effective financial criteria for integrated marketing

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FINANCIAL MANAGEMENT OF INTEGRATED MARKETING PROGRAMS

Jay JaffePresidentActuarial Enterprises, Ltd.Chicago, IL312-397-0099jay@actentltd.com

September, 2009

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Integrated Marketing

A marketing process which uses coordinated

distribution channels, media and messages to improve

profitability

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The 5 Risk Elements of any Insurance Marketing Program

Claims Persistency Administrative Expenses Investment returns Marketing costs

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The 5 Risk Elements of any Direct Marketing Program (in order)

1. Marketing costs

2. Persistency

3. Claims

4. Administrative Expenses

5. Investment returns

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The Primary Risk Element of any Direct Marketing Program

MARKETING COSTS

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Why Marketing Costs are the #1 RISK ELEMENT

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Why Marketing Costs are the #1 RISK ELEMENT

$$$ are spent < any policy is sold When marketing costs > marketing

allowances, it is unlikely that: The costs will be recovered; and The product will be profitable

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Integrated Marketing Introduces Complications

as a Result of Multiple Distribution Channels,

Media and Messages

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(Internet)

(Agents)

(Worksite) (Telemarketing)

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(Radio)

(PDA)

(TV)

(Mail)

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(Fear)

(Free)

(Family)

(Action)

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We’ve Created the Classic ….

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&

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And, We Tend to Create a

Mentality at Our Companies

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The Odd Couple

Jack Klugman (Oscar) and Tony Randall (Felix)

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Some Examples of Silos Distribution systems within a

company operate that independently Media managers each having their

own plans, budgets and bonuses Underwriters only worrying about

claims

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The result is that very few insurers have a recognizable and consistent message --- which may mean they don’t have a picture of where they are going.

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The Secret to

Financially Managing Integrated Marketing

is ????

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The Answer: Integrating Marketing

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INTEGRATED MARKETING =

JIG SAW PUZZLE

You need to look at both the BIG PICTURE

and all the LITTLE PIECES

in order to get everything to fit together

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Lead Cost: An Example of Non-Integrated

Marketing in an Integrated Marketing Program

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Lead Program Facets Multiple lead sources Cost of leads varies dramatically by

source Paid policies (conversion) results

are not uniform Value of a “name” for “after sales” is

not easily determined Which area owns the leads?

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Developing a Lead Program = An Investment Strategy

The problem: All leads are not equal in cost --- so how do you chose which leads to acquire?

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#1 LEAD SELECTION

CRITERIA (theoretically)The leads that produce the lowest cost per paid policy!

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But What About? The cost of leads given to agents who

don’t even use the leads? Leads that can be recycled and

produce other business? The value of revenue from products

marketed by other companies that are sold to your customers?

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AND

OTHER QUESTIONS

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Modeling Integrated Marketing Activities is Very Complicated

(Live Oak Tree)

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Decision Making for Integrated Marketing Systems

Requires complicated analytic models Calls for acquiring additional data but only

when it will improve the quality of a decision and at an affordable cost

Is partly a scientific and partly a gut reaction process but decisions should be made using more than an “I think” basis

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Some Things You Need to do if You Want to Make Quantitative

Decisions Create comprehensive data bases Identify the key metrics that need to be

tracked and understood Start with simple models Increase the complexity of models as you

gain knowledge Recognize the team aspects of Integrated

Marketing

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The Team Multiple marketing types Underwriters Actuaries Lawyers IT people Claim processors Etc.

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REMEMBER RULER #1: REMEMBER RULER #1: IF YOU CAN’T IF YOU CAN’T MEASURE IT, MEASURE IT, DON’T DO IT.DON’T DO IT.

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EXAMPLES OF TARGETS Profit Claims (mortality, morbidity, etc.) Lapses Conversion rates Expenses:

Marketing Administrative

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Actual to Expected Ratios A/E rations are helpful because they

give you an instant picture If conversion rate A/E = 105%, then

good If lapse rate A/E = 105%, then bad

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The new direct marketing is an information-driven marketing process,

made possible by database technology, that enables marketers to develop, test, implement, measure, and appropriately modify customized marketing programs

and strategies.

From The New Direct Marketing, David Sheppard Associates, p. 3

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NEW INSURANCE PROGRAM ASSESSMENT FORMULA

Excellent

Good

Average

Poor

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THE ULTIMATE TEST OF A PRODUCT

WILL THE

EAT THE ???

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THE INSURANCE DIRECT MARKETING FORUM 2009