PGI Case Questions.
Question 1
Q1a
PGI has conducted a number of interviews to investigate the possibility of introducing a new general insurance policy. The company has asked for your help in analysing this interview data. You are required to carry out a process of data reduction on this interview data using any appropriate method of your choosing (you may wish to consider using the “large sheet of paper” method).
INTERVIEWEE AUDIT
Spreadsheet showing the interviewees responses to the marketing research
| Interviewee(s) | 1 | 2 | 3 | 4 | 5 | 6 |
| /Question(s) | Interview 1 Male 46yrs | Interview 2 Female 56yrs
| Interview 3 Male 23yrs
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Interview 4 Female 23yrs
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Interview 5 Male 63yrs
| Interview 6 Female 43yrs |
| Willingness to buy policy via group membership | Yes/Already does so | No/uses Mortgage Lender who financed the policy | Yes/If competitively priced | No/compares and uses online listing of companies. | Yes/possibly after retirement | No/from people who have good knowledge about insurance |
| Expectation from a household contents Policy. | Must cover house contents, portable belongings and family belongings | Fire /Accidental Damage, theft and inclusion of outside goods. | Accidental loss. Fire and Theft | Fire and Theft/Basic less costly cover | Fire, theft, accidental damage, legal expenses insurance. Prefers the help from telephone help lines and repair, tradesman-sourcing etc. | Everything should be covered and does not like exclusions |
| Important things in a contents Policy | Accidental Insurance Cover Theft and Fire damage, In favour of financial indemnity only. | Legal expenses insurance and less paperwork in expediting the policy | Accidental loss, Fire and Theft. Must have easy settlement/claim settlement/Does not prefer extra charges/prefers monthly payments | Fire and Theft and Replacement insurance in case of loss | Everything | Fire, theft, accidental damage, travel insurance, public liability, legal expenses, help line |
| Unimportant things in a contents policy | Dislike for legal paperwork, replacement Insurance and impersonal machine operated customer service | Nothing is unimportant/unhappy with the increasing exclusions in covers | Does not like the legal advice and repair help part. Things these thing are costly and useless | Does not like the “Wear and Tear” reduction/lack of a no-claims discount | Impersonal mechanized telephone responses | Complicated legal language |
| Sources of information about policy | TV Newspapers and Letters | TV and through Bank | Local Insurance broker /agent | Internet/Does not prefer media advertisements of any kind | Word of mouth and letters from companies | Providers/ insurance broker |
| Gender responses | ||
| Female | Male | |
| Preference for group insurance | Response was no for all three female interviewees | Yes for all three males |
| Likes /Expectations about Insurance cover | Preference for a larger ambit of cover including house contents, portable belongings and family belongings/Fire /Accidental Damage, theft an inclusion of outside goods. Active and personal telephone help lines and repair, tradesman-sourcing etc. Financial indemnity only. Cover for Legal expenses, Less paperwork in expediting the policy/Presence of an easy settlement/claim settlement/ travel insurance, public liability, legal expenses, help line
| Ditto for both genders to a large extent |
| 3 –Dislikes about policy | Complicated Legal Provision and Impersonal Customer Help | Ditto/Common Complaint against both genders |
| 4 – Sources of Finding out about cover. | Mixed/word of mouth/media and internet | Ditto for both genders |
| Table: Demographics of target buyers– Age distribution | |||
| Young (15-24) | Middle-aged (45-54) | Old (54+) | |
| 2 – Group insurance | 1-1 Yes and No | 1-1 Yes and No | 1-1 yes and no |
| 3 – Expectation/Likes about a cover | Preference for a larger ambit of cover including house contents, portable belongings and family belongings/Fire /Accidental Damage, theft an inclusion of outside goods. Active and personal telephone help lines and repair, tradesman-sourcing etc. Financial indemnity only. Cover for Legal expenses, Less paperwork in expediting the policy/Presence of an easy settlement/claim settlement/ travel insurance, public liability, legal expenses, help line
| Ditto across all ages | Ditto across all ages |
| 4 – Dislikes | Complicated Legal Provision and Impersonal Customer Help/Unreasonable Wear and Tear reductions | Ditto | Ditto |
| Source of finding about insurance | TV and word of mouth | TV and Word of mouth | TV and word of mouth |
MARKETING MIX
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| Gender | Age | Behaviour | |||||
| Female | Male | Young (15-24) | Middle-aged (45-54) | Old (54+) | Benefits sought | Purchase Occasion/Behaviour | Usage | |
| Insurance Cover | . Preference for a larger cover for money value-Do not prefer group insurance | Prefer group insurance | 1 yes and 1 No Yes for male and No for female/female prefers basic insurance | 1 yes and 1 No Yes for male and No for female | 1 yes and 1 No Yes for male and No for female-This group pre | More coverage and better customer help and legal and technical jargon | For the home marital status unknown | For home cover-Old |
| Price | Would not want to spend too much/ This segment would be more favoured to price discounts | Ditto/mainly because of less family concerns | No information was given for male about price preference but value for money for female | Price discounts will favour this segment-Possibly large buyer of contents and possible family person | Ditto. Need more coverage and clarity of what can be claimed. | Value for money/possible family purchase | Ditto | Ditto |
| Place | TV and Word of mouth and Internet | Ditto | Ditto | Ditto | Ditto | There should be greater use of personal advertising | Internet Advertising is also successful | Ditto |
Q1b -What advice could you give PGI about promoting to these customers?
From the response of the three male and three female interviewees it is possible to see that a strong willingness to buy policy via group membership has been shown by both the older and younger parts of the male interview sample base. Quite the opposite reaction is obvious from the female sample base, which seems to need more details about the policy being bought and almost shows a suspicion towards. Both the older male and female consumer base is more concerned with the details of the insurance coverage in terms of loss and items. It should be noted that the younger male and female consumer base does not seem to want to spend too much money and are not concerned about family coverage perhaps due to the fact that they are single. It seems that this segment would be more favoured to price discounts. The main target of creative discount packages and varying cover packages would be the older female consumer base then which can then be targeted via the internet as well as through media advertisements and word of mouth strategies.
Furthermore based on the interviews and their analysis in Q-1a, it is possible to see that the family dimension is important in conducting this business, as most buyers will be married with children. There is also an emerging market of single parent households due to the increased divorce rate. It can be discerned thus that such people would like greater insurance coverage in terms of the items included in the insurance cover. There is also an overall concern about the complicated exclusion clauses and paperwork in insurance agreements. PGI should try marketing a “less paper more work” scheme for these customers who do not want to engage in complicated legal jargon. The target consumer base that is the people from 30 plus years of age who are the serious buyers and who actually seek value for money – and this, indeed, is what they should get.
This group does not like complicated legal agreements and would prefer personal customer service, and it is more likely to respond to personal word-of-mouth based or telephone-based advertising. The extent of coverage being offered is essential and should ideally be marketed to include portable belongings and family member items. In terms of gender based differences, it has been seen that female consumers in particular need more reliability and are likely to put in a more detailed search and price comparisons than men, as women tend to be more cautious and risk-averse. This means the PGI needs to put in effort into comparison based web advertising. The male insurance buyer is looking for something convenient: that is, insurance that can be bought via group arrangements. Such men generally look towards their trade union (if they are members) to negotiate an arrangement for them. This means PGI should contact and focus on promoting ties with insurance groups to target the male customer base. It should also be noted that at this point of entry, PGI would have to focus upon building loyalties and personal relationships with the customer base. The main source is word of mouth but sometimes TV and Web advertising is more effective in terms of impact, especially to men who use the internet more than women, though women watch more TV. One source is banks and mortgage brokers so PGI should focus on promoting good relations with them as well.
Question 2
Using the PGI case study, carry out a Situational Analysis, which must include the following audits
- Customer audit
- Internal audit
(c) Market audit
Q2-Consumer Audit
| i) Who is important? | The family dimension is important as most of the buyers will be married with children and such people would like a greater coverage and less exclusion clauses and paperwork in their agreements. The female consumers need more reliability and are likely to put in a more detailed search and price comparisons than men. . |
| ii) How do they buy? | The younger group of buyers is looking for something basic, which does not cost too much possibly because they do not have a settled family life. The target consumer base that is the people from 30 plus years of age are the serious buyers who actually seek value for money and this is indeed what they should get.
This group does not like complicated legal agreements and would prefer personal customer service. This group is more likely to respond to personal word of mouth based or telephone based advertising. The extent of coverage being offered is essential and must include portable belongings and family member items. |
| iii) What are their choice criteria? | The male insurance buyer is looking for something convenient that is insurance that can be bought via group arrangements. Such men generally look towards their trade union to negotiate an arrangement for them. This means PGI should contact and focus on promoting ties with insurance groups to target the male customer bases. The female customer base needs more technical convincing in terms of financial benefits and item coverage. This can be done via internet advertising on websites that help comparisons. Both groups would prefer more clarity about what can and what cannot be included in this dimension.
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| iv) When do they buy? | Single people will prefer basic covers but the married people with families are more likely to buy these policies. |
| v) Where do they buy? | The main source is word of mouth but sometimes TV and Web advertising is more effective in terms of impact. One source is banks and mortgage brokers so PGI should promote relations with them as well. |
- INTERNAL AUDIT of PGI
The 4 M’s Model
| • Men | PGI has a sound group of people working together in a partnership and the relationships with underwriters are sound so far. |
| • Money | The company sells a product (motor insurance), which is a legal requirement to buy, and since this product is unique to them and inelastic in demand they are likely to have a good revenue source. This simply means that they will have enough money to source into the household insurance cover market business. |
| • Machine | They have the revenue and the competent personnel available for sourcing their energies towards a new business. |
| • Marketing – 4p’s | PGI has a good chance of success here as statistics indicate that expenditure on the household insurance is increasing. It should be noted that the target consumer base is both unemployed and retired. There is a definite market for household insurance due to the risk posed by weather conditions and crime although the overall market is still suffering from the after-effects of inflation. The rival businesses for PGI are not just other insurance companies offering the same product but mortgage lenders who seem to be able to control the options their clients have in terms of the choice of household insurance companies. In terms of the target market there is now more average income, single parent households that PGI can now focus on by offering more affordable insurance options. Infact this will be one way to break the large market shares of Bullrig and Cherry Ash who have experienced massive growth in a very short time over the last few years.
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Market Audit: COMPETITOR AUDIT: Porter’s 5 Forces model
Porter’s 5 Forces Model (Jobber, 2007)
- Rivalry within industry: There is a high level of rivalry within the current industry as coming from the four main market shareholders which include Cherry and Bullrig.These companies may have started recently but the recent rates of growth as evident from the tables provided may be a cause of worry for PGI now where as it is planning to enter the market now.
- Entry Barriers: This is coming from the lack of knowledge and prior establishment in the industry. Despite having been in the insurance business for a long time it is new to the household insurance industry. The main barrier here is getting to grips with the intricacies of targeting the older customer base, which actually buys this product.
- Buyer power: This product is sold more on the basis of reliable word of mouth recommendations and to an extent reliable Internet advertising. Customers are looking for a relationship of trust where there can speak to a person about their individual needs, concerns and queries about their insurance cover. Since this is a word of mouth phenomenon the buyer is also a potential referee and thus powerful.
- Substitutes: Household insurance is a one of its kind product but it can have several variations in terms of price and coverage.
- MACRO AUDIT: Political Ecological Socio-economic Technology (PEST): Political factors
| . – PGI has to take into account a possible increase in Insurance premium Tax to help prop up public spending |
Economic Forces and Socio-economic factors
| Economic growth | The sub prime crisis has left no one happy yet there is hope in terms of the increase in house ownership particularly buy-to-lets. In addition to this there are the changing customer expectations to easy access and cheaper year on year premiums – especially with the advent of comparison websites such as moneysupermarket.com.This has led to a decrease in customer loyalty. The low penetration of Affinity group membership and the possibility of a single product offering –leading to multiple provider relationships also have to be taken into account. Then there is the intense competition coming from affinity groups, which provide benefits for their members, which rival those provided by companies on an individual basis. Furthermore there is a trend of an increased dominance of direct writers like Bullring. The target consumer base at this point is well supported by an overall aging population as well as more average income single parent households. The increasing crime rate and damaging weather conditions make the market even more promising for PGI.
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Technological forces
| ICT systems | A concern has been shown for the diverse number of ICT systems in PGI, elements of which could impact on their ability to exploit economies of scale. Furthermore more needs to be done in terms of internet advertising and creating attractive packages for insurance comparison websites.
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SITUATIONAL ANALYSIS – SWOT Analysis
SWOT Analysis for RLL
| Strengths • Well established brand name For motor vehicle insurance • Financially strong For new venture | Weaknesses • Has not done enough in capturing the internet insurance market Needs to Organize ICT systems. |
| Opportunities • Untapped emerging market of single households which have less cash. PGI can break through the market by tapping into cheap deals for this customer segment
| Threats • Strong competitors Cherry Bullrig
•The current economic recession/Sub prime crisis •
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Question 3
Recommend a suitable outline strategy for PGI, explaining your choice fully.
Following a sound outline strategy as mentioned below, it would not be unreasonable to assume that PGI has a good chance of success here as statistics indicate that expenditure on the household insurance is increasing. It should be noted that the target consumer base is both unemployed and retired. There is a definite market for household insurance due to the risk posed by weather conditions and crime although the overall market is still suffering from the after-effects of inflation. The rival businesses for PGI are not just other insurance companies offering the same product but mortgage lenders who seem to be able to control the options their clients have in terms of the choice of household insurance companies. In terms of the target market there is now more average income, single parent households that PGI can now focus on by offering more affordable insurance options. In fact, this will be one way to break the large market shares of Bullrig and Cherry Ash who have experienced massive growth in a very short time over the last few years.
In recommending a suitable strategy for PGI it is necessary once again to glean over the SWOT analysis undertaken in the tables above. It has been seen that in terms of strength PGI is already in a strong financial position and is able to generate the necessary capital from the new business line from its current business activities. Its main weakness is the fact that market entry into the household insurance sector is already saturated by fast growing and fast acting competitors like Cherry and Bullrig.These main opportunity PGI has now is to focus on the information hungry and protective older female consumer base which is not easily convinced but once they chose their brand they are good for word of mouth publicity. Also PGI must remember the fact that the exposure to the internet has made consumers less faithful and the rival companies will have no problems reeling away their consumers through lucrative switch over offers unless they work harder at retaining their consumer base.
The main entry barrier comes from the lack of industrial knowledge and prior establishment in the industry. Despite having been in the insurance business for a long time PGI is new to the household insurance industry. The main strategy here is getting to grips with the intricacies of targeting the older customer base, which actually buys this product. It needs to be understood that this product is sold more on the basis of reliable word of mouth recommendations and to an extent reliable Internet advertising. Customers are looking for a relationship of trust where there can speak to a person about their individual needs, concerns and queries about their insurance cover. Since this is a word of mouth phenomenon, the buyer is also a potential referee and thus powerful. Thus, this may be a slow yet steady road, but the overall strategy at this point should simply involve building these relationships through sound provisions for customer service as well as consultancies. Another factor is building good relationships through e-commerce. This would mean a better Internet presence.
At this point the objective and strategy of PGI should be quick and effective market entry through intensive advertising and giving the consumer base something new and trustworthy to consider. This is not a once and for all strategy as it will continue into the post evaluation stage after the main objectives of effective market entry have been met. The success of this project is not only dependent on positive economic circumstances but also customer appraisal and satisfaction. Furthermore it would be a good strategy to tailor different cover packages for single households as well as household insurance may be a one of its kind product but it can have several variations in terms of price and coverage. For example young single customers are looking for the very basic insurance cover but single parents or middle aged family persons would like to have the belongings of their family members covered as well.
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Bibliography/Sources consulted
- The PGI case study (as provided)
- Kilter, P., Marketing Management; 9th International Edition; Prentice Hall International, Inc., Upper Saddle River, New Jersey 0745
- Jobber, D. 2007. Principles of Marketing. 5th
- Solomon, M., Bamossy, G., Askegaard, S. (2002). Consumer Behaviour – A European Perspective 2 nd edition. Essex, London: Pearson Education Limited.
- Blythe, J. (2003). Essentials of Marketing Communications. 2nd edition. Essex, London: Pearson Education Limited.