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FINANCIAL MANAGEMENT OF INTEGRATED MARKETING PROGRAMS Jay Jaffe President Actuarial Enterprises, Ltd. Chicago, IL 312-397-0099 jay@actentltd.com September, 2009 Integrated Marketing

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financial management of integrated marketing programs

FINANCIAL MANAGEMENT OF INTEGRATED MARKETING PROGRAMS

Jay Jaffe

President

Actuarial Enterprises, Ltd.

Chicago, IL

312-397-0099

jay@actentltd.com

September, 2009

integrated marketing

Integrated Marketing

A marketing process which uses coordinated distribution channels, media and messages to improve profitability

the 5 risk elements of any insurance marketing program
The 5 Risk Elements of any Insurance Marketing Program
  • Claims
  • Persistency
  • Administrative Expenses
  • Investment returns
  • Marketing costs
the 5 risk elements of any direct marketing program in order
The 5 Risk Elements of any Direct Marketing Program (in order)
  • Marketing costs
  • Persistency
  • Claims
  • Administrative Expenses
  • Investment returns
why marketing costs are the 1 risk element7
Why Marketing Costs are the #1 RISK ELEMENT
  • $$$ are spent < any policy is sold
  • When marketing costs > marketing allowances, it is unlikely that:
    • The costs will be recovered; and
    • The product will be profitable
slide9
Integrated Marketing Introduces Complicationsas a Result of Multiple Distribution Channels, Media and Messages
slide10

(Agents)

(Internet)

(Worksite)

(Telemarketing)

slide11

(Mail)

(PDA)

(TV)

(Radio)

slide12

(Fear)

(Family)

(Free)

(Action)

and we tend to create a

And, We Tend to Create a

Mentality at Our Companies

the odd couple

The Odd Couple

Jack Klugman (Oscar) and Tony Randall (Felix)

some examples of silos
Some Examples of Silos
  • Distribution systems within a company operate that independently
  • Media managers each having their own plans, budgets and bonuses
  • Underwriters only worrying about claims
slide19

The result is that very few insurers have a recognizable and consistent message --- which may mean they don’t have a picture of where they are going.

integrated marketing jig saw puzzle

INTEGRATED MARKETING = JIG SAW PUZZLE

You need to look at both the

BIG PICTURE

and

all the LITTLE PIECES

in order to get everything to fit together

lead program facets
Lead Program Facets
  • Multiple lead sources
  • Cost of leads varies dramatically by source
  • Paid policies (conversion) results are not uniform
  • Value of a “name” for “after sales” is not easily determined
  • Which area owns the leads?
developing a lead program an investment strategy

Developing a Lead Program = An Investment Strategy

The problem: All leads are not equal in cost --- so how do you chose which leads to acquire?

1 lead selection criteria theoretically

#1 LEAD SELECTION CRITERIA (theoretically)

The leads that produce the lowest cost per paid policy!

but what about
But What About?
  • The cost of leads given to agents who don’t even use the leads?
  • Leads that can be recycled and produce other business?
  • The value of revenue from products marketed by other companies that are sold to your customers?
decision making for integrated marketing systems
Decision Making for Integrated Marketing Systems
  • Requires complicated analytic models
  • Calls for acquiring additional data but only when it will improve the quality of a decision and at an affordable cost
  • Is partly a scientific and partly a gut reaction process but decisions should be made using more than an “I think” basis
some things you need to do if you want to make quantitative decisions
Some Things You Need to do if You Want to Make Quantitative Decisions
  • Create comprehensive data bases
  • Identify the key metrics that need to be tracked and understood
  • Start with simple models
  • Increase the complexity of models as you gain knowledge
  • Recognize the team aspects of Integrated Marketing
the team
The Team
  • Multiple marketing types
  • Underwriters
  • Actuaries
  • Lawyers
  • IT people
  • Claim processors
  • Etc.
examples of targets
EXAMPLES OF TARGETS
  • Profit
  • Claims (mortality, morbidity, etc.)
  • Lapses
  • Conversion rates
  • Expenses:
    • Marketing
    • Administrative
actual to expected ratios
Actual to Expected Ratios
  • A/E rations are helpful because they give you an instant picture
  • If conversion rate A/E = 105%, then good
  • If lapse rate A/E = 105%, then bad
slide39

The new direct marketing is an information-driven marketing process, made possible by database technology, that enables marketers to develop, test, implement, measure, and appropriately modify customized marketing programs and strategies.From The New Direct Marketing, David Sheppard Associates, p. 3

the ultimate test of a product

THE ULTIMATE TEST OF A PRODUCT

WILL THE

EAT THE ???