Marching in time

The broking sector will continue to face numerous financial challenges this year. The softening market means reduced revenue, particularly for those whose business models retain a significant commission component. And many other things will have an impact: competition from direct insurers and affinity groups; distributors from other sectors leveraging stronger brands; regulatory and compliance costs; increasingly demanding and savvy clients; corporate regulation; and, for consolidators, the heavy management workload of integrating acquired businesses.

The question is: against this backdrop, will existing business acquisition methods and approaches to communications remain effective? For 2006 and beyond, the case for strategic marketing and public relations is growing.

The approach to broker marketing

Compared with traditional 'operational' or 'tactical' marketing, which is the method largely adopted by the insurance industry, strategic marketing involves a top-down, coordinated approach with several distinctive characteristics. The company's marketing plan is derived directly from the business plan and is business-accountable, and marketing activity is measured against the Key Performance Indicators of the business. Marketing activity tends to focus around coordinated programmes, rather than one-off activities - and, as such, is proactive rather than reactive. Components in the marketing communications programme, such as public relations, advertising, promotions, literature, events, e-marketing and sponsorship, are coordinated with a single purpose rather than being run as separate initiatives.

Strategic marketing also tends to change the focus of the company's marketing from being activity-based to being results-based. So why has strategic marketing been a largely no-go area for brokers?

In the past, brokers have been able to make good financial returns without the need to adopt a strategic or coordinated approach to marketing - indeed, some have done no marketing at all to speak of. In many cases, market circumstances or some other external and unplanned events have positively affected revenues, thus diluting the appetite to generate new sales.

Attention has been focused more on client relationship management and direct sales. This plays to brokers' strong client-facing and deal-making skills, but it could be argued that these 'front-end' skills tend to disguise a lack of purpose and effectiveness in the marketing programme.

Essentially, brokers rely on their personal credibility and the firm's reputation and record with the customer. But what if the customer isn't familiar with the firm and its services, or if there are reputational issues to address? Strategic marketing and public relations provide the best environment for brokers to do business with current and prospective customers, providing ammunition to enable the company to develop and win business.

What is strategic marketing?

Is strategic marketing just clever rhetoric and expensive consultants, or a proven process that will generate improved returns for your business?

Strategic marketing generally starts with an analysis of the market environment in which the company does business. This will often raise some interesting questions. How much do we actually know about our market? What are the likely structural changes in it, and what are the implications of those changes? What do we know about our competitors? And what kind of products and services will customers require in future, and do we have the skills and resources to deliver them?

This analysis leads to customer segmentation and the identification of target customer groups - a fundamental principle of strategic marketing is that it is better to focus effort and budget on the customers you are most likely to do business with. High-volume direct marketing may work for selling credit cards, but marketers will argue that a targeted approach yields higher returns for professional services.

Market analysis can also open up some exciting opportunities for the business, including the identification of market segments and the development of new products and services relevant to the target sector.

From market analysis and customer segmentation, we recommend developing a marketing framework. This framework is the foundation for the strategic marketing programme and will normally include both visual considerations (logo and branding) and verbal messages (customer propositions and key differentiators). This is used to ensure a consistent and coordinated approach for all marketing materials, and acts as the link between the strategic and operational components of the marketing plan.

Measuring marketing success

Strategic marketing is normally implemented via a marketing timetable, setting out tasks and actions for each component of the plan. It also enables the budget to be allocated to specific tasks. This system is used to prioritise marketing options, since there are normally more opportunities than the budget will permit. It will also help businesses identify the initiatives that provide the greatest business benefit. Implementation of the plan should be tracked regularly through the timetable, which acts as a checklist and budget control system.

The strategic approach will establish measurement systems to track the business impact of all marketing activity. Measurements will normally derive from the key performance indicators of the business, and can cover areas like customer acquisition and retention rates, brand profile and recognition, financial return on marketing and sales investment and customer acquisition costs.

The strategy behind PR

Insurance has had more than its fair share of knocks. While public relations is not the only tool that will tackle these issues - previous attempts to improve the reputation of the industry have had varying degrees of success - the basic principles of communication point to the fact that PR can, and should, be an effective tool in managing perceptions of the industry.

There is no doubt that more businesses recognise PR has an important role to play in protecting corporate reputation. But there is still a lack of planned strategy for PR that is co-oriented with the business's wider marketing and business objectives. As mentioned earlier, the overall marketing strategy of any business must be driven from the top of the organisation to be effective, and PR is the same.

The risks associated with damage to a business's reputation are now the most significant threat to firms, according to a recent survey of senior risk managers across Europe. The respondents to the survey, conducted by the Economist Intelligence Unit, cited reputational risk as more of a threat than regulatory compliance, the impact of bad debts and most other traditional forms of risk facing companies today.

Reputational risks have a direct impact on the bottom line of businesses; if customers lose trust or witness a badly managed crisis, they vote with their feet. The survey respondents were clear on one thing - good communication with customers and other stakeholders is vital to protect against, or repair, damage to corporate reputation.

Enhancing the reputation of PR

But if reputation is such a valuable business asset, why does PR still lurk on the fringes for some? The tendency to put marketing and PR into individual silos is an understandable one; they are different disciplines with different skills. But while there are different objectives and outcomes from each activity, what they deliver for the business has to be focused in the same direction.

PR has a primary role in facilitating reputation management, but it is important to recognise that while PR can enhance reputation, it cannot create it.

The explosive growth of the media and the emergence of concepts such as reputation management and corporate responsibility has placed PR at the centre of business strategy. In terms of the insurance industry, PR has grown in sophistication and impact over a relatively short period of time. If PR is to take the next step, then it must demonstrate it can be an effective business tool executed as part of the company's overall business strategy. But this will also mean more support from leading broking businesses.

It is still not uncommon to find businesses saying one thing but doing another, sending confused messages to the audiences they are trying to reach. The result is a negative experience for the customer and a change in their view of the business. We sometimes underestimate consumers and believe that mixed messages or discoordinated communication do not have an impact. But they do.

PR will not sell insurance products, but it will give the customer a better understanding of the company, its attributes and what it believes in. Equally, marketing will not help to manage the company's reputation in the eyes of its customers, or ensure the right messages go out in the event of an issue arising that might damage it in the eyes of its stakeholders.

The case for strategic marketing and PR is now strengthening in the broking sector. Of course, it can be a challenge for a business as it requires more broadly based analytical marketing skills and more business accountability. It is, however, generally rewarding and profitable for a business. The old adage "no gain without pain" applies.