Selective demarketing: case study – Frizzell Insurance
The UK motor insurance industry has historically been extremely competitive with customers having very diverse needs; they shop around every time a renewal is coming in sight. To survive the competition, insurers need not only to build up awareness for recruitment purpose, but also try to retain existing customers at a higher rate. Service quality thus becomes high on the agenda. To better serve their customers and capitalize on the ﬁrms’ competitive advantages, insurers pay a substantial amount of attention to whom they target and whom to let go. Changes in the general environment often lead to changes in the proﬁtability of customer groups, such as the ageing issue of the drivers, the high risks involved with certain type of customers, and the advancement of modern technologies as well as how that would impact the distribution channels of motor insurance purchase. To ensure proﬁtability, insurers are more interested in attracting and maintaining customers who are loyal, safety-conscious and less likely to make claims. This means certain segments in the market would be more attractive to them than the others. And it is those segments that are less promising and proﬁtable that the insurers are trying to get rid of. Although a tough decision, insurers need to set their priorities regarding which customer group(s) they would like to serve and work out a way to reach their precise target group(s) without hurting their relationship with other customer or potential customer groups. This case study tells the story of Frizzell Insurance, a UK-based motor insurer, and how they managed to tactically expand the right type of customer base, while securing their reputation as a superior ﬁnancial solution provider.