Consumer Behavior in Insurance Positioning

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Table of Contents

Role of Consumer Behavior in Insurance Positioning
Impact of Purchasing Trends on Consumer Behavior
Product, Pricing, Promotional and Place Distribution Strategies Recommendations
References

Role of Consumer Behavior in Insurance Positioning

Consumer behavior is a broad concept that critically analyzes consumer purchases with the aim of predicting future purchases. It explains why a consumer settles on a certain product or service as opposed to another. Positioning refers to the view and opinion a customer places on a product in relation to competition.

A positioning strategy should take into consideration a number of factors. One such factor is the effect of consumer behavior. The role of a positioning strategy is to prepare the mind of a consumer. The basis should be differentiating a company’s product from competitors. In a market where the insurance service is the same, this is tricky. However, the service provider should strive to meet the basic requirements of a service before engaging in secondary requirements.

In United States, it is a legal requirement for any individual who owns or drives a vehicle to buy Auto Insurance. This provides a vast target market encompassing virtually all segments. Since this is not an essential product, a number of factors influence a customer’s decision to buy insurance from a particular provider.

Most customers might look for comfort, value addition and innovativeness since prices are almost the same. Hence, it is imperative for Nationwide Auto Insurance to employ a strategy that puts it in that position (Usunier 2000). Creating long-term bonds requires creating new ways that meet the sophistication and unpredictability of customers. Nationwide Insurance does not compete on prices. Rather, it employs a value addition policy that ensures brand loyalty.

Consumers perceive non-basic items as unnecessary costs. They do not enjoy purchasing auto insurance. This means that Nationwide should use creative ways to make this a good experience. From the above, it is important to note that Nationwide can combine a service whose requirements are bound to possession of yet another product. For example, Nationwide can package Car Insurance and Life Insurance together.

Unlike luxury products, which customers may quit using once they fulfill their urges, this service (insurance) is a requirement. Hence, the principle of diminishing returns does not apply. Income and budget constraints on consumers inform their every day purchases. However, in the case of Auto Insurance, this may not affect their decision, as it is mandatory. Hence, customers base purchase decisions on reliability, reputation, similar services and innovativeness. Nationwide should strive to compete from these angles (Usunier 2000).

Impact of Purchasing Trends on Consumer Behavior

Technology

Technology is closely associated to globalization. Nationwide insurance uses technology at various levels of its operations. For example, it allows online payments of premiums and uses customized customer service solutions such as face book and Twitter to handle enquiries (Suri et al 2003).

Technological improvements have introduced advances in software and hardware, which have created a shift in information power from marketers to consumers. The insurance industry has registered tremendous gains from the recent information technology waves in terms of automation. Consumers in this environment have continued to expect more from insurance providers. For example, a mobile application that reminds them to pay premiums when they fall due may be pleasant (Castells 2011).

Globalization

Consumer behavior is not a static concept. Apart from the fact that majority of customers tend to act in different ways and react differently to the various strategies, global purchasing trends equally affect their behavior. First, globalization has exposed customers to volumes of easily available information from which they can make decisions. In the context of insurance industry, customers can easily compare different providers, gauge other consumers’ reactions and make a reliable decision.

It is, therefore, incumbent upon Nationwide to maintain an impeccable reputation (Nationwide 2012). This is especially true in a world where consumers discuss brands at readily available forums such as blogs and social networking sites. An adverse move may easily sway a prospective customer’s opinion and may even dislodge a customer from a company (Suri et al 2003).

Hence, companies need to be globally alert on the hot issues that consumers are discussing concerning their operations and make instantaneous corrections and clarifications to avoid negative opinions, which have the capability of spiraling to dangerous levels (Castells 2011).

Cultural Changes

Nationwide communicates it corporate culture well to suppliers, customers and prospective clients. The company engages in social responsibility activities to enhance its culture. It touts diversity and inclusion, respect, integrity and honesty as its main pillars. It is paramount to project a clear organizational structure in an industry whose business threatens a company’s morality and integrity.

Additionally, consumers are quite alert and dynamic making articulate profiling a challenge. Customers critically look into organizational ethics before making purchases. Hence, Nationwide should strive to align strategies with values and competencies to attract this unpredictable market.

Product, Pricing, Promotional and Place Distribution Strategies Recommendations

Product Strategy

Nationwide offers a variety of products spread across its five main areas of operation (property and casualty, life insurance and retirement savings, health, mortgage and banking and asset management). It should use the already existing multi-policy offers to drive sales of Auto Insurance. Nationwide can also personalize its ‘vanishing deductible and I am on your side programs’ through use of podcasts to enhance lower premiums on Auto Insurance.

Nationwide can also reposition by offering specialized car maintenance solutions through use of past accident data simulations. Nationwide can redefine policies to cut premium payments for selected groups, such as students, who willingly and proportionately adhere to programs such as ‘smart ride’. Lastly, nationwide can reposition the claims process by having mobile units that only respond to an accident scene if the customer does not have a mobile application that processes the claims instantaneously.

Place Distribution Strategies

Nationwide employs the services of exclusive agents, individual brokers and banks as part of an intricate distribution strategy. Lately, Nationwide has widely used the internet to bolster this strategy. Through its ‘I am on Your Side’ customer experience slogan, the company seeks to leverage social media exhaustively. Though Insurance is mostly a face-to-face service, Nationwide should revolutionize this by selling Auto insurance online as part of a repositioning strategy. The company will spend less on agent commissions and save customer’s insurance ‘shopping’ costs.

Promotional Strategy

Auto insurance industry’s promotional spending has recorded an upward trend since 2006. Major competitors, however, constantly outspend Nationwide. In 2009, Nationwide changed its slogan from ‘Life Comes at You Fast’ to ‘I am on your Side’. Since then its promotional strategy centers on this slogan.

The company uses broadcast television, print, web and radio to reach out to its market. It also uses public relations and sponsorship programs. However, Nationwide should use personalized strategies more often as part of ‘I am on Your Side’ slogan. This will initiate direct buzz marketing, which is an effective tool in the internet. Additionally, Nationwide should leverage social media avenues (e.g. You Tube, Face book and Twitter) as part of a repositioning strategy.

These are increasingly becoming powerful brand discussion forums and Nationwide can use this valuable information to improve its Auto Insurance service. This would be a smart move to counter the disadvantage where competition outspends it in mainstream advertising. Additionally, Nationwide can reposition through continued roll out of its ‘smart ride program’ in every state. Currently, Nationwide runs tests in only one state and its success may drastically reduce premium payments on Auto Insurance and save customer costs.

Pricing Strategy

Nationwide does not compete on price. Instead, it places emphasis on value and creating innovative and fresh ideas. For example, in 2009 Nationwide created an iPhone application that allows customers to initiate a claims process when an accident occurs. This application is open source and it was new in the insurance industry. The customer can take photos of the accident scene, inform the authorities and fill claims forms online, which saves time.

To reposition, Nationwide can insist further on value addition. Nationwide can refrain from spending too much on advertising compared to competitors (e.g. Progressive, Allstate and GEICO) to attract customers, which has been the trend since 2006. Additionally, since customers can easily obtain price comparisons, it would be prudent to continue offering excellent customer services (e.g. claims handling).

Nationwide should also continue using the ‘I am on Your Side’ slogan to influence customer purchases through hands-on community engagements. Lastly, it should continue with its policy where it differentiates its Auto Insurance service on value addition as opposed to price.

References

Castells, M. (2011). The Rise of the Network Society: The Information Age: Economy, Society and Culture. New York, NY: John Wiley & Sons.

Nationwide (2012). Nationwide Car Insurance.

Suri, R. et al (2003). The Impact of the Internet and Consumer Motivation on Evaluation of Price. Journal of Business Research, 56.1: 379-390.

Usunier, J. (2000). Marketing across Cultures. New York, NY: Prentice Hall.

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