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FINANCIAL MANAGEMENT OF INTEGRATED MARKETING PROGRAMS
Jay JaffePresidentActuarial Enterprises, Ltd.Chicago, [email protected]
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
