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.

SBI- the Banker to Every Indian:

The world of finance and economics is very complex and boring for the layman. India is a developing economy moving from agrarian to the service sector directly giving manufacturing sector a miss in its transformation. The extent of a developed country can be gauged from the level of complexity and maturity of the financial market. Banking forms a critical part of the financial market comprising of equities, debt, commodities and a bit of insurance.

SBI is the oldest bank in India with a rich heritage of more than two centuries. It is India’s largest public sector bank in terms of balance sheet, customers, number of branches and ATMs and number of employees as well. Yet it doesn’t have the brand recall of say an ICICI or HDFC or any other foreign bank. SBI was a sleeping giant even post liberalization. Foreign banks and even Indian private banks went miles ahead in the race of brand equity and brand recall and service. SBI stood for a government bank, lethargic in its service. SBI was not the preferred choice for customers. Its scale, backed by the government made it sustainable. But since last couple of years it has woken up to the array of opportunities and turned itself into a versatile origination attuned to the needs of the changing customer.

The Indian consumer’s purchasing power and disposable income has grown exponentially in the last 5 years. The nimble and lean foreign and Indian banks have grabbed the customer with both hands. SBI lacked in this, rather all Indian Public sector banks lacked in this. Thus there was a line of PSBs outside ad agencies for changing everything from logo to the positioning and the promotional campaign. We had union bank of India, Canara Bank, Bank of Baroda among others changing their logo and using celebrity endorsements for their promotions.

SBI of late has started with a print and outdoor campaign which is drastically different. Neither are they talking about financial products, interest rates or returns nor are they going for the emotional appeal of trust, ease in service or reach of maximum ATM. The campaign is based on the value which makes all great brands i.e. the longevity. IBM, Coca Cola are century old brands. SBI is also trying to say that if we are centuries old, we are that damn good for the people. The methodology to convey this message is quite peculiar.

Motilal Nehru, one of the early Indian independence activists, Sardar Patel, architect of the integrity of India, Jagdishchandra Bose, an eminent Indian scientist, Dadabhai Navroji, founder of Indian National Congress for independence of India, Rabindranath Tagore, literature Nobel Laureate, Dr. Rajendra Prasad, Independent India’s first President, M Visvesvaraya, Engineer and Statesman were customers of SBI. This methodology is unlike testimonial ads yet it has that flavour. No other bank can boast of such an elite clientele. Thus they are trying to say that this is the clear differentiation which no other bank can claim to have.

A good and a refreshing piece of creativity and strategy. Kudos to you, SBI and their agency.

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.