The popularity of price comparison websites means that financial services products are now largely commoditised.
So how can insurance companies and banks engender customer loyalty when in many cases they have limited brand recognition?
At a DMA event I attended this week several industry speakers discussed exactly this topic, and the prognosis for financial services appears to be fairly depressing.
I’ll get the bleakest vision of the future out the way first.
During an overview of disruptive fintech startups, Barry Clark from Future Foundation mentioned an app called Knip that acts as a mobile insurance broker.
The app enables users to compare and buy insurance products, manage their policies, and even make a claim.
While this sounds like a great service for users, this type of app has potentially dire consequences for financial services companies.
As Clark pointed out, in this example Knip owns the customer relationship and products are completely commoditized. The insurance companies are just faceless providers.
If these apps continue to gain popularity (and potentially branch into other areas, such as banking), should financial services companies stop investing in brand marketing altogether?
Would it not make more sense to focus all investment into creating a brilliant back-end and operations team to ensure that integration with platforms like Knip is quick and simple?
Stripping out marketing costs would also mean that products are cheaper for the end user.
Emphasising value over price
Following on from Clark, Katrina King from Direct Line Group (DLG) asked how financial services can combat price comparison sites by shifting their messaging to emphasise value instead of price.
The harsh truth of the matter is that loyalty to insurance companies is mainly due to customer apathy.
If people can be bothered to shop around for a new policy, then decisions are often driven by price – a reality reflected in the marketing messages we see from financial services companies.
The challenge for DLG, which shuns comparison sites, is how to avoid this race to the bottom and put the focus on the value of its services rather than the cost.
The result was DLG’s recent ‘Fixers’ campaign featuring Harvey Keitel, which highlighted the ways in which the company helps customers when they have an emergency.
For example, DLG provides a free hire car for 21 days if a customer’s own vehicle is stolen or damaged.
King said that most customers only recognise the value of their insurance product when they’re complaining about something (e.g. “Why don’t you cover xx?”), as people buy on price assuming they’ll never actually have to make a claim.
Therefore the campaign had to put a big focus on educating customers as to why value is important when buying insurance.
The Fixers campaign achieved excellent results for DLG.
This slightly blurry slide shows that the number of people who said they feel close to the Direct Line brand increased by eight percentage points from August 2014 to September 2015.
Furthermore, DLG received a number of positive emails from customers thanking the business for adding the benefits such as free car rental.
As you can probably imagine, it’s not often that people write to their insurance company to say thanks.
King said that the campaign was a success as it was created with the customer in mind. Furthermore, the messages were constantly tested and optimised to ensure maximum impact.
What does the future hold?
King’s final slide presented her view for how insurance brands can continue to compete with price comparison sites and fintech startups.
That’s also where this post will finish.
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