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Trusted Experience

What the hotel industry can teach insurance companies about creating brand loyalty.
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Trusted Experience

  1. 1. Trusted ExperienceWhat the hotel industry can teach insurancecompanies about creating brand loyaltyWhite paper | June 2012
  2. 2. Shikatani Lacroix is a leading branding and design firmlocated in Toronto, Canada. The company commissionsassignments from all around the world, across CPG, retail andservice industries, helping clients achieve success within theiroperating markets. It does this by enabling its clients’ brandsto better connect with their consumers through a variety ofcore services including corporate identity andcommunication, brand experience design, packaging, namingand product design.About the AuthorJean-Pierre Lacroix, R.G.D., President and Founder ofShikatani LacroixJean-Pierre (JP) Lacroix provides leadership and direction tohis firm, which was founded in 1990. He has spent the last 30years helping organizations better connect their brands withconsumers in ways that impact the overall performance oftheir business. Mr. Lacroix was the first to coin and trademarkthe statement “The Blink Factor” in 1990, which today is acornerstone principle to how brands succeed in themarketplace. JP has authored several papers, has beenquoted in numerous branding and design articles and, in 2001,he co-authored the book “The Business of Graphic Design,”which has sold over 10,000 copies. JP can be reached and you can follow his blogs and www.sldesignlounge.comOther Articles and BooksBelonging Experiences...Designing Engaged BrandsBusiness of Graphic DesignWhite paper | June 2012 | Trusted Experience | 1
  3. 3. The insurance industry, in state of anxietyThe recent PricewaterhouseCoopers (PwC) Top Issues AnnualReport for the insurance industry clearly identified that theindustry is experiencing significant challenges. Low interestrates are impacting a life insurer’s ability to generaterevenues. Smaller margins are causing amortization toaccelerate. Goodwill is eroding as earnings decrease. Plus, thefinancial impact of global warming. Adding to this anxiety arethe new U.S. insurance regulations, Own Risk and SolvencyAssessment (ORSA), adopted in 2011 by the NAIC, whichraises the level of complexity in managing risk. With theadded burden of new processes, and the inability to offsetlower revenues with a reduction in expenses, the insurancesector has started exploring new initiatives that will ensurelong-term growth.A key growth opportunity for organizations wanting tocontinue to grow and prosper is in emerging markets as thecurrent developed markets yield slim returns. In these newmarkets, the young well outnumber the aging population forthe significant future, the middle class is growing at a pacethat is driving double digit, year-over-year consumption, andits governments are investing in infrastructure that is drivingthe importance of insurance.However, as organizations wanting to capitalize on theseemerging markets have learned, these regions havedemonstrated to be very price sensitive and hypercompetitive, challenging the beliefs that incremental profitscan be derived from a higher sales volume.White paper | June 2012 | Trusted Experience | 2
  4. 4. Another opportunity identified in the PwC report is the shiftfrom product-focused to customer-centric operating models.Of the many pillars described, one of the key strategies is toalter the competitive playing field by developing a sustainableand competitive pricing advantage instead of aggressivelyfighting for market share with price promotions. The strategyconsists of providing customers with a customized andpersonalized package of price, product and service at theindividual level. This initiative shifts the operating model byfocusing on customers’ needs rather than promoting generic,one-size-fits-all products.Both opportunities support the need for insurers to rethinktheir go-to-market strategies to capitalize on these emergingmarkets, and the more discerning consumers in matureestablished markets. To establish a high degree of trust andrecognition, insurance organizations need to reconsider abricks and mortar strategy that will complement their onlineexperience as part of a multi-channel initiative, and willprovide greater value and build brand loyalty. This isespecially true in emerging markets where brands need tobuild relationships to gain the trust of their customers.We can also gain learning from our work in the wealthmanagement industry where online-centric service providerssuch as ETrade, TD Ameritrade, TD Waterhouse and CharlesSchwab support their virtual world with bricks and mortarinitiatives that leverage the importance of building tangiblerelationships with new customers who want training wheelsfor their self-directed investment initiatives.White paper | June 2012 | Trusted Experience | 3
  5. 5. Bricks and mortar, the foundation for building trustThe challenge in today’s competitive landscape is the abilityof organizations to build trust, which is the foundation forcreating strong brand loyalty. Brands that market intangiblebenefits such as insurance and investments are challengedwith a range of options that offer a lower frequency ofpurchase and a complexity of choice that can beoverwhelming. With the advent of online shopping and thegrowth of this category as a percentage of total sales, manyinsurance organizations have rushed to provide a virtual storeto sell their services as a means to build market share.Companies such as Aviva now offer RAC, a unique onlinebrand to capitalize on the growth of this medium as a distinctsales channel for auto insurance. Other insurance companieshave also initiated similar strategies such as the launch ofEsurance by Allstate to effectively compete with online-onlybrands such as Progressive and Geico.White paper | June 2012 | Trusted Experience | 4“Bricks-and-mortarstores wonthe highestmarks for‘Mostreliable’(69%) and‘Safest’(77%).”Nielson June 2012 Study
  6. 6. Although the growth of online sales provides brands with ahigh degree of convenience and ease of access, it doeseliminate an important dimension of brand loyalty — theability of building personal relationships that lead to deeper,long-term affinities for their brands. Studies have shown thatretaining customers is highly profitable. In the financialservices industry, a 5% increase in customer retentiongenerates more than 25% in increased profits as the lifetimevalue can effectively be capitalized. A key factor in buildingthis profitable customer base is the ability to create anenvironment that provides reliability and a sense of securitythat customers are making the right purchase.And this is the area where bricks and mortar experiencesexcel over new emerging online offerings. With the rise of anaging population and the growth of ethnically diversecommunities, physical experiences truly become the key tobuilding customer relationships.The online impact of commoditizationThe growth of online insurance sales can potentially lead tothe commoditization of the industry as seen in many otherservice sectors. In particular we can learn from the hotelindustry which has seen a major impact on price and marginas more and more purchases are done through websites suchas and These online stores offercustomers price protection, a great range of options, inaddition to highly competitive pricing that is hard to match byconventional travel agents.White paper | June 2012 | Trusted Experience | 5“Lack of centralleadership,wayward priorities,and the inherentdifficulty of shiftingfrom traditionalcustomer contactpoints to onlinechannels all detractfrom theexperience thatretailers providetheir customers.”Forrester’s study on U.S.retailers
  7. 7. The abundance of choice and the ease of shopping for thelowest hotel cost have significantly impacted the profitabilityof brands and their ability to differentiate themselves whilebuilding brand loyalty. A recent industry study clearlyidentified that the challenges facing the hotel industry willonly get worse as the gap between sales and the cost of salesand margin continues to widen, undermining a hotel’s abilityto reinvest in the bricks and mortar part of its brandexperience. At first, the internet provided hotels with anopportunity to escape commoditization by opening newchannels of distribution for their services. Hotels quicklyadopted the online channel of sales as a means to remaincompetitive and increase their occupancy levels.However, without clearly understanding how to change thecustomer’s physical experience and other elements of themarketing mix, this rapid move to online sales has led toexactly what they had been attempting to avoid — thecommoditization of their offering.To overcome this commodity trap, primarily created by anonline experience that diminishes the value of hotel brands,leading hotels have reinvested in their physical presencethrough renovated hotels that cater to the emotional side oftheir clients’ needs. These new enhanced brands still rely on amulti-channel strategy while ensuring the physical experienceof the guest translates into brand loyalty and preference overother less expensive offerings. This supports the premise thatthe tangible branded experience has a significant impact oncustomer preferences within a category that has becomecommoditized through a high dependency of online sales andmarketing.White paper | June 2012 | Trusted Experience | 6
  8. 8. Where some lead, others will followLeaders in insurance and banking are realizing the importanceof a bricks and mortar presence as part of their multi-channelmarketing strategy. Our work in 2008 with Royal Bank ofCanada to launch the RBC Insurance Centers, which colocatewith their conventional banking services, allowed theorganization to capitalize on customer branch visits by up-selling them on insurance services. The physical presence ofinsurance centers also allows the brand to build credibility inthe longevity and seriousness of the offer. By having acolocated design, it also allowed RBC to overcome theregulatory restriction that prohibits the promotion and salesof insurance products within a financial institution.Another approach consists of providing promotional materialand brochures inside conventional bank branches or as part ofauto dealer showrooms, which introduce the services within abricks and mortar environment only to be completed in anonline or telephone service. These referral merchandisingapproaches are the most common within the automotive andtravel industry and can lead to incremental sales but do littlefor building brand loyalty or retention. Insurers wanting togain a greater share of their customer’s wallet need toconsider more permanent and integrated approaches whichleverage all aspects of the multi-channel with a strongphysical presence.White paper | June 2012 | Trusted Experience | 7
  9. 9. Other organizations have embarked on different strategiessuch as State Farm who recently launched a communitycenter as part of an integrated program designed by IDEO, aglobal leader in design innovation. Next Door is a come-as-you-are community space and cafe where anyone can askquestions about finances and insurance and find answers.There is no sales pitch. The one-of-its-kind facility, located inthe tony, uptown Chicago neighbourhood Lincoln Park, wascreated by State Farm to provide a place for the communityto share ideas, a place where the organization can learn fromcustomers, and a place to encourage innovative new ideas.White paper | June 2012 | Trusted Experience | 8
  10. 10. Another approach leveraged by Belair Direct, a leadingprovider of auto and travel insurance in the Quebec market,combined its telemarketing offices with a new front-end,customer-centric service area. Traditionally, the companyoffered walk-in customers with the ability to purchase travelor auto insurance from a customer service desk similar tobanking services. It was felt that the organization could betterserve its customers by providing a retail experience thatfeatured all of the services available. Our firm was retained toexplore three different customer experiences, which includedinteractive pods that allowed customers to shop online fortheir insurance needs, guided by a sales associate. The finalprogram was launched in Trois-Rivières, Que., a small townjust east of Montreal, and consisted of a coffee and seatingarea, four service pods that featured the range of productsavailable by Belair Direct, in addition to a transaction area toenroll customers into the insurance packages. The operatoralso offered pre-packaged kits when bundled insuranceservices were purchased, from a road safety kit to a homeemergency package.White paper | June 2012 | Trusted Experience | 9
  11. 11. ConclusionAs online sales represent a larger portion of an insurer’srevenues, it will be important to avoid falling into thecommodity trap by training consumers to focus on price asthe differentiating factor. As insurance organizations look atgrowing their revenues and slowing the account churn thateats away at profits and margin, it will be important toreconsider the importance of a branded place to buildrelationships.The market place has become a very competitive space withbottom and top line challenges that will lead to greaterindustry consolidation and a bigger challenge in creatingmeaningful differentiation. To prosper, organizations mustremain focused on the customer and their emotive needstates, such as trust and security, while creating a proprietarybrand experience that includes a bricks and mortar strategy.A lot can be gleaned from the wealth management and hotelindustries and applied to insurance sales and marketing thatwill ensure greater brand affinity and market share.White paper | June 2012 | Trusted Experience | 10
  12. 12. For more information, contact:Jean-Pierre Lacroix, PresidentShikatani Lacroix387 Richmond Street EastToronto, OntarioM5A 1P6Telephone: 416-367-1999Website: www.sld.comEmail: jplacroix@sld.comWhite paper | June 2012 | Trusted Experience | 11