Some people are waiting for the next shoe to drop. The first shoe of economic woe is the mortgage mess. That's still not cleaned up and back to normal, whatever the new normal will be. Could the next shoe be the auto insurance business?
Some readers are looking to clarify what a "blue ocean strategy" is. It may be helpful first to know what the opposite is, a "red ocean." Auto insurers are in the red ocean. Each has been drawn into a fight to convert customers to their companies. They are sacrificing profits to steal customers and raise market share.
It is a zero-sum game; when it's all over, none of the individual companies will be better off. Auto insurers are competing on price, thereby commoditizing the product.
What may matter more to them are other insurances they can place with their car-insurance customers: home and life insurances in particular. But, if auto insurance customers do not insure themselves more than before-zero sum.
The ads have become increasingly ridiculous. For example, "Jerry" calls his former agent, "Jessica"-he has wrecked his car on or in his house. Not long before, he switched his auto coverage to another company presumably to save up to 15% in 15 minutes. His former agent now claims she may save him hundreds to come back. That equates to, "We were overcharging you before; come back and pay less than you are paying now with the other guys."
An End To The Feeding Frenzy?
When will this feeding-frenzy end? Your guess is good as mine.
Bank and credit union services have long been commoditized, in part because banks and credit unions have contrasted themselves on price and in part because the products consumers use are very much the same.
One credit card company is selling the idea that their credit cards pay back "more cash." That company will make less money on current and new customers by paying out more cash. Is it a loss-leader so they convert those new customers to other profitable services?
How successful have you been driving existing and new members to the third, fourth, even fifth balance-sheet-product? In other words, have you succeeded in shifting unprofitable members into profitable territory?
Challenge yourselves to think strategically: what can we do for members, and to attract new members, that no one else is doing and will not be duplicated or matched quickly? And don't stop there; what's the blue ocean strategy following that one? Yes, think strategically while you're also in survival mode.
Dan Clark is the 30-year principal at Dan Clark Associates, LLC, in Tallahassee, Fla., specializing in strategy and governance. He can be reached at 850-559-7094, and
