£125 million spent in 2017! We investigate………

When you look at the current UK home insurance market consumers are bombarded with a vast array of marketing messages. They predominately fall into three types of messages, which we’ll explore along with the total spend being made within the UK sector on above the line marketing and the types of media being employed by marketers.

Hey big spender……

The insurance industry spent just shy of £100 million on advertising home insurance in 2017 and if you add the standalone home emergency product into this mix, it jumps to £125 million per year. That’s a staggering spend and the equivalent cost in football terms of Romelu Lukako and Kevin de Bruyne’s transfers fees. I think we know where the bargain was there! But back to insurance, there has been a steady decline in spend over the last 3 years, where we saw a peak spend of £175 million in 2014 (both products). But does this mean less advertising is being conducted? The answer is simply no; insight shows the decline is due to the strategy & type of ad spend being made. Big spending insurers are switching to digital advertising which is cheaper (is also harder to track actual spend), and are now recognising the tie up of all their products is a far cheaper option to increase volume, than spending big cost per sale’s to recruit customers with less brand loyalty. A multi-product holding then also aids in combatting the added factors of renewal transparency, consumers shopping around & tools to compare products easily.

Contact at 7 o’clock……

So the market is spending large amounts, but what are the channels & media communications of choice? Research from both Mintel & RSA shows that direct mail accounts for around 36% of spend and TV a further 37%. No surprise as these communications are expensive but deliver on reach (TV) and provide the ability to contact at an optimal time and personalise (DM).

TV offers great reach and brand awareness, but this spend has fallen over the last 3 years, driven by the adoption of social media, streaming services i.e. Netflix and video sharing sites such as YouTube. Direct mail is also down by around the same proportion over the entire period, this is likely due to providers mailing more targeted databases, as well as, making use of alternative channels to engage with existing customers e.g. text, email and social media.

The channel with the lowest amount of market spend in 2017 was door drops, with just 3% of the overall total spent. This suggests a considerable preference for direct communication using power data (i.e. renewal & propensity to purchase) when prospecting customers through the letterbox.

Truth or myth……

Through our monitoring of the UK market there are three types of campaign messages that are predominately being used:

  1. Low price points (Home Insurance from £99)
  2. Big discounts (Get up to 35% off your home insurance)
  3. Incentives (£50 cashback when you buy today).

You’ll see these messages frequently used by various insurers (banks, retailers & direct insurers). But how are these messages constructed and are they really attainable?

Low price points

This message will lead with an eye catching low price point, something along the lines of ‘Home Insurance from £85 per year’. But look closer at the campaign legal wording; it’s usually based on 10% of a very small volume of customers. So very unlikely a premium that will be attainable, it’s designed to drive calls and clicks in large volume, then at the back end a slick sales process to overcome objections (which usually is price difference) and upsell to conversion. But is this really the way to start the relationship off with an extended truth, we wouldn’t want it in our personal life so why when buying a product! It’s no coincidence then that the insurers leading with these types of messages experience poor retention rates, by basically attracting the wrong type of customer with the wrong type of message. Employ a premium based on a higher percentage of customers, to provide real validity and start the journey right. Think about it, we might be £40 more expensive but it’s a premium that will likely be attained by our customers and it’s still competitive for them. Know your customer and their tolerances.

Big Discounts

We all love a discount, who doesn’t! It’s a feeling of elation! It’s a simple message, which creates real standout in the market. You’ll usually see similar to ‘Get 40% off your home insurance as a new customer’. Again looks like a great offer, but on closer inspection this type of discount will be made up of a combination of various discounts, which could be introductory, a no claims discount or an incentive to purchase online. To deliver the cut through this type of message needs to be deployed over a limited period and not run on a regular basis to drive customer urgency, otherwise the sentiment of the message is lost and you become a DFS! Plus the discount needs to be true, too many campaigns like these were run in the past by raising premiums then discounting, so effectively customers paying the same price they should have been paying (the FCA are now watching). Retention can also be an issue as discounts usually drop off in year 1, so a robust renewal pricing strategy needs to be employed.

Incentives

My favourite campaign is a simple offer that is clear in its intentions. This type of offer will run with ‘Take out a new combined buildings and contents policy you’ll also get £50 cashback, once you’ve held your policy for 60 days’. The incentive can be vouchers, cashback or even a prize draw. But high value incentives work best, think £50 cashback. There most probably will be and should be a qualifying period to ensure there is no cancellation during the cooling off period.  This type of campaign also usually sees no loyalty issues but this depends on where the insurance was purchased, for example if the incentive was attained via an aggregator or affiliate then this customer will highly likely seek out similar incentives at renewal . Only downsides are around cost and the fulfilment of the incentive, so seek out simple methods such as online or email, make the journey easy and reward your customers.

What does all this mean?

Big advertising spends fighting for share of voice and aggressive marketing campaigns attempting to deliver new business growth tell us the current market is extremely competitive………but the market has been like this for a long time.

The insight also tells us multi media contact strategies are employed to get maximum reach for noisy campaigns. It turns out to be a never ending circle, as to be cost effective large volumes of customers are put through the top of the funnel as so many are being lost at renewal. But again this has been the norm for a long period.

But what has changed significantly is the media selections being employed and the strategy to recruit. We need to learn from this and start to employ the same techniques to protect our core customer bases; otherwise our own pools of customers will be out of reach. So what I mean by this is the market is starting to link purchase to product holdings, it’s cheaper to give a current customer an incentive to buy another product than it is to draw in a new non related customer. The products are then linked and loyalty is improved. Just look out to the market and see the extra discounts or savings that can be made if you hold another product or even a loyalty retail card.

If we don’t act now it will just be harder to prize customers away, so trade on that relationship and build the policies now! Finally think about media selections and proposition. A consistent proposition and creative thread across all channels within the marketing strategy is key. A strong overarching proposition can be creatively flexed over a long time period and between channels to ensure stand out. Consistent messaging also helps build awareness, so your product will considered at purchase.

Customer Relationship Management (CRM) is the final key and where we see the biggest change in media selection. It’s being employed to create another reason to stay, by building customer engagement and showing real value. It doesn’t need to be intrusive, just timely and informative. These regular communications within the life of a policy drives higher retention rates, builds loyalty and x-sell at the right stage of a customers lifecycle.

Final thoughts……..

We are all creatures of habit, like it or not. We shop at the same supermarket each week, like certain brands of clothes and eat our favourite foods at the restaurants we enjoy. Your customers are the same. Why? The simple human instinct of trust. So use that hard earned brand equity………..

Sources: Mintel, UK Home Insurance 2017 & the thoughts of a middle aged marketer J.