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Tom Schori DBA Millennium Marketing Research®, 808 Ironwood, Normal IL 61761, 309-532-8466

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How a life insurance company can sell more policies to its customers.

By Thomas R. Schori, Ph.D., and Michael L. Garee, Principals,  Millennium Marketing Research, 808 E. Ironwood, Normal, IL 61761-5239. Tel. 309-532-8466 -

There is good news and bad news insofar as new purchases of individual life insurance policies are concerned. First, the good news. For every 100 customers you have, they purchase 14 individual life insurance policies each and every year, and, of course, your company is selling some of those policies. The bad news, however, is that most of these new policies are purchased from other companies.

To put this situation in more concrete terms, consider that, if you have a million customers, those million customers are buying 140,000 individual life insurance policies every year. If you’re primarily a "life" company (like Prudential, Metropolitan, et al.) and you’re among the very best, you may be selling nearly 50% of the policies your customers buy. Conversely, if you’re primarily a "multi-line" company (like State Farm, Allstate, et al.), at best you’re selling¾maybe¾ 15% of the policies your customers buy.

That the very best companies meet the individual life insurance needs of such a small proportion of their customers is truly sad, and truly dismal! But why does such a small proportion of your customers purchase their life policies from you? Simple! Your company quite likely is focusing on those things which it thinks drive life insurance buying decisions¾not on that which actually drives customers’ life insurance buying decisions.

Let’s face it, where marketing activities are concerned, most companies tend to be inwardly focused. Rare indeed is it to find a life insurance company that doesn’t insist, loudly and frequently, that it knows its customers intimately, their needs, desires and preferences. The only problem with this approach is this: the company is almost always wrong! Rather than actually asking customers what’s important to them when making additional life insurance purchases, typically, a company automatically assumes it already knows the answer to the question and so never even bothers to ask customers.

To be sure, there are a number of research approaches that have been described in the literature that purport to be useful in identifying the determinants of consumer buying behavior. And, during our many years in the insurance industry, we tried many of those approaches. But, unfortunately, they just didn’t work, so we developed our own procedure to identify the determinants of brand choice, a procedure which we’ve fully described in the scientific literature a couple of times [Schori, T. R. & Meadow, H. L. "Brand choice modeling," Psychological Reports, 1985, Vol. 57, 1260-1262; Schori, T. R. "Getting the most out of image: An example from the fast food industry," Psychological Reports, 1996, Vol. 78, 1299-1303]. And, this is a procedure which actually works! You might find it useful to read the articles. In easy to understand terms, these articles explain, in some detail, just how one can identify that which drives customers’ buying decisions. Validity in the approach? You bet! In the second published account (Schori, 1996), we illustrated the procedure with fast-food data that had been collected at our expense. Based upon our analysis, we commented on that which McDonald’s should avoid doing at all costs because it would have an adverse impact on consumer buying decisions toward their brand (i.e., toward McDonald’s). Either McDonald’s didn’t read the article or unwisely failed to heed its advice, for they intentionally did just that which we’d strongly advised that they not do. And the negative impact on McDonald’s was just as harsh as we’d predicted.

While the procedure does identify that which one should avoid doing, its chief value is in identifying that which an organization should do in order to have more individuals choose that organization’s brand, i.e., it identifies how an organization must position itself to maximize market share.

In the simplest terms, here’s how the procedure, which we’ve termed the Optimal Brand Positioning Model, works. (If you want all the technical details, you can find those in the articles mentioned above.)

Let’s assume that you’re a life insurer, Company X, with, say, 500,000 customers. You know those 500,000 customers buy 70,000 individual life insurance policies each year from some insurer but only (maybe) 35% of them from you. As a marketer, you know that consumers view a product or a service as a "bundle" of attributes. Having long talked with your customers, you pretty much know what constitutes the most important attributes of life insurance. So here’s how you proceed:

• Develop a survey instrument that includes what you believe to be the 20 most important life insurance attributes.

• Have customers indicate the relative importance of these attributes by allocating 20 points among them. For instance, they could allocate all 20 points to a single attribute, one point to each attribute, or some middle ground, with the constraint being that the total must sum to 20 [Schori, T. R., "A note on attribute importance," Perception & Motor Skills, 1995, Vol. 80, 1129-1130].

• Have customers indicate how their "ideal" life insurer would perform on these 20 attributes.

• Have customers indicate how your company (Company X), plus your two primary competitors, performs on these 20 attributes, as well as how the company from which they purchased their most recent life insurance policies (if not already rated) performed.

• Then, exercise the Optimal Brand Positioning Model. The model, taking into consideration that which drives each individual’s brand choice, depicts the share potential associated with each possible modest change in positioning. That is, it not only depicts what the organization must do to maximize the proportion of life insurance policies purchased from it, i.e., the optimal positioning, but it also shows the share consequences of every single positioning change, both positive and negative.

• Finally, to provide guidance as to what you must do to achieve the optimal positioning, conduct focus groups among customers [Garee, M. L. & Schori, T. R., "Focus groups illuminate quantitative research," Marketing News, June 9, 1997, Vol. 31, No. 12] to gain insight as to how you might operationalize the positioning which will maximize the proportion of life policies your customers buy from you.

The moral of this story is rather simple:

• Read the articles! They tell you exactly how to implement the Optimal Brand Positioning Model.

• Field the Optimal Brand Positioning study.
• Operationalize the findings.

• Focus every communication that you direct toward your customers on those attributes which have been found to drive their life insurance purchase decisions.

Before much time has elapsed, guess what? Good news indeed! You'll be writing a substantially higher proportion of those life policies your customers are already buying. Not rash talk. Just a simple fact.