Car insurers have dramatic ROI on marketing and advertising effort. A study from McKinsey & Company shows that auto insurers have failed to boost sales even after spending billions of dollars on advertisements.
McKinsey's analysis is based on the American market, although the consulting firm states that similar patterns are visible across the global car insurance market.
Over the past decade, US auto insurers have been in a "marketing arms race", boosting spending 15% a year to almost $6 billion in 2011. In return, sales in the market have been stagnant over 10 years. More shocking is that more than half of the advertising expenditure has come from insurers that didn't even gain market share, McKinsey & Company calculated.
"When Nike advertises shoes, people can buy more shoes," says Tanguy Catlin, a partner in McKinsey's insurance practice. Spending more on auto insurance marketing doesn't necessarily translate into higher sales, because consumers "don't buy multiple insurance policies".
The surging cost of winning new customers has made retaining policyholders even more important, McKinsey said. Insurers can benefit if they tailor messages to specific customer groups as for instance banks have done in The Netherlands by developing so-called micro-brands.
"Auto-insurance shoppers are not as single-minded as the advertising aimed at attracting them would indicate" according the consultants. "There are multiple segments, and the consumers in each of these segments are driven by different needs and preferences, and respond to distinct messages at distinct touch points in their shopping journey".