Trusted ExperienceWhat the hotel industry can teach insurance

companies about creating brand loyalty

White paper | June 2012

Shikatani Lacroix is a leading branding and design firm

located in Toronto, Canada. The company commissions

assignments from all around the world, across CPG, retail and

service industries, helping clients achieve success within their

operating markets. It does this by enabling its clients’ brands

to better connect with their consumers through a variety of

core services including corporate identity and

communication, brand experience design, packaging, naming

and product design.

About the Author

Jean-Pierre Lacroix, R.G.D., President and Founder of

Shikatani Lacroix

Jean-Pierre (JP) Lacroix provides leadership and direction to

his firm, which was founded in 1990. He has spent the last 30

years helping organizations better connect their brands with

consumers in ways that impact the overall performance of

their business. Mr. Lacroix was the first to coin and trademark

the statement “The Blink Factor” in 1990, which today is a

cornerstone principle to how brands succeed in the

marketplace. JP has authored several papers, has been

quoted in numerous branding and design articles and, in 2001,

he co-authored the book “The Business of Graphic Design,”

which has sold over 10,000 copies. JP can be reached at

jplacroix@sld.com and you can follow his blogs at:

www.sld.com/blog and www.sldesignlounge.com

Other Articles and Books

Belonging Experiences...Designing Engaged Brands

Business of Graphic Design

White paper | June 2012 | Trusted Experience | 1

The insurance industry, in state of anxiety

The recent PricewaterhouseCoopers (PwC) Top Issues Annual

Report for the insurance industry clearly identified that the

industry is experiencing significant challenges. Low interest

rates are impacting a life insurer’s ability to generate

revenues. Smaller margins are causing amortization to

accelerate. Goodwill is eroding as earnings decrease. Plus, the

financial impact of global warming. Adding to this anxiety are

the new U.S. insurance regulations, Own Risk and Solvency

Assessment (ORSA), adopted in 2011 by the NAIC, which

raises the level of complexity in managing risk. With the

added burden of new processes, and the inability to offset

lower revenues with a reduction in expenses, the insurance

sector has started exploring new initiatives that will ensure

long-term growth.

A key growth opportunity for organizations wanting to

continue to grow and prosper is in emerging markets as the

current developed markets yield slim returns. In these new

markets, the young well outnumber the aging population for

the significant future, the middle class is growing at a pace

that is driving double digit, year-over-year consumption, and

its governments are investing in infrastructure that is driving

the importance of insurance.

However, as organizations wanting to capitalize on these

emerging markets have learned, these regions have

demonstrated to be very price sensitive and hyper

competitive, challenging the beliefs that incremental profits

can be derived from a higher sales volume.

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Another opportunity identified in the PwC report is the shift

from product-focused to customer-centric operating models.

Of the many pillars described, one of the key strategies is to

alter the competitive playing field by developing a sustainable

and competitive pricing advantage instead of aggressively

fighting for market share with price promotions. The strategy

consists of providing customers with a customized and

personalized package of price, product and service at the

individual level. This initiative shifts the operating model by

focusing on customers’ needs rather than promoting generic,

one-size-fits-all products.

Both opportunities support the need for insurers to rethink

their go-to-market strategies to capitalize on these emerging

markets, and the more discerning consumers in mature

established markets. To establish a high degree of trust and

recognition, insurance organizations need to reconsider a

bricks and mortar strategy that will complement their online

experience as part of a multi-channel initiative, and will

provide greater value and build brand loyalty. This is

especially true in emerging markets where brands need to

build relationships to gain the trust of their customers.

We can also gain learning from our work in the wealth

management industry where online-centric service providers

such as ETrade, TD Ameritrade, TD Waterhouse and Charles

Schwab support their virtual world with bricks and mortar

initiatives that leverage the importance of building tangible

relationships with new customers who want training wheels

for their self-directed investment initiatives.

White paper | June 2012 | Trusted Experience | 3

Bricks and mortar, the foundation for building trust

The challenge in today’s competitive landscape is the ability

of organizations to build trust, which is the foundation for

creating strong brand loyalty. Brands that market intangible

benefits such as insurance and investments are challenged

with a range of options that offer a lower frequency of

purchase and a complexity of choice that can be

overwhelming. With the advent of online shopping and the

growth of this category as a percentage of total sales, many

insurance organizations have rushed to provide a virtual store

to sell their services as a means to build market share.

Companies such as Aviva now offer RAC, a unique online

brand to capitalize on the growth of this medium as a distinct

sales channel for auto insurance. Other insurance companies

have also initiated similar strategies such as the launch of

Esurance by Allstate to effectively compete with online-only

brands such as Progressive and Geico.

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“Bricks-and-

mortar

stores won

the highest

marks for

‘Most

reliable’

(69%) and

‘Safest’

(77%).”

Nielson June 2012 Study

Although the growth of online sales provides brands with a

high degree of convenience and ease of access, it does

eliminate an important dimension of brand loyalty — the

ability of building personal relationships that lead to deeper,

long-term affinities for their brands. Studies have shown that

retaining customers is highly profitable. In the financial

services industry, a 5% increase in customer retention

generates more than 25% in increased profits as the lifetime

value can effectively be capitalized. A key factor in building

this profitable customer base is the ability to create an

environment that provides reliability and a sense of security

that customers are making the right purchase.

And this is the area where bricks and mortar experiences

excel over new emerging online offerings. With the rise of an

aging population and the growth of ethnically diverse

communities, physical experiences truly become the key to

building customer relationships.

The online impact of commoditization

The growth of online insurance sales can potentially lead to

the commoditization of the industry as seen in many other

service sectors. In particular we can learn from the hotel

industry which has seen a major impact on price and margin

as more and more purchases are done through websites such

as Hotel.com and Expedia.com. These online stores offer

customers price protection, a great range of options, in

addition to highly competitive pricing that is hard to match by

conventional travel agents.

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“Lack of central

leadership,

wayward priorities,

and the inherent

difficulty of shifting

from traditional

customer contact

points to online

channels all detract

from the

experience that

retailers provide

their customers.”

Forrester’s study on U.S.

retailers

The abundance of choice and the ease of shopping for the

lowest hotel cost have significantly impacted the profitability

of brands and their ability to differentiate themselves while

building brand loyalty. A recent industry study clearly

identified that the challenges facing the hotel industry will

only get worse as the gap between sales and the cost of sales

and margin continues to widen, undermining a hotel’s ability

to reinvest in the bricks and mortar part of its brand

experience. At first, the internet provided hotels with an

opportunity to escape commoditization by opening new

channels of distribution for their services. Hotels quickly

adopted the online channel of sales as a means to remain

competitive and increase their occupancy levels.

However, without clearly understanding how to change the

customer’s physical experience and other elements of the

marketing mix, this rapid move to online sales has led to

exactly what they had been attempting to avoid — the

commoditization of their offering.

To overcome this commodity trap, primarily created by an

online experience that diminishes the value of hotel brands,

leading hotels have reinvested in their physical presence

through renovated hotels that cater to the emotional side of

their clients’ needs. These new enhanced brands still rely on a

multi-channel strategy while ensuring the physical experience

of the guest translates into brand loyalty and preference over

other less expensive offerings. This supports the premise that

the tangible branded experience has a significant impact on

customer preferences within a category that has become

commoditized through a high dependency of online sales and

marketing.

White paper | June 2012 | Trusted Experience | 6

Where some lead, others will follow

Leaders in insurance and banking are realizing the importance

of a bricks and mortar presence as part of their multi-channel

marketing strategy. Our work in 2008 with Royal Bank of

Canada to launch the RBC Insurance Centers, which colocate

with their conventional banking services, allowed the

organization to capitalize on customer branch visits by up-

selling them on insurance services. The physical presence of

insurance centers also allows the brand to build credibility in

the longevity and seriousness of the offer. By having a

colocated design, it also allowed RBC to overcome the

regulatory restriction that prohibits the promotion and sales

of insurance products within a financial institution.

Another approach consists of providing promotional material

and brochures inside conventional bank branches or as part of

auto dealer showrooms, which introduce the services within a

bricks and mortar environment only to be completed in an

online or telephone service. These referral merchandising

approaches are the most common within the automotive and

travel industry and can lead to incremental sales but do little

for building brand loyalty or retention. Insurers wanting to

gain a greater share of their customer’s wallet need to

consider more permanent and integrated approaches which

leverage all aspects of the multi-channel with a strong

physical presence.

White paper | June 2012 | Trusted Experience | 7

Other organizations have embarked on different strategies

such as State Farm who recently launched a community

center as part of an integrated program designed by IDEO, a

global leader in design innovation. Next Door is a come-as-

you-are community space and cafe where anyone can ask

questions about finances and insurance and find answers.

There is no sales pitch. The one-of-its-kind facility, located in

the tony, uptown Chicago neighbourhood Lincoln Park, was

created by State Farm to provide a place for the community

to share ideas, a place where the organization can learn from

customers, and a place to encourage innovative new ideas.

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Another approach leveraged by Belair Direct, a leading

provider of auto and travel insurance in the Quebec market,

combined its telemarketing offices with a new front-end,

customer-centric service area. Traditionally, the company

offered walk-in customers with the ability to purchase travel

or auto insurance from a customer service desk similar to

banking services. It was felt that the organization could better

serve its customers by providing a retail experience that

featured all of the services available. Our firm was retained to

explore three different customer experiences, which included

interactive pods that allowed customers to shop online for

their insurance needs, guided by a sales associate. The final

program was launched in Trois-Rivières, Que., a small town

just east of Montreal, and consisted of a coffee and seating

area, four service pods that featured the range of products

available by Belair Direct, in addition to a transaction area to

enroll customers into the insurance packages. The operator

also offered pre-packaged kits when bundled insurance

services were purchased, from a road safety kit to a home

emergency package.

White paper | June 2012 | Trusted Experience | 9

Conclusion

As online sales represent a larger portion of an insurer’s

revenues, it will be important to avoid falling into the

commodity trap by training consumers to focus on price as

the differentiating factor. As insurance organizations look at

growing their revenues and slowing the account churn that

eats away at profits and margin, it will be important to

reconsider the importance of a branded place to build

relationships.

The market place has become a very competitive space with

bottom and top line challenges that will lead to greater

industry consolidation and a bigger challenge in creating

meaningful differentiation. To prosper, organizations must

remain focused on the customer and their emotive need

states, such as trust and security, while creating a proprietary

brand experience that includes a bricks and mortar strategy.

A lot can be gleaned from the wealth management and hotel

industries and applied to insurance sales and marketing that

will ensure greater brand affinity and market share.

White paper | June 2012 | Trusted Experience | 10

For more information, contact:

Jean-Pierre Lacroix, President

Shikatani Lacroix

387 Richmond Street East

Toronto, Ontario

M5A 1P6

Telephone: 416-367-1999

Website: www.sld.com

Email: jplacroix@sld.com

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