Inside Products by Linda Koco

What will it take to spur people to open their wallets and start spending again? Ive been hearing that question, again and again throughout the recession, from people both inside and outside the insurance sector.

This column will not offer any turnkey answer, for I dont believe such exists for all. Rather, well explore the folly of pressing for a “one answer, one person, one product” solution to current sales woes and explore a way to start addressing that issue.

Well start with an example from retailing, because this puts enough distance from the insurance sector to clarify the issues. Then segue to insurance and financial services.

Right now, many retailers are getting worried that year-end consumer spending will be a bust, due to recessionary pressures on employment, paychecks and confidence levels. So, they are pushing holiday sales–with deep discounts–very early in the selling season.

From all the sales extravaganza hubbub, youd think the retailers “know” the promotions will goose sales. I recently spoke with a regional retailing executive who confirmed exactly that message.

“We always get more sales when we advertise and less when we dont,” the executive told me, “so were going to push the ads harder than ever this season.” The firms sales have been down substantially this year, so the company figures this aggressive strategy is necessary, she said.

Since I rarely encounter such confident, we-know-the-way marketing anymore, I was dumbfounded.

Well, what about next year, I asked. Does the company have similar confidence about 2003 sales and a sure-fire strategy to go with it?

Yes, she quickly replied, “weve budgeted for 10% growth.” My eyes popped. As you know all too well, a lot of companies would be happy just to break even, at least in the first quarter. So I probed: How will you do that?

“Oh,” she said, “weve got a new product launch coming up, so that will account for a good part of it.”

That got my attention. After all, new product launches, especially when combined with intensive advertising and well laid out promotion, have long been viewed as a sure-fire way of putting a nice bulge in the revenue stream. But launches of truly new products can be costly, so during the recession, a lot of companies have been curtailing them.

What product are you planning to launch? I asked, wondering if it is an innovative design. “Well, actually, well be tweaking one of our existing products,” she said. “The original version hasnt been selling as well as it used to, so we think the upgrade will give it some new life.”

Hmm, I thought. Minimum cost. Maximum hope.

The insurance and financial services sector has some similar thinking going on. Jack Bragg, an actuary and a regular columnist for National Underwriter, has mentioned how the industry is veering away from doing serious product innovation right now. Meanwhile, numerous companies in 2002 have rolled out one product upgrade after another, some telling me this is the best strategy for weathering the tough economy.

Sadly, product development lore is awash with stories of companies that flopped from trying to make the A-team with product upgrades. Just look at Cokes introduction of “New Coke.” Or look at any life policy or annuity upgrade you can think of; if well executed, marketed and administered, the tweaks help keep the product in the ballpark, but rarely do they usher in loads of new customers.

Most product literature says that, to make a big splash today, companies need brand new, heavily researched and intensively marketed concepts. This might give the product a crack at being first, second or third in the market, with profitability the big payoff.

Yet even that commonly held notion is none too predictive. Sales and product leaders can slide. Remember Equity Funding, Monarch Life and many others.

My message: It takes more than advertising, more than upgrades, more than all-new initiatives, and more than being number one, two or three to create a product winner.

Some insurance developers try to get more predictability by running the numbers before a sales campaign or product debut. That is, they do the specs, build the prototype, conduct the consumer and market research, launch pilot tests, fine-tune the launch, map out the marketing, and on and on. Others put their confidence in designs by cross-division teams.

Yet, even with the best of efforts, some launches dont fly. Right now, for instance, index annuity sales are booming on an industrywide basis, but some companies in the market arent selling very many of the products, even designs that are pretty well constructed. This is typical of all businesses. Slow-, low-, and no-sellers exist in every product line, and the reasons for their status are as unique as their structures.

That grinds some executives, who believe that, if one company is doing well with a particular product or strategy, their own company should be able to do so.

As we have seen, no “one answer, one person, one product” will make a product fly, and no one thing will make it fall. Because one insurer finds success with building products by the numbers doesnt mean another will.

Everyone involved with products–executive, developer, lawyer, strategist, advertiser, marketer, financial manager, distributor, customer relations rep–needs to keep that in mind.

Product people today are under tremendous pressure to build policies that sell. They need to revisit how lemming-like solutions get in the way; how product tweaking doesnt replace innovation; and how customizing products to their own operation and customers can yield results.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 30, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.