doug sumner distribution models presentation
DESCRIPTION
A presentation on financial services distribution models (with an emphasis on Bancassurance and Life Insurance) that I gave a little while ago in Thailand. I\'m happy to discuss if any one is interested.TRANSCRIPT
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Distribution Strategies and Tactics
Douglas Sumner
Douglas Sumner – not to be copied or reproduced without permission© Douglas Sumner. Please do not copy without permission
Retail financial services companies seek to differentiate
themselves through one or more of 4 key strengths:
use of diverse products and asset classes
focus on service needs
leverage of distributional strengths
promotion and sponsorship
This presentation discusses using distributional techniques to expand the opportunities for life insurance sales
Distribution Strategy is a Key Success Factor….
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..But companies are often slow to adapt
What’s intriguing is the ‘internal focus’ and the low importance attached to channel strategy
US Snr banking exec survey
Source - LIMRA
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Matching products with channels and markets
Life insurers have expanded their value proposition to become ‘Wealth Managers’.
The same pressures that caused this revamp are driving the need to expand and restructure distribution channels.
Regardless of your current distribution strategy for your products you need to respond to a seemingly ever expanding range of distribution channels and understand their impact on product design and potential for further sales.
Distribution opportunities exists along a continuum of client types and there is no inherent reason why retail financial services co’s should only operate in, or profit solely from, face to face distribution to the ‘top end’ of the market – It all depends on how you define your business.
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Distribution Choices
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permission
Distribution – choices (some of them anyway)
Agency Distribution ‘alliances’ Bancassurance Direct marketing Telemarketing Internet marketing Statement marketing ‘e’ mail marketing Independent brokers/financial planners Television Workplace Shop front Kiosk
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Agency Reports of its death around the region have been greatly exaggerated
But you will kill it – and it will kill you if you don’t both agree to let each other evolve!
Changing consumer preferences will lead to legislator action and regulator oversight.
You must have a ‘consumer first model in product design and pricing to ensure the long term viability of agency
Needs analysis is compulsory
Remember – your actions today will be judged by the compliance standards of 10 yrs hence!
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AGENCY - tipsAgency faces threats from :
Changing consumer preference/regulation
Bancassurance
Financial Planning
Margin squeeze
Extensive training is not the answer – consider an ‘open architecture’ approach that let’s them compete with these other rapidly developing channels – don’t condemn them (and don’t let them condemn you!) to yesterday’s business model.
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Direct Marketing/Telemarketing
Direct mailing and telemarketing to bank credit card databases has been common practice in many markets for a number of years. For banks, telemarketing of credit life policies (in particular, credit card protection plans) to their cardholder databases has been a highly lucrative source of income.
This activity is now common across virtually all retail databases within banks and many life companies – less so in funds mgt firms.
While this channel only accounts for a smaller proportion of the market, some companies have made notable progress, claiming penetration levels of up to 2.5 policies per customer and penetration of databases up to 65 per cent.
This style of distribution with the right products can be highly profitable and really should form a core of any distribution strategy.
Less well appreciated is how it can complement face to face strategies
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Learn about your clientsAnalytics can provide significant insights into your clients that are often not undertaken in pure face to face.
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Direct Marketing/Telemarketing – Tips
Access to a database where their is high affinity and which has not been exhausted through over use are the keys to success in direct marketing
Data mining/propensity modeling can make improve the returns from this already profitable channel and can make even an exhausted base worth revisiting.
Telemarketing will increase the cost but can markedly increase the response
Specialist skills and expertise are also required and many banks outsource the distribution in the channel.
Test, test and test again in this channel
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‘e’ mail marketingMore than anything, a successful email campaign hinges on it's content. A campaign is being sent to people who have requested information that is important to them. By creating a dialog that is targeted and on topic, readers will find value in your communications and find out that your business is a relationship that they want to continue.
Any good email marketing platform will give you a lot of valuable data such as read rates, forward stats, click-throughs and bounces. By carefully analysing this data, you can adjust your design and campaign for the best results.
Techniques include :
Viral email. Create an email campaign that will encourage your customers to send your messages onto their contacts. Designing the right viral email will allow you to gather names and addresses, which can be used later for direct marketing and can help boost your company's image within your marketplace.
Combining email marketing with traditional direct mail has boosted results by almost 80% in some cases
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‘e’ mail Marketing - tips The “From” line is the greatest driver in getting email opened, so it’s important
to include a company name as well as the offer. Example: “A 10% savings from Thai Insurance”.
The longer the subject line, the higher the response.
The newsletter format — as opposed to the traditional letter or postcard — is the best performing email format for B to C.
The best performing emails contain more images and less text, or an equal balance of both.
When giving multiple links in an email, it’s good to assign each link a different color.
In B to C, links attached to images work better than text links.
Hard dollar discounts work better than percentage discounts.
Company logos should always appear above the fold (that section of an email the customer can see without scrolling downward)
An effective call to action can appear either above or below the fold.
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Statement marketingTypically provides the client with a standard ‘A’ and an inexpensive ‘B” upgrade offer.
Statement marketing incorporates the offer directly on to the customer’s statement. It can give:
Much higher response rates – because clients respond ‘when they have the pen in their hand’
More cost-effective campaigns - renewal notices are typically read rather than automatically thrown in the bin!
No additional postage or envelope costs – you’re mailing anyway No need to model list down for high-propensity
A form of direct marketing that can very effectively deal with : Declining cross selling results Increasing customer opt-outs
Reported response rates of almost 50%....
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Independent brokers/financial planners
Deciding to open up your product line to external 3rd parties can be controversial within the organisation.
However, if you have the manufacturing capacity then it can be a profitable expansion of your distribution and cheaper and faster than growing your own agency force.
Many of the drivers that favour Bancassurance also favour this channel.
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Independent brokers/financial planners - tips
The quality of your ‘value add’ will go a long way in this channel – but don’t get used!
Beware a ‘race to the bottom’ as competition often revolves around lower prices and ever improving features and benefits
Understand that you will lose control of your marketing and pricing power – and maybe your agents
Effectively you are outsourcing your distribution – this expense will fall – others will rise
Experience shows you may end up wanting to buy your distribution back
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TelevisionHome shopping is taking off around the world.
For instance investment products being sold in Korea,
Funeral plans in Australia etc
Coming wave is interactive home TV shopping
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Worksite Marketing
Comprehensive worksite marketing can make considerable sense:
Product paid for through the salary is typically much ‘stickier’
Can have taxation benefits when paid for by employer – a powerful incentive
Can effectively block out all the downstream product providers – provided you have more than a single product strategy
Long term strategic benefit in catching an aging workforce as governments are forced to help people save for their retirement – typically through their employer
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Worksite Marketing - tips
Broker market often controls
HR dept is the decision maker
Align your marketing message with employee benefits/organisational best practice aspirations – the language of the HR dept
Understand remuneration practices
Use DM/TM/Email for cross sell-upsell programmes
Keep the employer informed
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Bancassurance In many Asia Pac countries, Bancassurance seems to have stagnated.
(query those who say it is still ‘immature’.) Much of what has been sold is single premium, guaranteed return deposit substitution product.
Savings products – single premium guaranteed products typically have very small profit margins and are sold as deposit replacement, so the pool of clients diminishes rapidly.These products also have the potential for considerable misselling.
European Bancassurers cite 25 percent to 30 percent of bank customers as holding an insurance policy bought through the bank, in many newly developing markets the figure would most likely be well below 5%
Leveraging existing clients through ‘alternative distribution’ techniques is key – not solely building a face to face channel.
The truth is, Bancassurance is a multi –channel distribution strategy- not just the one you understand!
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Brand + Sales skill = Sales!
Banks have brand strength but they can’t sell.
Life co’s can sell but they don’t have brand strength.
So – not surprisingly, most successful model seems to be to partner with (or buy) a sales oriented financial services co – typically one with strong life insurance experience – and build a sales force exclusive to the bank.
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Typical Bancassurance distribution choicesTip - try and avoid the distribution agreement model
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Distribution modelsDistribution models
4 6 7 8 8 8 10 10
3133 33 33
55 55
8693
133
155
Full integrationPartial integrationLow integration
No of policies per bank agent per year
Insurance activities are fully integrated into banking operations
Insurance products are exclusively sold by bank agents
Employees of the bank are targeted as the “first” customers. They act as multipliers because they believe in the products being sold
Contracts are closed by insurance company sales agents after the initial contact has been established by bank’s agents
Insurer usually sells products via multiple channels – has relatively low orientation to the banking partner
Productivity improves when products are simplified and standardised for the bank
Bank staff sells simplified (non underwriting) products and the insurance company sales agent sells the more complicated products at the bank branch
Insurance co. supports bank sales employees
Source: Bancassurance – Combining Strengths – J P Morgan 2002
There are many differing models but it seems clear that ‘full integration’ is the most successful approach
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Checklist for a Bancassurance branch6 main issues 10 Sub-Issues
1. Entry experience 1.1 position of insurance advisors
2. sales 2.1 Lead Generation
2.2 Sales Person
2.3 Product
2.4 Handling objections
3. Marketing 3.1 Promotional Activity
3.2 Marketing Materials
4. Service 4.1 Service Quality
5. Systems 5.1 Sales System
6. Others 6.1 Customer Contact
Q: Can we identify what a ‘good’ Bancassurance branch looks like?To answer the question we undertook a mystery shopper survey of 50 branches and completed a questionnaire about the experience
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Checklist for a Bancassurance branch
We then correlated the results to identify if their were clear traits that separated ‘good’ from ‘bad’ branches – as measured by production.
We found their were clear differences that enabled us to conduct a checklist to help identify a likely productive branch.
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Main Does the target branch match the following description Yes Avg No
1. Entry experience
Position of insurance advisors is easy to identify and an inviting and clear procedure is in place to hand clients to them
2. sales Advisors are skilled in identifying insurance needs
Advisors are enthusiastic and professional in appearance and conduct
Advisors clearly explain product recommendations and how they meet customers needs
2.4 Handling objections
3. Marketing
Promotional activity is clearly displayed and advisors are aware of bank promotional programmes as they occur
Marketing material are clearly displayed and actively used by advisors
4. Service Branch provides a comfortable ‘financial services’ environment, all services are easily accessible and fit out is modern and professional
5. Systems Advisors have CRM, Presentation and quotation systems to present financial services products
6. Others Sellers ensure to obtain consent for next appointment and have a procedure in place to ask for referrals
Branch ChecklistGood branch if ‘yes >5 Poor branch if ‘no’ greater >4
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We interviewed 50 branch managers and again correlated the results to see if we could identify the traits of a ‘good’ branch manager – as measured against product sales
7 Main issues 29 Detail Questions
1. Sales approach 5
2. Lead Generation 6
3. Performance metrics 4
4. Branch manager engagement 3
5. Other vendor information 3
6. Promotion and support 5
7. Other 3
Checklist for a good Bancassurance Branch Manager
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Main Issue Does the branch manager match the following description? Yes No
1. Sales approach The branch manager recognizes the importance of needs based selling
2. New business generation
The branch manager actively encourages across selling mentality in the branch
Teller/advisor professionalism and service quality is consistent with a modern financial services institution
The branch manager insists that tellers prospect and advisors seek referrals aggressively
The branch manager utilizes a customer segmentation model by product in the branch
3. Performance drivers
The branch manager believes that sales and marketing are the key priorities to improve customer service and branch performance
4. Branch manager engagement
The branch manager feels empowered to develop his/her own creative/sales & marketing ideas within HO guidelines
6. Promotion and support
Branch manager ensures Tellers/Advisors trained in basic selling skills
Branch manager requests marketing support aggressively
Branch manager insists staff are trained to present confidently and professionally
Checklist for a good Bancassurance Branch ManagerBest branch if ‘yes>6 Poor branch if ‘no’ >3
© Douglas Sumner. Please do not copy without permission
Douglas Sumner – not to be copied or reproduced without permission© Douglas Sumner. Please do not copy without permission
Diff’rnt strokes
The move to wealth management typically sees a singular focus on High Value Customers. However, in most institutions (and countries) , these customers typically represent a small proportion of the customer base and in any case are not the natural market of life companies
Consider the lower value customer types – the ‘middle market’. These customers are often overlooked when setting strategy despite the fact that they represent a large proportion of the available or potential customer base. Low value and large proportion can mean highly profitable – if done correctly.
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Diff’rnt strokes
Smart distribution companies know that many of the distribution techniques outlined here are designed to satisfy the majority of the market who typically consume high volumes of simple products which require little sales interaction – and that’s OK.
Smart distribution companies also know that these distribution techniques are designed to find and services those high value customers who have not yet been identified, whom are in channel search elsewhere or, increasingly, are savvy enough to use the tools of the internet to do it themselves.
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Thank-you for your attention