Insurers Debate Benefits of Branding Versus DR

NEW YORK – While the Direct Marketing Association estimates $83 billion will be spent on direct marketing of insurance products this year, the amount spent on DRTV marketing is more difficult to quantify.

As demonstrated at the DRTV Lead Summit here on Nov. 3, insurance companies are oftentimes more concerned with generating brand awareness than generating efficient leads through DRTV media.

“It was a very painful decision for us,” said Mory Katz, president of startup Response Insurance Inc. “We understand that DRTV has many advantages in cost-efficiency and measurability, but we had to make a strategic decision on whether we wanted response or brand image. An argument was made to go with strictly brand identification.”

His company is no stranger to the power of direct marketing. It was co-founded by Peter Wood, the now-legendary founder of Direct Line UK, a startup company whose direct marketing prowess earned it 13 percent of the British auto insurance market in 10 years.

But the company also recognized that generating brand awareness was important to project an image of legitimacy – an essential selling point for any insurance company.

Its commercials all feature its signature icon, a red-colored telephone, and are tagged with the toll-free vanity number, 1-888-RED-PHONE. While Katz recognizes that the vanity number makes it very difficult to track which TV stations in which markets produce a cost-effective response, he wants to establish a distinct identity for the company. His company observed that the easy-to-remember vanity number drew more response than a distinct toll-free number.

“We found that not having the vanity number on the commercial decreased the volume of our responses by 10 percent,” he said. “We want people to associate low-cost insurance with the red phone.” Since the company's launch last year, it has signed 5,000 policies.

The importance of brand awareness was echoed by another insurance company, National General Insurance Co., St. Louis, MO, that also launched several TV campaigns, but none of them could be considered true DRTV.

The company, a $1.3 billion a year unit of General Motors Corp., traditionally sold private label insurance through affinity groups and associations, including the American Institute of Certified Public Accountants and the Veterans of Foreign Wars. It wanted to establish its own brand identity, though, and improve sales of auto insurance policies directly to consumers in the broadmarket. National General chose St. Louis as its first test market for an integrated campaign.

“We wanted brand awareness beyond affinity markets,” said Shawn Morris, senior vice president of marketing at National General. “Our broadmarket results were solid, but needed improvement.”

Its first marketing effort included a mix of direct marketing and general advertising in media ranging from television to billboards. While its direct mail response rates averaged 1.9 percent, the company found that its brand recognition was less than 19 percent.

After analyzing marketing data accumulated after this first phase, it entered phase two with a renewed effort to raise its exposure, eliminate losing elements and use humor to break through to wider recognition. The goal of its TV campaign, while not a true DRTV effort, was to reach 95 percent of its target each four weeks. It wanted to reach 85 percent of the market three or more times.

Its second group of spots were more humorous – one commercial showed an angel and devil representing the torn conscience of a driver arguing over his driving – and helped to boost awareness of the company to 47 percent, Morris said. Meanwhile, the company founded that newspaper advertising was not an effective direct response medium and free-standing inserts and shared mail were also inefficient.

After honing its marketing efforts through an additional third phase, the company found that while its direct marketing response declined from 1.9 percent to 1.3 percent, its lead conversion rate rose from 6.5 percent to 11.9 percent. That rise seemed to indicate the company was focusing its message better.

The next stage for the company will be to seek some kind of stable response rate from direct marketing efforts in the St. Louis market.

“Next year, we will have no TV, no radio and no billboard promotions in the St. Louis market,” Morris said. “It will be interesting to see if our back-end stabilizes.”

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