the buyer for advice on how to overcome barriers or solve problems. Some sellers may be reluctant to do this; they may perceive this as pandering or displaying a lack of skill. In reality, the opposite is true. In their research, professors Katie Liljenquist and Adam Galinsky found that asking an opponent for advice made the seller appear more warm, humble and cooperative, improving the chance of closing the deal at a desirable price.

Asking for advice provides three key advantages (in addition to getting valuable information). First, it makes a sales rep appear more likeable, warm and cooperative. Furthermore, the buyer may be flattered because the request is an implicit endorsement of their expertise and status. Second, through conversation buyers will be able to see things from the rep’s perspective leading to more creative problem-solving and solution alignment. Finally, asking for advice could turn the buyer into an internal advocate. Providing advice is an investment of their time and effort making them more likely to follow through on their recommendations and become the seller’s champion.

The beauty of asking for advice is that it is simple, low-cost and works with most people. Sometimes, however, sales reps face a head-to-head selling situation where they need to stand out from the competition.

Give the buyer something extra

Most large organizations employ skilled buyers and rigid procurement processes to minimize purchase costs, eliminate rogue buying and qualify vendors. This creates special challenges for companies who have little or no previous selling history at the company or offer a relatively undifferentiated product. Often, at the end of the process buyers will go back to the finalists and tell them the bids are equivalent, asking them to provide “something more” to break the tie.

The typical seller will respond with the well-worn tactic of stressing the bells and whistles in their product that may be lacking in the competitors’. When that doesn’t work, sellers will usually default to price concessions, added features or better terms. According to research by professors Anderson, Narus and Wouters, most buyers are not looking for these things. Our experience is that offering late-stage price concessions can signal desperation, reduce trust (since the best price was supposed to have been submitted earlier), or introduce concerns that quality and service will be shortchanged with lower prices. The researchers assert that when buyers ask for additional value, “they are actually looking for a justifier: an element of an offering that would make a noteworthy difference to their company’s business.”

A “justifier” helps buyers visibly demonstrate to management that they are making a contribution to the overall business — without sacrificing quality, service or delivery — helping enhance their status and providing psychological validation for their choice. Providing justifiers delivers many benefits for suppliers. Firms are better able to differentiate their product, powerfully link it with the prospect’s strategic goals, and price their offerings at or near the upper end of each customer’s acceptable range.

Identifying and leveraging justifiers comes from deeply understanding how a company really uses the product and what their larger business priorities are. These differentiators could improve ease of use (and lower overall cost) through the use of special sizes, bespoke logistic services or seamless integration with complementary products. As an example, a real estate-developer client used the tactic of paying a prospective tenant’s moving costs to fill buildings. In another case, a robotics company we worked with secured a major project with this justifier – integrating two different components (one of them from another vendor) into a sub assembly, reducing the customer’s labour and inventory costs, and ensuring seamless interoperability.

In many cases, the best product, service or price will not secure the business. A skilled sales representative can still provide the edge in a competitive situation through employing proven relationship-management techniques, as well as other successful practices while creatively addressing fundamental client needs.

For more information on our services or work, please visit the Quanta Consulting Inc. web site.