Mark South, Managing Director, MSQ Partners
The world of insurance is evolving rapidly. Technologies such as connected autonomous vehicles, the digitally connected home and wearable health tracking devices require insurers to rethink traditional business models. The global tech giants, with troves of data and insight, are parking their tanks on the lawns of Fenchurch Street. To survive and thrive, insurers need to embrace innovation at a pace not seen before, both in their products and services, and in the customer experience. They need the space to focus on core competencies, while ensuring they are communicating with the right people, in the right way, at the right time. These are Board level agenda issues capable of ‘making or breaking’ even the largest of insurers and are placing increasing levels of pressure on in-house marketing teams.
A recent report by consulting firm, McKinsey, highlights that, with the exception of utilities (including broadband providers), the insurance sector provides the worst online customer experience. A similar study conducted by SalesCycle reveals that the insurance sector has an 84% cart abandonment rate. Providing the customer with a greater variety of payment options, speeding up the purchase process, being more available for customer contact, and auto-populating online forms have all been suggested as potential solutions. But, as good as these tactical solutions are, they all miss a fundamental point–in house marketing teams are constantly juggling the role of brand guardian, the need to get a customer acquisition or retention campaign out of the door, conducting customer research, keeping customer databases clean and tidy, making incremental changes to the website, managing the ten different agencies covering digital, PR, events, advertising, research, web development, and mar-tech. They have become a ‘jack of all trades, and a master of none’, and that comes down to capacity and capability.
Unfortunately, the situation gets worse, before it gets better. Clients expect their agencies to plug the gap – to understand how to use the best of the new tech and tools available to place content and advertising, stay on top of measurement data, employ nudge tactics, and steer the ship across multiple media channels for the most effective outcome. Few agencies can do all of this at speeds close to real-time and the agencies that lead in the use of technology tend to be small niche players. Clients therefore have to play the co-ordination role at the centre of a host of providers, all the while paying each of them for account-management. To evolve, the big agency networks would have needed to better understand their own processes and capabilities, the role they were playing in the wider client marketing ecosystem, invested for the long term and become more disciplined – relying less on personal heroism and becoming more systematic. But they haven’t.
Is ‘In-housing’ the right answer?
In the short term, for the brand giants in the insurance sector at least, it may be. If they can bring in new talent, and keep it happy, in-housing could help these companies win the battle that starts afresh each day. But it will be a very costly exercise, certainly not affordable to the small and mid-tier players in the sector or the specialists, and could come with some problems of its own; a lack of deep understanding of market movements and industry trends over time, how to originate the creative insight that usually comes from an independent perspective, how to create sufficient variety of challenge to excite and develop creatives working on just one (very big) brand, and how to avoid your agency ‘going native’. In time, talent could be lost, or cease to evolve at the pace of the wider industry. The other big issue is that an in-house agency is ‘cost-free’, meaning capacity limits are quickly reached and breached, and cannot easily scale to meet demand. These constraints can quickly become a frustration and prioritising work becomes a political challenge – the net outcome being increased levels of paperwork and declining internal client satisfaction.
For everyone else in the insurance industry, a new marketing agency solution is required to combat the threat from big tech with big data, and ensure long term survival and growth; one that supports the development of outstanding CRM capability, enabling a ‘segment of one’ view on their customer base, and prioritises new customer acquisition. They need to be able to meet new prospect customers with propositions better than the competition and communicate their value broadly, simply and clearly. And above all, build a ‘marketing machine’ that is more efficient and more effective than either an in-house or traditional agency/client relationship. The answer may well be outsourcing.
The outsourcing alternative
The idea of outsourcing has never found much purchase in marketing. A couple of factors could explain this; clients have been reluctant to outsource ‘core’ activities and marketing agencies haven’t been able to take a process-led view of what they do, or transform their business model to allow them to provide service in this way.
To offer a marketing outsourcing solution, a would-be-provider must understand both marketing, and outsourcing. Getting outsourcing right is a complex business, usually the domain of management consultants who map out exactly how things happen; how much of each activity is undertaken, the costs, the skills involved and the technology enablers. And then there is the transition plan and contract. They are rational and driven by efficiency goals. They reduce complexity into elegantly simple processes, frameworks and models. It’s unusual to find management consultants in marketing agencies, but not impossible. And it’s only those that do that can build genuine, deep interdependent partnerships, offering skills that map to each step in the marketing process.
Agencies understand the human aspect of how companies and teams really work. They prize creativity, human insights and are driven by the effectiveness of their work in delivering social change, improving customer experiences or selling more products.But they can sometimes lack structure and don’t obviously seem to follow a route-map.
When you blend the strengths of both, the weaknesses are cancelled out and the result is an agency partner with skills and a culture fit to offer an outsourcing solution built for both efficiency and effectiveness. An outsourcing relationship can feel as close as an in-housing arrangement, without the set-up cost or downsides.
The final piece of the argument comes from the way in which an outsourcer contracts with its clients. Outsourcing contracts and relationships are longer term, anything from 3 to 10 years, and so,both the client and the outsourcer are able to forecast revenues over a longer timeframe,fostering a longer term perspective on the investments to be made – to keep ahead of developments in technology to meet service standards, and in the capabilities of people.
In-housing may be the start of the trend, but outsourcing may be where it ends up.
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