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Progressive Insurance
Progressive Insurance
• How did they become the fifth largest auto insurance company nobody ever heard of?
Paul Farris Phil Pfeifer
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1Copyright 2000 Paul Farris and the Darden
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The Auto Insurance Report 9/6/99
• “Progressive has the most innovative pricing schemes in the auto insurance business. Not through the wizardry of one clever executive, but rather because an army of people are all rowing in the same direction - seeking new ways to differentiate risk.”
Paul Farris Phil Pfeifer
Progressive Insurance
• Triggers that bring Progressive to mind?
• Given the success, why does Progressive want to change?
Paul Farris Phil Pfeifer
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2Copyright 2000 Paul Farris and the Darden
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Pressures to Change
• Lifetime value of customers (standard versus non-preferred, churn versus margins)
• Pricing edge may be eroding? Others are entering this segment?
• Regulatory climate
Paul Farris Phil Pfeifer
The Auto Insurance Report 9/6/99
• “Progressive is ahead of the pack in looking for new ways to differentiate its claim product. It will take a long time to match State Farm and Allstate’s ubiquity and customer passion, but Progressive is innovating more and selling its ideas better than anyone else.”
Paul Farris Phil Pfeifer
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Which are e-business changes?
Which help the most?
• Information transparency: Express Quote
• Claims processing technology.
• Immediate Response: 24 X 7 claims, fast service, accurate,
• Symbols: Progressive Gold Card, other branding through on- and off-line advertising.
• Multiple channels: Web, 1-800, agents.
Paul Farris Phil Pfeifer
What are Challenges
• Channel conflict? Can you make multiple channels work?
• Role of advertising, branding and positioning to make new moves successful?
• Competition: new and established?
Infomediaries? Is Insweb an opportunity?
Paul Farris Phil Pfeifer
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Paul Farris Phil Pfeifer
Paul Farris Phil Pfeifer
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Paul Farris Phil Pfeifer
Paul Farris Phil Pfeifer
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Managing the Transition
• Which steps makes sense to go first? Which are last?
• How (can, should, will) you talk out of both sides of your mouth?
• Take the opportunity to prune less productive retailers, make existing feel better.
• Give them SuperBowl tickets. Step up adv!
Paul Farris Phil Pfeifer
“Parading on Both Sides of Street”
• Marc Zeitlin faces task of promoting
Progressive’s 38,000 agents as ads feature
800 number and Internet site.
• “It’s not secret that agents are not fond of the 800 number” (F. Hammond) “This is an attempt to say we do business both ways.”
• “We’ve got our work cut out..we have to convince agents that our direct channels do not mean less business.
Paul Farris Phil Pfeifer
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The Auto Insurance Report 9/6/99
• “We listen politely..but the fact remains that many independent agents continue to look warily upon Progressive and its multichannel distribution strategy. Talk to agents every day, as we do, and you will find a continued undercurrent of concern about what Progressive really plans to do.”
Paul Farris Phil Pfeifer
Pursuing Web Existing Channels
• Limit online sales to certain products or markets (Waterford Wedgewood sells special products on the web such as crystal chandeliers).
• Give traditional channel commissions on web sales in their territory. Variations: Clinque sells through Macy’s virtual cosmetics counter and own Web site, certain promotions available only at retail!
Paul Farris Phil Pfeifer
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Different Strokes
• Use web to provide leads to existing channels, Toyota provides product information, then points to a dealer
• Save web for yourself, Levi tried to keep the cybermarket to itself
• Do your own thing: Nike features button to buy online (full price and shipping)
Paul Farris Phil Pfeifer
The Auto Insurance Report 9/6/99
• “Progressive is ahead of the pack in looking for new ways to differentiate its claim product. It will take a long time to match State Farm and Allstate’s ubiquity and customer passion, but Progressive is innovating more and selling its ideas better than anyone else.”
Paul Farris Phil Pfeifer
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Copyright 2000 Paul Farris and the Darden
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CEO of Mid-size Insurance
Company
• “The industry is so dominated today by distribution that every time management tries to change something, the system of independent agents promptly kicks management in the groin. “
• “We feel under siege, and yet we think there is real opportunity here.”
• “It’s a great time to be schizophrenic.”
Paul Farris Phil Pfeifer
Paul Farris Phil Pfeifer
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• Allstate 1/17/00 announced $1B initiative to build a direct-response sales and service 24 x capability.
• First “big 4” to do so
• Captive agents will be converted to independent contactor status and 4,000 nonagent position will be eliminated.
• Products will be repriced to compete with
GEICO and Progressive.
Paul Farris Phil Pfeifer
How Fast?
• Cannibalize your distribution channels in stores too quickly and sales are lost.
• Move over to the Net too slowly - and sales are lost.
• “This industry is the laggard.” 40% of insurance companies were “unsure” of Internet plans or didn’t view as important.
• 50% want to buy auto insurance direct.
Insweb - as intermediate, low-risk step to going direct ?
Paul Farris Phil Pfeifer
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Build a Brand
• “ You should have your brand’s message architecture and communications strategy in place before you launch your e-commerce strategy?”
Core
Essence
Personality
Emotional Benefits
Product Benefits
Product Attributes
Success In the Internet Economy,USWeb /CKS white paper, MC1-0006-1, March, 1999: 8.
Paul Farris Phil Pfeifer
Update: Brand Building
• Progressive chooses “Innovative”
Video positioning.
Video
Video
Video
• $20 million Super Bowl halftime.
• They Said it:
Peter Lewis when asked about Progressive spending
$20 million on ET Super Bowl advertising:
“It was an act of hubris and egomania in which I was very much involved.”
Paul Farris Phil Pfeifer
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Update: Channel Conflict
Video
• Agents complain about 1-800
• Progressive’s Philosophy
Video
• Pricing Plans
• Agents sell three policies
• Classic (15% commission)
• Advantage (10% commission)
• Supersaver (7% commission)
• 1-800 priced as Supersaver
• Web priced $25 under supersaver.
Video
• New Commercials
Paul Farris Phil Pfeifer
Paul Farris Phil Pfeifer
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Paul Farris Phil Pfeifer
Update: Channel Control
• As many as 50 “mistypes” such as
GEIGO.com and ALLSTATES.com send surfers to Progressive’s Express
Quote page.
Paul Farris Phil Pfeifer
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Update: New Initiatives
Video
• Polaroid to digital
Video
• Personalized Progressive
Video
• Immediate Resolution
Video
• Autograph
Paul Farris Phil Pfeifer
Progressive Insurance and the Role of the Technology
• Technology-enabled process improvements that add customer value
• Disruptive technologies force reaction from entrenched competitors
• Channel disintermediation, reintermediation, syndication,
(communication and distribution)
• Strong brand needed to ensure success of the channel changes.
Paul Farris Phil Pfeifer
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