1. Brand Marketing Plan
By:
Team Brand Evolution
Rajeev Kalavar: rajeev_kalavar@mba.berkeley.edu
Susan Song: susan_song@mba.berkeley.edu
Date:
12/7/2009
2. Executive Summary
The US auto insurance industry is highly commoditized with slow organic growth.
Brand awareness is critical, and GEICO has out-spent its competitors in advertising dollars.
However, competitors are catching up and we recommend GEICO increase its marketing budget
by 6.26% and allocate $882MM towards 2010.
GEICO’s message is focused on superiority in price and ease of use. We recommend
additional focus on customer service and financial strength, which resonates well in the current
recessionary environment. GEICO needs to search for new target segments and cross-sell to
continue its growth. It should also increase its customer touch points by partnering with car
dealerships. To improve advertising efficiency, GEICO needs to ensure its media channels are in
sync when launching a new campaign. GEICO has done well in creating an emotional bond and
built strong brand assets. We recommend leveraging these specifically within the social network
media.
Finally, we suggest executing a sustainable competitive pricing point lower than its
competitors till end of FY '10. With heightened focus on cost-savings, this is a great opportunity
for GEICO to accelerate customer acquisition and target the #2 position in the industry.
Business Trends
Economic
The current recessionary environment has negatively impacted the auto insurance
industry. Insurance agencies charge most policyholders a monthly premium, which is then
invested until it is needed to pay out claims. With the stock exchange indexes in free-fall, most
companies have lost capital value of their investments. The last two years have also seen a big
2
3. increase in weather-damage claims. Together with loss of investment income and unexpected
rise in claims, an industry with $5.8B in profits has had a net loss in 2008.
Social
The recession has changed consumer behavior which hurts the auto insurance industry.
Policyholders are either increasing their deductibles to lower monthly premiums, or opting for no
coverage1. To save money and maintain margins, some insurance companies have been forced
to increase premiums on existing policyholders2, leading to higher than expected turnover. This
has fueled distrust among consumers towards their auto insurance companies and consumers
have become extremely price sensitive. Consumers are now searching for quotes online and
comparing rates. In addition, customers are avoiding small insurance companies in fear of
insolvency.
Industry Trends
Current business situation
The US auto insurance industry is a multi-billion market where a one-percent shift in
market share amounts to a $1.6 billion dollar shift in premiums3. Major auto insurance
companies understand that customer satisfaction is the key to attract and retain customers –
including customer value: interaction, policy offerings, billing and payment, price and claims.
1
Studies by the Insurance Research Council says approximately 17% of drivers across the United States may be
driving without insurance by 2010.
2
“U.S. annual auto insurance premiums averaged $1,674 in September 2009” at
http://www.carinsurance.com/Average-Premiums.aspx
3
“2008 National Auto Insurance Study”, JDPower.com, at http://www.jdpower.com/insurance/articles/2008-
national-auto-insurance-study
3
4. The US auto insurance industry is fairly mature. In a span of a decade and a half, rate of
growth of the US auto insurance industry has been 4.5 percent4. With low growth rates,
capturing market share is essential for auto insurance companies.
Major challenges currently facing US auto insurance industry include: 1) extremely high
expenses from over treating legitimate injuries and soft tissue injuries and 2) fraudulent claims,
both leading to high insurance premiums.
Trends versus Previous Periods
According to a study from ComScore, approximately 32 million online quotes were
submitted and a record 2.4 million policies were purchased online in 20085. This is an increase
of 7 percent, indicating the increasing importance of the Internet as a transactional medium.
Consumers are becoming price sensitive, shopping for insurance and reconsidering coverage.
The online channel provides quick and easy access for comparison-shopping and fulfillment of
policy purchases.
Forecast of future trends
With limited new customer segments, the industry is facing substantial challenge of slow
organic growth with companies vying for market share gains. Advertising remains a top priority
to stay relevant in the minds of consumers as they comparison shop. The industry will
4
“US Auto Insurance”, EconomyWatch, at http://www.economywatch.com/world-industries/automobile/us-auto-
insurance.html
5
Andrea Vollman, “Press Release-U.S. Auto Insurance Policies Purchased Online Up 7 Percent in 2008 Versus Year
Ago Despite Soft Consumer Demand”, conScore, posted 4/2/2009 at
http://www.comscore.com/Press_Events/Press_Releases/2009/4/Auto_Insurance_Policies_Purchased_Online_Up
_7_Percen
4
5. consolidate through mergers once the economy recovers to achieve economies of scale and
scope.6
Competitive Environment
GEICO markets its policies primarily through direct response methods. GEICO competes
for private passenger auto insurance customers with other companies that sell directly to the
customer as well as with companies that use a traditional agency sales force; from well-
established auto insurance companies to reinsurers serving the auto industry. GEICO's major
competitors include State Farm, Allstate, Progressive, and Nationwide.
Exhibit 1 lists the top 10 companies in the Auto Insurance Industry. See complete list in appendix
Exhibit 1 shows the top 10 auto insurance companies by market share7. As of last year,
State Farm owned 18.3% of the market, followed by Allstate with 10.7%, GEICO with 7.6% and
6
Greg Horn, “Peering into the Future”, Automotive Body Repair News, Vol. 48 Issue 11, p100-102, published on
11/2009.
5
6. Progressive with 7.1%. The market is highly competitive and with little product differentiation,
extremely fragmented.
GEICO is also competing to overcome the negative perception consumers have against
insurance companies, who they consider untrustworthy. As a commoditized industry, insurance
companies are perceived as 'boring', and establishing emotional relevance is a key challenge.
Major Competitors and Likely Movement
State Farm, Allstate and Nationwide primarily market and sell their car-insurance policies
through agents. State Farm and Allstate have around 17,000 and 13,000 'captive' agents8,
respectively. Progressive also uses independent agents who sell policies for many different
companies. Progressive of late has also ramped up its direct channel and is a significant threat to
GEICO’s presence online.
GEICO’s competitive advantage is derived from its low cost operations, which are made
possible by the direct sales business model. By selling products over the phone and online,
significant efficiencies can be captured. Using the Internet to search for and purchase insurance
is getting more common. The ongoing recession has accelerated this adoption, as price has
become an important aspect for consumers. Progressive and GEICO have stood to gain most
from this, as is evident from the Exhibit 2, highlighting GEICO and Progressive's Value Line
Report9.
7
“Top 25 Insurance Companies-Total Private Passenger Auto”, National Association of Insurance Commissioners,
at http://naic.org/documents/research_premium_by_LOB.pdf
8
“Different business models for auto insurers”, AAA Auto Insurance at
www.aaaautoinsurance.net/5303_different_business_models_for_auto_insurers.shtml
9
“GEICO Vs Progressive: Selected 10 year Metrics”, Seeking Alpha at http://seekingalpha.com/article/144346-
geico-vs-progressive-selected-10-year-metrics
6
7. Exhibit 2 GEICO and Progressive's Value Line Report as of 2009
GEICO’s compounded annual growth rate in premiums earned over the ten-year period
was 10.1% while Progressive grew at a 9.1% rate. Over the past two years in particular, we can
conclusively see the benefits of GEICO’s low cost model. Despite having higher underwriting
loss ratios in both years as well as lower levels of premiums earned, GEICO ended up with
higher profits due to significantly lower underwriting expenses.
Audit of Threats to Existing Brand Franchise
To reduce their high operating cost structure, we expect Farmer's, Allstate and
Nationwide to incorporate a direct model over time. While this is not an easy proposition10, this
is a potential threat.
As a subsidiary of Berkshire Hathaway, GEICO has historically out-spent most of its
competitors to build awareness. This has been an effective strategy. However, most of the
competitors have increased their budgets as well; Farmers from $50MM in 2003 to almost
10
First, it is a paradigm shift in their business model, which has been operating with captive agents since their
inception; State Farm was incorporated in 1922, AllState in 1931. Second, if they go direct, they will have an army
of jobless insurance agents, which can potentially lead to a backlash
7
8. $200MM in 2008, and Progressive by 160% since 2003 to almost $459MM11. But the more
insurers advertise, the more difficult it is for anyone to stand out. In a commoditized market, this
can negatively impact GEICO's ability to stay relevant.
Exhibit 3 GEICO's Strategic Leverage Triangulation
Recommended Brand Marketing Plan
GEICO’s business strategy is to be a low-cost insurer by striving to provide excellent
service to customers, with the goal of establishing long-term customer relationship.
Overall Marketing Strategy
The key to growth is acquiring new market share, and that is GEICO’s focus. It’s primary
target audience is adults 25-49 with HHI $30,000+ 12. It skews younger, is tech-savvy and likely
11
“GEICO envy drives Farmer’s review”, Adweek Aug 13, 2008 at
http://www.adweek.com/aw/content_display/news/account-activity/e3i55fbb1a3b41a2bcd5e4e5711c3015293
8
9. to accept the direct approach to auto insurance. They enjoy and understand GEICO's witty yet
self-deprecating meta-marketing. Their purchase decisions are driven by the desire for quality,
simplicity of purchase, stress-free encounters and accessibility. The creative strategy reinforces
GEICO's position as a leader at the forefront of technology while delivering the wit and charm
consumers expect from GEICO.
From the conception of gecko the green lizard in 2000 to the more recent googly-eye money
stack campaign, GEICO's marketing campaigns have been extremely successful in capturing
audience' attention and increasing its brand awareness as the go-to company for car insurance. In
addition to being witty, each of GEICO’s campaigns delivers an important message and
frequently addresses consumers’ pain points:
• Gecko the green lizard – tackling the “low involvement” faced by insurance industry and
creating a relatable image for the company brand name.
• Caveman – “It is so easy even a caveman can do it” – tackling the perception that
shopping for insurance policy is a daunting affair.
• Googly-eye money stack – “15 minutes could save you 15%” – tackling consumers’
desire to save on cost.
For GEICO’s next campaign, we recommend GEICO focuses on addressing other major
customer concerns: customer service and a company’s financial strength. Since the economy
downturn, financial strength of the company has been a factor that consumers look for when
evaluating their choices. With a strong financial health and an icon like Warren Buffet, GEICO
can position itself as the best overall value player in the market.
12
“DMA International Award Winner: GEICO”, Direct DMEF Works, at
http://www.directworks.org/Corporate/Default.aspx?id=1096
9
10. Recommended Marketing Strategies
a. Target Customers
i. Quantitative Audit
Exhibit 4 highlights the key factors for consumers that drive their insurance company
decision. A survey taken indicates Price and customer service are top of the list, followed by
trustworthiness and ease of purchase. Interestingly, 3% quoted financial solvency as a deciding
factor.
#1 factor for selecting auto insurance
Product flexibility Financial solvency
5% 3%
Price (premium)
Trustworthiness
33%
23%
Ease of Use
Customer Service
(purchase)
(claim handling)
15%
21%
Exhibit 44 Survey: #1 factor for selecting auto insurance company
In the same survey, on the question of who offered the best customer service, 36% quoted
Progressive, 26% quoted Allstate, with GEICO and Farmers at 19% each. See Exhibit 5.
10
11. Insurance company with best customer
service
Nationwide
12%
Farmers Progressive
15% 36%
Geico
15%
Allstate
22%
Exhibit 5 Survey: Insurance company with the best customer service
Finally, on the question of whether they would switch if another insurance company
satisfied the key attribute they valued, 77% responded as definitely, likely or maybe. This is
significant, since it highlights the commoditization of the industry, and places great value on
establishing an emotional connection in addition to perceived differentiation among the key
drivers for consumers.
11
12. % Switchers if key driver is satisfied
Would not switch Would switch
16% immediately
23%
May switch
21%
Likely to switch
40%
Exhibit 6 Survey: % switchers if key driver is satisfied
ii. Segmenting Affinity Groups
The key target segment for most insurance companies is the preferred-risk higher income
demographic. There is a high statistical correlation between higher income individuals and safe
drivers. GEICO's research has indicated college educated first time car buyers may also be a
low-risk option, a viable segment. On a psychographic scale, GEICO also serves the motorcycle,
RV, ATV and boat insurance market, where their target segment includes individuals who love
sports, are adventurous, and enjoy outdoor activities. Finally, one can identify 4 key behavioral
segments - consumers who value price, customer service, ease of use and product flexibility. In
the survey, these attributes had almost equal distributions, indicating each of these attributes is an
important segment.
b. Brand Platform
i. Positioning
12
13. To achieve its overall marketing strategy, GEICO's offerings must be aligned to its target
segments, whose needs are categorized in Exhibit 7 below:
Customer Wants Mindset Positioning
Lowest Premium • Want to pay the lowest premium. Price • Saves money
drives everything • Flexible product options
• Willing to compromise on coverage or • Best in class for the price
deductibles • Great discounts
Great customer service • Simplicity of purchase • Intuitive - extremely easy to buy
• Quick resolution to issue • Best in class customer service
• Anytime access to service agent • Quickest resolution to claims
• Always there - 24/7 service
Flexible product • The most flexible product options
• Cares about coverage details • You're in control - pay only for what
• Cares about customizing coverage you need
• Extremely easy to customize
Complete coverage • Wants coverage for auto, other vehicles, • One-stop shop - complete coverage
home, etc. for all your needs
• Wants minimal effort to get coverage. • Extremely easy to add more
Prefers to deal with one company coverage
• Hates to shop around • Financially strong, a brand you can
• Peace of mind trust
Exhibit 7 Target Segments Categories
13
14. Exhibit 8 Brand Positioning Proposition
ii. Strategic Personality
The insurance industry is perceived to be “old and boring” and untrustworthy. GEICO is
looking to reverse that perception through its ever-present Gecko Salesman mascot, which
projects a youthful persona that's intriguing with its cockney accent, and refreshingly innocent.
Through this, GEICO aims to portray itself as different and better. We believe this is the right
personality for the brand, and recommend its continuation.
iii. Brand Attitude
14
15. GEICO should aim at building an emotional connection to its customers. GEICO has
done a good job of this through ads that target particular pain points13. GEICO signals that it
understands its users to be suave and witty, who are 'cool' like their insurance company.
However, we believe GEICO needs to start catering to its growing 49-65 segment. People in this
segment care about their kids having insurance coverage. GEICO needs to develop an attitude
that convinces them that GEICO is sympathetic to this viewpoint, and has a solution for it.
iv. Net value proposition
GEICO's net value proposition is its ability to provide competitive rates and provide
excellent customer service. As a subsidiary of Berkshire Hathaway, it has a Standard & Poor
AAA rating for its financial strength14. In the current economic climate, carrier solvency is an
important value proposition and GEICO should develop a marketing strategy that highlights it to
differentiate itself.
13
Caveman commercials target ease of use, Googly-eyes targets saving money
14
Geico.com website at http://www.geico.com/about/corporate/honors-and-ratings/
15
16. Exhibit 9 Brand Platform Diagnostic
c. Pricing Strategy
The US auto insurance industry is at maturity with slowing organic growth. Growth for
the company is at the expense of other insurance companies. As consumers change behavior to
save money, GEICO's direct model has enabled them to weather this change in consumer
behavior; in 2008, premiums increased 5.7% over 2007, reflecting an 8.2% increase in voluntary
16
17. auto policies-in-force partially offset by lower average premiums per policy15. With heightened
focus on saving on insurance premiums, this is a great opportunity for GEICO to accelerate
customer acquisition and we recommend executing a sustained competitive pricing strategy with
a price point lower than its competitors, at least till end of FY '10. This strategy is aligned with
GEICO's lowest-cost position, and we believe it enables them to aggressively increase their
market share.
Recommended Marketing Programs
a. Advertising Budget
GEICO's marketing budget has been growing steadily since 2005; roughly about $483
MMs in 2006 to the latest data measured $618 MM in 200816. Projecting, GEICO is estimated to
spend about $790 MM in 2010 on advertising. We recommend that GEICO double the spending
increase amount and allocate $882MM for advertising budget in 2010, with the majority of the
additional spending allocated to recommended programs on social media networks, promotional
program with car dealership, community outreach program, and direct mail [see Exhibit 10].
(Amounts in '000) 2006 2007 2008 2009 2010
Total Premiums 11,055,000 11,806,000 12,479,000 13,258,375 14,086,426
Historical Advertising Spend 483,000 618,000
Projected Advertising Spend 699,051 790,733
Recommended Advertising Spend (r x 2) 882,414
Spend as % of Premiums 4.37% 4.95% 5.27% 6.26%
*Note 1: Italic = Projected Value
*Note 2: Advertising Spending Annual Increase => 483*(1+r)^2 = 618; r = 13.11%
15
GEICO 2008 10-K statement
16
“Power Players”, Advertising Age, Vol. 80 Issue 37, p22-32, published on 11/2/2009.
17
18. Exhibit 10 Projected & Recommended Advertising Budget
b. Media Spending Strategy:
Communication Goal: To engage insurance policy shoppers by convincing them that
GEICO is the #1 go-to company offering the best value in the market.
YEAR 2010
(Amounts in '000)
TOTAL $882,414
Television Total $255,900
National Cables (HBO, Comedy Central, Bravo,
MSNBC, Travel Channel, CNN, etc.) $76,770
National Networks (NBC, CBS, ABC, FOX, high-
profile programs - Superbowl, Grammy's, etc.) $127,950
Spot TV in multiple markets $51,180
Radio Total $176,483
Network Radio (i.e. CarTalk) $88,241
Spot Radio $88,241
National Print $88,241
Outdoor $35,297
Online Total $123,538
Search Engine Marketing (SEM) $86,477
Social Media Networks(Facebook, Twitter,
YouToube, etc.) $24,708
Other Auto Related Website(Kelly's Blue Book,
etc.) $12,354
Direct Mail $158,835
Local Community Outreach Program $8,824
Car Dealership Promotional Program $35,297
Exhibit 11 Recommended Media Spending by Channels
18
19. GEICO has done a phenomenon job in traditional advertising media categories including
television, radio, and print. Here are areas of improvement recommended to GEICO’s marketing
program to stretch its reach even further:
c. Promotional Program with National Car Dealership
GEICO should expand beyond its direct-sales model to diversify revenue streams and
capture clients at all possible touch points. We suggest that GEICO partner with car dealers by
offering new car buyer promotions at the point of purchase. Each year more than 7 million
people who go in to buy a car also buy auto insurance on-site, amounting to about 15 percent of
all car purchases17. The point of purchase represents a unique opportunity for GEICO to
encourage non-clients to switch over.
According to a study done by Insurance Information Institute, GEICO’s current market
share in 2008 is 7.6%18. If GEICO can maintain the same market share in the dealership
purchase space, a 7.6% share of 7 million clients translates to an additional 532,000 policies per
year. At an average annual premium of $1,884 per policy19, this represents a $1 billion
opportunity.
d. Cross-sell Other Insurance Products via Direct Mail/Email
GEICO's website lists a range of other insurance products it provides. However, in spite
of mailing over 800 million mailers annually, GEICO has minimal mailers, if any, promoting
17
Kirsten Force, “Offering Insurance Can Seal the Deal”, Management & Technology Magazine, 2/2005 – NADA
Issue, at http://www.explink.com/pressroom.cfm
18
“Major Players-Ranking By Line”, Insurance Information Institute, at
http://www.iii.org/economics/national/majorplayers/
19
IFAwebnews Staff, “Report: Average auto premiums show first increase in five months”, IFAwebnews.com,
posted 7/3/2009 at: http://ifawebnews.com/2009/07/03/report-average-auto-premiums-show-first-increase-in-five-
months/
19
20. their cross-line products. We believe that with GEICO's strong brand name and high customer
satisfaction, GEICO is in a good position to showcase their other insurance products. We
suggest that GEICO starts this initiative on its current customers via direct mail.
Assuming a 5% (1 in 20) cross sell20 on 9 million GEICO customers will generate an
additional $252 million in revenues and almost $36 million in added profits per year21.
e. Online Marketing Program
GEICO already has a strong emphasis on its online marketing program; in 2007 GEICO
spends about $90 million dollars in SEM alone22. There are two areas that GEICO should
improve upon:
i. Tap into Social Media Networks
GEICO has an extremely valuable asset to its marketing mix - the lovable green lizard
Gecko. Gecko has been an instrumental driver for GEICO's strong name recognition since its
inception in 2000. We suggest that GEICO take a step further and explore using Gecko in social
media channels such as Facebook and Twitter. Several other competitors such as Allstate and
20
Anthony O’Donnel, “The Elusive Prize: Effective Cross-Selling”, Insurance & Technology, posted on 9/16/2005 at
http://www.insurancetech.com/news/showArticle.jhtml;jsessionid=1VK53JNWYLRVVQE1GHPSKHWATMY32JVN?a
rticleID=170704148&pgno=4
21
According to Epiphany, a CRM solutions provider, for a diversified insurance and financial
services company that has about 5 million customers, an increase of only one product per 20
customers could result in nearly $140 million in additional annual revenues and almost $20
million in added annual profits
22
Andrew Davis, “How GEICO Wastes $90 MM a Year on Search Engine Marketing”, Tippingpoint Labs, posted
4/3/2009 at http://blog.tippingpointlabs.com/2009/04/how-geico-wastes-90mm-a-year-on-search-engine-
marketing/
20
21. State Farm have already ventured into this arena; successful cases have already been seen in
UK's auto insurance industry23.
ii. Search Engine Marketing
GEICO is one of the top SEM spenders, if not the largest. GEICO may be wasting its
money by purchasing generic insurance related AdWords.. Studies have shown that GEICO's
website is already well designed for organic search [see Exhibit 12]. Purchasing expensive
AdWords on these generic insurance terms may not be the best usage of its SEM budget. Instead,
GEICO should consider purchasing relevant keywords in sync with its in-running marketing
campaign, such as "Googly-Eye commercial", "Cavemen” or “Gecko”.
24
Exhibit 12 Google Key Words Search Results
23
Michael Litman, “Social Media and Car Insurance: A Match Made in Heaven?”, Mashable The Social Media Guide,
posted on 4/5/2009 at http://mashable.com/2009/04/05/compare-the-meerkat/
21
22. f. Public Relations Programs
There has been some negative press regarding to GEICO's "preferential treatment" on
customers' education and economic status. We recommend that GEICO continue to take the "no
comments" position, as it certainly does not want more attention on these sensitive
issues. However we do suggest that GEICO initiate local community outreach programs and
gets directly involved especially in the lower economic neighborhoods. It should also sponsor
programs such as safe driver program to educate consumers on becoming safer drivers.
Success Metric Measurement
Short-Term ROMI:
The incremental $91 million advertising and promotion spend targeted along the major
initiatives outlined above will generate an estimated +$1.25 billion in new business
revenues. Given a 5 year projected timeframe to achieve full implementation, we can
conservatively estimated $250 million in revenues for the first year alone, yielding a 2.75 ROMI
factor.
Long-Term ROMI:
Ongoing Metrics
Metrics: - Brand Awareness & Positioning
- Brand Consideration
- Purchase Intent vs. Non Purchase intent
24
Andrew Davis, “How Geico Wastes $90 MM a Year on Search Engine Marketing”, Tippingpoint Labs, posted
4/3/2009 at http://blog.tippingpointlabs.com/2009/04/how-geico-wastes-90mm-a-year-on-search-engine-
marketing/
22
