NEW YORK – U.S. auto insurers failed to boost sales even after spending billions of dollars on advertisements with Hollywood actors and professional athletes, McKinsey & Co. said.
The industry has been in a marketing arms race during the past decade, boosting spending 15 percent a year to almost $6 billion in 2011, the management-consulting firm said in a report released last week. Sales have been stagnant for the group over 10 years and more than half of the advertising outlay has come from insurers that didnt gain market share, McKinsey said.
Progressive and Geico added customers by advertising low prices. That pitch may not be the most effective for all insurers as they compete for part of a mature market, said Tanguy Catlin, a partner in McKinseys insurance practice and a co-author of the report.
When Nike advertises shoes, people can buy more shoes, he said. Spending more on auto insurance marketing doesnt necessarily translate into higher sales, because consumers dont buy multiple insurance policies.
Geico led insurers in ad spending in 2011 with an outlay of almost $1 billion, according to data compiled by SNL Financial. The insurers spots have featured a talking pig and comedian Gallagher to highlight savings customers can realize by switching to its policies.
State Farm Mutual Automobile Insurance, the largest U.S. auto insurer, has used sports stars such as Green Bay Packers quarterback Aaron Rodgers in ads. It was second with more than $800 million in spending in 2011. Allstate Corp. was third, followed by Progressive and Farmers Insurance, which has a management relationship with Zurich Insurance.
That spending has helped the top five advertisers pull away in terms of brand awareness from rivals including Travelers and Liberty Mutual Holding, McKinsey said. Buying more ads may not be the best strategy for all insurers, since only about 30 percent of policyholders focus on the cost of coverage.
The other 70 percent – the silent majority of policyholders – appears to be difficult to reach, the authors wrote in the report. This is likely because they are unresponsive to marketing messages based solely around price.
Auto insurers have been bolstering marketing teams to compete. Northbrook, Ill.-based Allstate hired Sanjay Gupta from Ally Financial as chief marketing officer last year as the insurer seeks to build Esurance, a unit that sells policies direct to consumers over the Internet.
Allstate hired actor John Krasinski as a pitchman for TV spots and radio ads that began airing in 2011 to supplement campaigns it already runs using Dennis Haysbert and actor Dean Winters playing a character named Mayhem.
Progressive, known for its spunky saleswoman Flo, spent $536 million on ads in 2011, SNL Financial data show. The Mayfield Village, Ohio-based insurer hired Jeff Charney from Aflac in 2010 to be chief marketing officer.
Were not going to outspend anybody, but we definitely are going to out-create people, Charney said at an investor presentation in June 2011, referring to the companys strategy for online advertising.