LIC Single-Premium ad gaffe

Advertising space in newspapers come at a very high premium. Second only to the television. The premium increases with the placement of the ad in the newspaper. Top-right hand or a jacket ad or a double-spread ad. A gaffe is quite a rarity in newspapers since it is proof-read. However a gaffe such as the above is quite serious ( Single premium ad followed by a post to be careful about the product). Surely it was not intentional from the newspaper. Yet LIC marketing managers must be irate on seeing this piece. The damage may not be too much considering the clutter of ads and information on financial products. LIC managers and more importantly their advertising agency and media agency, should be doubly careful the next time around.

Source: Economic Times 28^th March 2012 Page 13

Zindagi Mile Na Dobara- creating problems for Investment companies!!

It is said that celebrities influence minds of the young who are at an impressionable age. They follow their path blindly. Right or wrong is just a perception for these guys who get swayed by the on-screen charisma of the actors. Not only the young but even mature people get swayed intentionally or subconsciously when the message is woven in an emotional scene.

A case in point is the scene between hunk Hrithik Roshan and sultry Katrina Kaif. He is like the many next door boys for whom money is the priority over family and she is a person who pursues passions. When she says that “stop planning for your retirement and live life for the present”, it unintentionally hit the raw nerve of investment companies who say that they plan for the future including the pension funds, mutual funds and insurance companies.

The thought of living for the present as much as it sounds perfect is difficult to follow in this imperfect world. As life expectancy increases and science advances, cost of medicine too is going up. Without proper planning of finances and health insurance, it is very difficult to survive the medicine expenses. The cost further increases for critical diseases and lifestyle diseases such as blood pressure, diabetes among others. Thus people in the developing world need to plan for the future at the cost of being stingy in the short term.

Moreover the developing world doesn’t have the type of social security that the European countries and US have. Thus you see the high savings in China and India whereas consumption remains debt-fueled in Europe and the US. Anyway getting back to Zindagi Mile Na Dobara, I hope people take it just as a film and not derive unintended messages from him.

Usage of children in endorsements:

The rule of advertising is to use celebrity or people in ads who relate to the target audience. E.g. A sportsman would endorse a sports shoes not a filmstar. The rule doesn’t hold in the continuously changing market in India. Especially if it involves children. There was a time when children were used in ads only for children’s products such as nutrition category (Bournvita, Chyawanprash) or ice creams (Amul or Kwality) or chocolates (Cadbury).

As time progressed children were used more and more in ads for products not bought for them but were for household consumption such as consumer durables (Airconditoners, refrigerators, television, Audio systems) or food (Maggi, type of masala). Pester power was considered to be the weapon then. Things have not changed. Pester power still remains but the thought process behind using children for an array or products/ services has changed. Nowadays children are used for all types of product/ service categories. Aviation, banks (Axis bank, IDBI bank, Kotak bank), Cars (Volkswagen, Maruti), insurance (ICICI Pru, HDFC Standard Life, Metlife, Max newyork), detergent (Rin, Ariel, Tide, Wheel), oral care (Colgate, Pepsodent), tourism (Mahindra resorts), real estate (almost all ads in print media such as Lodha, DLF, HDIL), mutual funds, retail (big bazaar), Textile (Raymonds), telecommunications (Vodafone), oil and gas(Jaypee), cement, steel to name a few companies. You name a category and children are used. The rationale being that research has shown ads with children having more recall value than its ads of competitors without children. Children are endearing to all of us. This could be the reason for the high recall.

Communication is all about the message rather than the characters involved. The effectiveness of an ad is in understanding the way to reach the target audience and knowing the idea to make the target audience relate to the message and thus the product/ service. This has been understood by the Indian advertising industry.

Thus we see the latest offering from Metlife fixed income plan where we see the grand son blackmailing his grandmother for buying stuff and relating it to fixed income from financial products. A child in an ad who does not know what insurance means.

Targeting of Unit-linked Insurance plans (ULIPs):

The biggest innovation for the insurance industry over the past couple of years has been the Unit-linked Insurance plans (ULIPs). It was fuelled by a booming stock market. It is seen as a direct competitor to the Mutual fund industry with value addition of insurance as well. However the downward spiral of the markets after the recent crisis has directly affected the ULIPs where the majority is invested in the Equity markets.

To be different from competition and get people to buy ULIP products, two things can be done:

1. Understand consumer behaviour and appropriate targeting-

There are 3 types of customers for ULIPs- General public accounting for almost 90% of the buyers who are unaware of the intricacies of this financial product and are conned by salespeople. These people are influenced by peers and hearsay. These are the type of people who have stayed away from ULIPS recently resulting in the dip in sales.

Second type is the informed public who account fro about 5-7%. These people have become conservative in investing in ULIP and are very circumspect and waiting for equity markets to resurrect.

Third type is the High-net worth individuals (HNIs) who account for just 1-2%. The next point will elaborate on the same.

2. Sectoral choice availability-

Presently a customer doesn’t know which sector his investment is done. He just gets daily updates in the Net Asset Value (NAV). For making ULIPs attractive for HNIs, three things can be done- give option of sector such as infrastructure, banking, PSU, FMCG or telecom or commodity markets. They can be divided according to growth fund where there are high returns but commensurately high risk too. Then their can be safe and fixed returns funds with minimum risk. And finally exotic funds with exponential growth options where the money would be exposed to high risk and complex financial products such as Credit Default Swaps (CDS), commodities, bonds, currencies among others.

Both these methods are possible. Only appropriate data needs to be collated.

Lastly Perceptual Mapping also can be done but it is from marketing point of view only and has to be done every 3-5 years or if you have changed your value proposition. Just like what Bajaj Allianz did with its digression to emotional appeal from a practical one.

Innovation for Insurance industry players:

Each of the companies in the industry has their own core competency. Each of them fights on their basis of one of 4Ps of marketing, Product, Price, Promotion or Place. And if it happens to be the service industry, you can add 3 more Ps of People, Process and Physical evidence. The insurance industry is no different. LIC banks on its trust factor, Bajaj Allianz on its product customization, ICICI Prudential on Price, HDFC and SBI on emotional appeal. So what should a company do more to get extra from its products?

A comparative analysis of the 4Ps but taken two at a time can be done. On one graph plot price vs. product and on the other, place vs. promotional spend. The gap in each graph can then be explored to make a niche for you and increase chances of growth.

Following are the factors that can be taken for each P:

Product:

1. Riders i.e. how many, less is better for customer understanding, but more riders done simplistically for a better product offering.

2. Liquidity: more the better for the customer but it increases chances for redemption resulting in loss for the company. A trade-off between liquidity and redemption pressures has to be arrived at.

3. Flexibility: switching cost and types

Price:

How much is the cost for the product. An oblivious point to mention but listed for a comprehensive structure.

Frequency of premium- people do not like to be reminded of premium payment frequently. So ideally it should be once or twice a year.

Place: i.e. the distribution reach

1. Sales force strength in numbers

2. Indirect channels

3. Direct channels

4. Bancassurance

Promotion: advertisement spend (easiest to compare)

Thus weightage to each factor helps in plotting the graph and arriving at the gap mentioned initially.

Bajaj Allianz Life Insurance’s strategic disaster of Repositioning:

The latest victim of Repositioning seems to be Bajaj Allianz life Insurance. They have changed their tagline from “Jaise Jarurat waise insurance” to “Jiyo Befikar”. The original tagline mentioned about ‘customised offering’ by Bajaj Allianz. The new positioning mentions about the trust factor which has an emotional appeal.

Trust factor is the most important criteria in Insurance products. The problem though with this new positioning is that the other companies have already made this appeal in their positioning. ICICI Prudential’s tagline ‘Jeetey Raho’; SBI Life’s tagline ‘With Us, you’re sure’; Birla Sun Life’s tagline ‘muskurate raho’ and HDFC Standard Life’s tagline ‘Sar Utha Ke Jiyo’, all mention about the trust factor with an Emotional appeal.

This is where Bajaj Allianz has made a mistake. It was the only company which focused on the product with a practical appeal. It differentiated itself explicitly from the other companies. By doing this new positioning with an emotional appeal, it has lost out on the differentiation.