NORTHBROOK, Ill. - Allstate Corp.'s life and financial product distribution unit, Allstate Financial, is gearing up to get more aggressive about marketing annuities, bank products, and investment products and services to its core middle-class customers.
Earlier this year, when the marketing team at Allstate Financial wanted to figure out what is important to a middle-class customer, it dragged three department store mannequins into the office.
The group dressed the mannequins and bought accessories for them. They even tried to delve into the mannequins' "psyches," creating a list of what they felt would be important to the customers the mannequins represented.
"We had one with jeans, sweatshirt, and boots. We figured he probably read the sports section of the paper," said Peggy Dyer, Allstate Financial's senior vice president for marketing. "The second mannequin had a business suit and a briefcase, and the third carried a diaper bag."
While all this could mean that the gang at Allstate Financial has gone insane, Ms. Dyer said it was just a exercise to get the marketing team's creative juices flowing.
The marketing team's mission with the mannequin project was to help Allstate Financial reach what its president, Tom Wilson, calls the "ignored" people - the middle class.
Middle-class Americans have always been the primary market for Allstate Corp.'s personal business lines - the homeowners and auto policies for which it is best known. Allstate Corp. insures one in eight Americans with some sort of policy, mostly auto or homeowners' insurance.
Allstate Financial, under the name Allstate Life Group of Companies, has always sold life insurance and annuity products. In the early 1990s Allstate Life added investment products to its list, and in 1999 it began to sell banking products, a year after receiving its thrift charter. The unit's name was change to Allstate Financial on Nov. 2 to deemphasize insurance and give greater weight to the financial products and services distribution.
Until the mid-1990s only Allstate-appointed agents could sell Allstate products - and in general, that is all they could sell.
Allstate Corp. now has 13,000 such captive agents, and Mr. Wilson said that last year 60,000 insurance-licensed reps could sell Allstate Corp.'s life insurance, annuities, and investment products. Ten thousand of these reps worked through banks or wirehouses, which now provide 40% of Allstate Financial's new business, he said.
With all that new distribution muscle, Allstate Corp. is determined to reach middle-class customers to sell banking, life insurance, and investment products more effectively. And that is where the mannequins come in.
The marketing team had done a segmentation study of the American people to learn how best to market financial services, Ms. Dyer said. The mannequins were meant to represent three types of marketing targets:
- Fifty-somethings with about $100,000 of assets who need help with retirement planning.
- Individuals and couples who have about $300,000 of assets. (These folks tend to be relationship-driven and prefer to buy financial products from advisers they trust, Mr. Wilson said.)
- Younger families with moderate incomes and few assets, who generally have life insurance through their employers.
"They're all what you can consider middle-class," Mr. Wilson said. "We gave the mannequins personalities, and asked: What's important to them? What percentage of them had CDs? What about money market accounts, investments or credit card debt?" he said."Banks are the key distributors for us" with the 50-somethings, Mr. Wilson said. "The second group will probably go to a planner, while the third will be best reached through the corporation they work for, through affinity marketing, or through a direct marketing campaign."
But while the distribution channels are important, Allstate Financial will not reach its target audience if it does not design specific products for them, he said.
One product Allstate Financial plans to launch through the bank channel next year is a cross between an annuity and a structured settlement product, designed for the pension market.
"It will be different from a payout annuity, and we think banks will be a key distributor for it," Mr. Wilson said. "But this product has to be simple. It's imperative that we make products our middle-class customers can understand."
The average customer does not want to be frustrated by the fine print, which most investors cannot decipher, he said. "And when they meet with financial planners, the planners talk over their heads. It's not right."
Ms. Dyer said her husband, an attorney, could not define what an annuity was. "He said to me that he felt stupid, that he thinks he should understand it, but he can't," Ms. Dyer said. "We need to simply state when an annuity is appropriate and how it functions."
Allstate is already No. 4 in bank sales of annuities, having sold $711 million in the third quarter. And the parent company has good penetration in the middle-class market, Mr. Wilson said.
"When you're insuring one in eight Americans with a property and casualty product, you have to be successful in reaching the middle class. We have the name recognition - now we have to keep developing products."
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