Investigating the possibility and value of implementing Integrated Marketing Communication in the South African insurance industry Florian Heinrich Research report presented in partial fulfilment of the requirements of the degree of Master of Business Administration at the University of Stellenbosch Supervisor: Prof F. Herbst Degree of confidentiality: A March 2013 ii Declaration By submitting this research report electronically, I, Florian Heinrich, declare that the entirety of the work contained therein is my own, original work, that I am the owner of the copyright thereof (unless to the extent explicitly otherwise stated) and that I have not previously in its entirety or in part submitted it for obtaining any qualification. F. Heinrich March 2013 Copyright © 2010 Stellenbosch University All rights reserved iii Acknowledgements I would like to thank my wife Nicky for her support and encouragement during the course of my MBA studies and while I was writing this research report. You have supported me with time and love and made it possible for me to accomplish this. I would also like to thank my parents Dr. med. Frank Heinrich and Marion Heinrich for always supporting me emotionally and financially. You made it possible for me to complete my Masters studies with your encouragement, love and dedication to further my education. I would like to thank Professor Frikkie Herbst for his time, advice and for taking me under his wing while completing this study. I would also like to thank him for his understanding and support. I would like to thank all interviewees, Danny du Plessis, Danie Scholtz and Adele Joubert for taking the time to talk to me during their busy schedules and sharing their experiences, opinions and knowledge. Thank you also to the staff of the University of Stellenbosch Business School. You have truly made an impact on my life be it in a personal or academic way. iv v Abstract Lion of Africa Life Assurance Company Limited is a small life insurance company based in Cape Town. Currently its main products are Individual Life, Individual Funeral, Group Funeral and Life as well as Employee Benefits products. Due to its small size it is constraint by a lack of financial and human resources. The research who is an employee of said company and has insight into its current marketing activities investigates whether it is viable and actually possible to implement Integrated Marketing Communication in a South African life insurance company. This report investigates theory during the literature review, applies the theory to the South African insurance industry and by interviewing industry experts finds whether or not Integrated Marketing Communication is viable for the insurance industry. The report concludes with recommendations to Lion of Africa Life Assurance Company Limited as to whether to incorporate a Integrated Marketing Communications strategy into their overall marketing strategy. vi Table of contents Declaration ................................................................................................................................ ii Acknowledgements ................................................................................................................. iii Abstract ..................................................................................................................................... v Table of contents ..................................................................................................................... vi List of tables............................................................................................................................. ix List of figures ............................................................................................................................ x List of acronyms and abbreviations ....................................................................................... xi CHAPTER 1 ORIENTATION ..................................................................................................... 1 1.1 INTRODUCTION ............................................................................................................. 1 1.2 INTRODUCTION TO LION OF AFRICA LIFE ASSURANCE AND THE SOUTH AFRICAN INSURANCE INDUSTRY ........................................................................................... 1 1.2.1 Lion of Africa Life Assurance Company Ltd .................................................................... 1 1.2.2 The South African Insurance Industry ............................................................................. 2 1.3 Problem Statement .......................................................................................................... 4 1.4 Research Objectives ....................................................................................................... 4 1.4.1 Primary Research Objective ........................................................................................... 4 1.4.2 Secondary Research Objectives ..................................................................................... 4 1.5 Research Questions ........................................................................................................ 5 1.5.1 Primary research question .............................................................................................. 5 1.5.2 Secondary research questions ....................................................................................... 5 1.6 DELINEATION AND LIMITATIONS ................................................................................. 5 1.7 RESEARCH DESIGN AND METHODOLOGY ................................................................. 5 1.8 CLARIFICATION OF KEY CONCEPTS ........................................................................... 6 1.8.1 Marketing........................................................................................................................ 6 1.8.2 Marketing Mix ................................................................................................................. 7 1.8.3 Relationship Marketing ................................................................................................... 7 1.8.4 Integrated Marketing Communication ............................................................................. 7 1.8.5 Buying Behaviour ........................................................................................................... 7 1.9 CHAPTER OUTLINE ....................................................................................................... 8 1.10 CONCLUSION................................................................................................................. 9 CHAPTER 2 LITERATURE REVIEW ...................................................................................... 10 2.1 INTRODUCTION ........................................................................................................... 10 2.2 MARKETING – A BRIEF HISTORY ............................................................................... 10 2.3 MARKETING - TODAY .................................................................................................. 11 2.4 CONSUMER BUYING BEHAVIOUR ............................................................................. 12 2.4.1 Cultural ..........................................................................................................................13 2.4.2 Social ............................................................................................................................13 vii 2.4.3 Personal ........................................................................................................................14 2.4.4 Psychological ................................................................................................................14 2.5 BUSINESS BUYING BEHAVIOUR ................................................................................ 15 2.5.1 Business market versus consumer market ....................................................................16 2.5.2 Business Buying Behaviour ...........................................................................................16 2.5.3 Influences on Business Buyers ......................................................................................17 2.6 RELATIONSHIP MARKETING ...................................................................................... 19 2.7 THE MARKETING MIX .................................................................................................. 19 2.7.1 Product ..........................................................................................................................20 2.7.2 Price ..............................................................................................................................21 2.7.3 Place .............................................................................................................................21 2.7.4 People ...........................................................................................................................22 2.7.5 Physical Evidence / Environment ...................................................................................22 2.7.6 Process .........................................................................................................................22 2.7.7 Promotion ......................................................................................................................22 2.8 INTEGRATED MARKETING COMMUNICATION .......................................................... 25 2.9 CONCLUSION............................................................................................................... 26 CHAPTER 3 MARKETING MIX APPLIED TO THE SOUTH AFRICAN INSURANCE INDUSTRY ............................................................................................................................... 27 3.1 INTRODUCTION ........................................................................................................... 27 3.2 THE MARKETING MIX .................................................................................................. 27 3.2.1 Product ..........................................................................................................................27 3.2.2 Price ..............................................................................................................................28 3.2.3 Place .............................................................................................................................28 3.2.4 Promotion ......................................................................................................................29 3.2.5 People ...........................................................................................................................31 3.2.6 Process .........................................................................................................................31 3.2.7 Physical Evidence .........................................................................................................31 3.3 CONCLUSION............................................................................................................... 32 CHAPTER 4 RESEARCH DESIGN AND METHODOLOGY.................................................... 33 4.1 INTRODUCTION ........................................................................................................... 33 4.2. Research Process ......................................................................................................... 33 4.3 Research Approach ....................................................................................................... 34 4.3.1 Deductive approach .......................................................................................................34 4.3.2 Inductive approach ........................................................................................................34 4.3.3 Types of data .................................................................................................................35 4.4. Research Design ........................................................................................................... 35 4.4.1 Exploratory studies ........................................................................................................35 4.5 Research strategy ......................................................................................................... 35 viii 4.5.1 Case Study ....................................................................................................................36 4.6 SAMPLING .................................................................................................................... 36 4.6.1. Non-probability sampling ...............................................................................................36 4.7 Types of interviews ........................................................................................................ 36 4.8 INTERVIEWS WITH INSURANCE MARKETING AND SALES EXPERTS .................... 37 4.8.1 Interview 1: Danny du Plessis – Sanlam Employee Benefits .........................................37 4.8.2 Interview 2: Danie Scholtz – Sanlam Employee Benefits ...............................................37 4.8.3 Interview 3: Adele Joubert - Lion of Africa Insurance Company Limited .........................38 4.9 CONCLUSION............................................................................................................... 38 CHAPTER 5 RESEARCH RESULTS ...................................................................................... 39 5.1 INTRODUCTION ........................................................................................................... 39 5.2 ANALYSIS OF INTERVIEWS ........................................................................................ 39 5.2.1 Theme 1: Awareness of integrated marketing communication .......................................39 5.2.2 Theme 2: Implementation of integrated marketing communication ................................40 5.2.3 Theme 3: Progress of implementation of integrated marketing communication .............41 5.2.4 Theme 4: Divide between sales and marketing departments .........................................42 5.2.5 Theme 5: Challenges of integrated marketing communication – B2B vs. B2C ...............43 5.2.6 Theme 6: eMarketing and integrated marketing communication ....................................44 5.3 CONCLUSION............................................................................................................... 45 CHAPTER 6 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS FOR FUTURE RESEARCH .............................................................................................................................. 47 6.1 INTRODUCTION ........................................................................................................... 47 6.2 SUMMARY .................................................................................................................... 47 6.3 KEY RESEARCH FINDINGS......................................................................................... 48 6.3.1 Introduction....................................................................................................................48 6.3.2 Possibility of implementing Integrated Marketing Communication ..................................48 6.3.3 Value of implementing Integrated Marketing Communication ........................................49 6.3.4 Progress of Integrated Marketing Communication implementation ................................49 6.3.5 Integrated Marketing Communication – B2C vs. B2B ....................................................49 6.3.6 eMarketing in the South African insurance industry .......................................................50 6.4 IMPLICATIONS FOR LION OF AFRICA LIFE ASSURANCE ........................................ 50 6.5 RECOMMENDATIONS ................................................................................................. 51 6.6 CONCLUSIONS ............................................................................................................ 51 REFERENCES ......................................................................................................................... 52 APPENDIX A TRANSCRIPTIONS OF INTERVIEWS .............................................................. 54 APPENDIX B INTERVIEW SCHEDULE .................................................................................. 70 ix List of tables Table 2.1: Characteristics of Business Markets 16 x List of figures Figure 1.1: TCF and the product life cycle 3 Figure 1.2: Chapter Outline 8 Figure 2.1: Holistic Marketing Dimensions 12 Figure 2.2: Factors influencing consumer behaviour 13 Figure 2.3: Maslow’s Hierarchy of Needs 14 Figure 2.4: Model of business buyer behaviour 17 Figure 2.5: Major influences on business buyer behaviour 18 Figure 2.6: The seven P’s of Marketing 20 Figure 4.1: The research process 33 xi List of acronyms and abbreviations APO African Peoples Organisation B2B Business-to-Business B2C Business-to-Consumer B-BBEE Broad-Based Black Economic Empowerment CAR Capital Adequacy Requirement EB Employee Benefits EXCO Executive Committee FSB Financial Services Board FSP Financial Services Provider IMC Integrated Marketing Communication RA Retirement Annuity SAM Solvency Assessment and Management SEB Sanlam Employee Benefits TCF Treating Customers Fairly 1 CHAPTER 1 ORIENTATION 1.1 INTRODUCTION Marketing is a major expense in many companies, whilst often the first budget to be cut. In order to reduce these costs and reach more customers, companies need to make use of Integrated Marketing Communications (IMC) which should possibly include an eMarketing strategy if identified as viable. There are many challenges along the way towards a successful implementation of an Integrated Marketing Communications strategy for any company. It is even more difficult in an industry like the insurance industry which is highly regulated. This research report is going to explore the challenges that a company operating in the life assurance market may face when implementing such a strategy. It will furthermore give recommendations of how to overcome these challenges as well as advice to implement a strategically sound IMC strategy combined with an eMarketing strategy that attracts new customers and builds strong relationships with existing ones. 1.2 INTRODUCTION TO LION OF AFRICA LIFE ASSURANCE AND THE SOUTH AFRICAN INSURANCE INDUSTRY 1.2.1 Lion of Africa Life Assurance Company Ltd Lion of Africa Life Assurance Company Ltd (Lionlife) was formed out of the formed African People’s Organisation (APO) in 2002. In this year, Commlife Holdings, the holding company of Lionlife, bought the APO Burial society and changed its name. APO being a traditional underwriter of funeral insurance benefits was what Lionlife needed to grow and strive. In 2005 Lionlife converted the Assistance license to a full Life Assurance license. An assistance license or rather an assistance policy is defined within the Long Term Insurance Act, 1998 (Act No. 52 of 1998) as: a life policy in respect of which the aggregate of-a) the value of the policy benefits, other than an annuity, to be provided (not taking into account any bonuses to be determined in the discretion of the long-term insurer); and b) the amount of the premium in return for which an annuity is to be provided, does not exceed R10 000, or another maximum amount prescribed by the Minister, and includes a reinsurance policy in respect of such a policy; The current prescribed maximum amount by the Minister is R18 000. 2 A life policy on the other hand: means a contract in terms of which a person, in return for a premium. undertakes toa) provide policy benefits upon, and exclusively as a result of a life event; or b) pay an annuity for a period; and includes a reinsurance policy in respect of such a contract; There is no maximum value to a life policy as long as the insurer complies with the requirements of the Long Term Insurance Act, 1998 (Act No. 52 of 1998) and all other acts regulating the industry. A life license can be extended in order to be able to provide additional products such as a disability policy, fund policy, health policy or sinking fund policy. Today Lionlife is a growing venture offering Individual and Group Funeral policies, Individual and Group Life policies, Retirement funds and disability products. Lion of Africa Life Assurance Company is also South Africa’s only Level 1 Broad-Based Black Economic Empowerment (BBBEE) life insurance provider. Due to its comparatively small size and lack of resources at this point, Lionlife has a very small share of the South African Life Insurance market. 1.2.2 The South African Insurance Industry The South African Life Insurance Industry is a highly profitable but also a highly regulated environment to operate in. Whilst other companies can pretty much do what they like as long as it is in line with general ethical standards (or sometimes not), Insurance companies are guided by legislation and regulation as set out by the Financial Services Board. A new framework currently being implemented is called Treating Customers Fairly (TCF). The desired outcome of the TCF framework according to the Financial Services Board (2011:7) is a regulatory approach that seeks to ensure that specific, clearly articulated fairness outcomes for financial services customers are demonstrably delivered by regulated financial institutions. The outcome is further split into six separate outcomes: The TCF fairness outcomes, positioned from the perspective of the customer, are the following: Outcome 1: Customers are confident that they are dealing with firms where the fair treatment of customers is central to the firm culture. Outcome 2: Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly.4 Outcome 3: Customers are given clear information and are kept appropriately informed before, during and after the time of contracting. 3 Outcome 4: Where customers receive advice, the advice is suitable and takes account of their circumstances. Outcome 5: Customers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and what they have been led to expect. Outcome 6: Customers do not face unreasonable post-sale barriers to change product, switch provider, submit a claim or make a complaint. It is desired, that these outcomes shall be applied throughout the entire product life cycle of a financial services product as shown in Figure 1 below: Figure 1.1: TCF and the product life cycle Financial Services Board (2011:8) Under Promotion and marketing the Financial Services Board (2011:8) requires that products are marketed to specific target groups, through clear and fair communications that are not misleading and are appropriate to the target group. Whilst the TCF framework only has to be fully implemented by Insurers by 2014, great efforts are being made by the FSB to ensure that all Financial Services Providers (FSP’s) meet the deadline. This brings a big challenge, especially to small insurers, with limited resources to monitor all its activities at all times. This research report shall identify whether it is possible and valuable to South African insurers to implement IMC within their organisations and if so identify challenges and opportunities in order to implement a successful Integrated Marketing Communication strategy. 4 1.3 PROBLEM STATEMENT South Africa has one of the most established and most successful insurance industries worldwide. This is mainly due to the fact that especially large organisations such as Sanlam, Old Mutual and Momentum could grow in an environment that was largely unregulated and during Apartheid made no consideration of the policyholder (especially previously disadvantaged individuals). At the end of Apartheid this environment changed. However by the time the above mentioned institution where so big already, that they had no real problem implementing the new legislation regarding financial services. The problem many small insurers, that have been established after 1994, are facing is that while they are in their growth phase they always have to consider the best outcome for the policyholder or customers. While this is not really a problem but rather a disadvantage against their large competitors, small insurers have to find a way to grow fast but responsible. One factor that is in the small insurers’ advantage is that they are much more flexible when it comes to product development and the implementation of new legislation and regulation. 1.4 RESEARCH OBJECTIVES 1.4.1 Primary Research Objective The primary research objective of this research will be to analyse and determine whether it is possible and valuable for South African insurance companies to implement an Integrated Marketing Communications strategy. 1.4.2 Secondary Research Objectives The secondary objectives are: to analyse what the progress of implementation of Integrated Marketing Communications strategies within South African insurers is (if any), to determine how to balance the strategy in order to address both individual and business customers equally efficient and to determine whether eMarketing within the insurance industry is a valuable component of Integrated Marketing Communications and what role it could possibly play in the future. 5 1.5 RESEARCH QUESTIONS 1.5.1 Primary research question Is it possible to implement and if so is there value in implementing an Integrated Marketing Communications strategy within a South African insurance company? , that is mainly operating in an intermediated market (B2B market), without slowing down the growth of the organisation and staying within the legislative and regulatory framework? 1.5.2 i) Secondary research questions How can a South African insurance company balance its marketing effort between individual (B2C) and business (B2B) customers? ii) Are South African insurers making progress towards the implementation of Integrated Marketing Communication? iii) Can and should a South African insurance company make use of eMarketing? 1.6 DELINEATION AND LIMITATIONS This study will only look at the framework of Integrated Marketing Communications with all its aspects and influencing factors. While general marketing concepts shall be taken into account there might not be a specific mention or explanation of such. Due to the fact that the research is employed in a marketing position within a South African insurance, interviewer bias might occur, although the researcher will make every effort to reduce it as far as possible. Since all interviewees are specialists in their respective fields and have extensive professional experience in the insurance industry, terms might be used that are very specific to the industry. In case of such occurring, the research shall specify the terms in a glossary for the reader. Furthermore, it must be emphasised, that this research was conducted within the financial ability of the researcher with no external funding of the project. Moreover, this research is dependent on the willingness of interviewees to be interviewed and provide the information needed. 1.7 RESEARCH DESIGN AND METHODOLOGY The researcher assumes that there is currently no active effort being made to integrate marketing communication with South African insurance companies. 6 During the last couple of weeks, the researcher studied various resources of material including academic literature, journals as well as online resources. It transpired that sources such as books are helpful in order to get basic information about the topic. The intent of the research, however, is to create an output as up-to-date as possible. This can often only be achieved by gathering information online through blogs, forums and other well-established platforms. Further literature research has been conducted and will be done with the help of online databases such as EBESCO Host and Emerald. In order to find out whether it is actually possible and valuable to implement the Integrated Marketing Communications Mix within South African insurers, the researcher is using the exploratory / qualitative methods of research to gain insights into the above. Furthermore, the researcher chose to make use of one to one, non-standardised interviews as it was identified as the most appropriate method to collect the appropriate qualitative data. Saunders et al. (2009:323) suggest that when you are undertaking an exploratory study, or a study that includes an exploratory element, it is likely that you will include non-standardised (qualitative) research interviews in your design. Furthermore it is stated by Saunders et al (2009:324) that an interview will undoubtedly be the most advantageous approach to attempt to obtain data where there are a large number of questions to be answers, where the questions are either complex or open-ended or where the order and logic of questioning may need to be varied. Interviews are normally either audio-recorded or notes are being taken by the interviewer. The interviewer has audio recorded or taken notes in all his interviews and has transcribed them into full length documents indicating the questions asked and answer given by the respondents. Furthermore, the researcher is employed by a South African insurance company as Manager: Marketing and Sales Support. Due to the fact that the researcher has several years’ experience in the field, personal opinions and knowledge will be included in the research. In preparation of the interviews, the researcher investigated the process of primary data collection, data preparation and analysis in the available literature. 1.8 CLARIFICATION OF KEY CONCEPTS 1.8.1 Marketing “Marketing has been defined as an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholder.” (Kotler & Keller, 2009:45) 7 1.8.2 Marketing Mix “The marketing mix is the set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market.” (Kotler & Armstrong, 2006:50) 1.8.3 Relationship Marketing “Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business.” (Kotler & Keller, 2009:60) 1.8.4 Integrated Marketing Communication “Integrated marketing communication (IMC) is a concept of marketing communications planning that recognizes the added value of a comprehensive plan. Such a plan evaluates the strategic roles of a variety of communications disciplines – for example, general advertising, direct response, sales promotion, and public relations – and combines these disciplines to provide clarity, consistency, and maximum impact through the seamless integration of messages.” (Kotler & Keller, 2009:531) 1.8.5 Buying Behaviour 1.8.5.1 Business buyer behaviour “The buying behavior of the organizations that buy goods and services for use in the production of other products and services or for the purpose of reselling or renting them to others at a profit.” (Kotler & Armstrong, 2006:171) 1.8.5.2 Consumer buyer behaviour Consumer buyer behaviour is: “The buying behavior of final consumers – individuals and households who buy goods and services for personal consumption.” (Kotler & Armstrong, 2006:136) 8 1.9 CHAPTER OUTLINE CHAPTER 1: ORIENTATION •Introduction into the study •Problem statement and objective of the study •Structure of the study CHAPTER 2: LITERATURE REVIEW •Review of marketing •Review of consumer buying behaviour •Review of business buying behaviour •Review of relationship marketing •Review of the marketing mix •Review of Integrated Marketing Communication CHAPTER 3: MARKETINGMIX APPLIED TO THE SOUTH AFRICAN INSURANCE INDUSTRY •Application of the seven P's of the service marketing mix to the South African insurance industry CHAPTER 4: RESEARCH OBJECTIVES CHAPTER 5: RESEARCH RESULTS •Analysis of the interviews and literature study CHAPTER 6: SUMMARY, CONCULSION AND RECOMMENDATIONS •Summary of key research findings •Implications of the findings •Recommendations for future research Figure 1.2: Chapter Outline 9 1.10 CONCLUSION This chapter introduces the research to be conducted in this research report. It introduces the company Lion of Africa Life Assurance Company Ltd and also introduces the South African Insurance industry in general. Furthermore, it gives an overview of the research design and methodology the research intends to make use of in this research report. In the following chapter, the researcher shall undertake an in-depth review of literature pertaining to the research questions and objectives stated in this chapter. 10 CHAPTER 2 LITERATURE REVIEW 2.1 INTRODUCTION Integrated Marketing Communications is a relatively new subject in the marketing arena, especially with the evolvement of electronic marketing. In order to understand how we got to the current state it is good to look at the beginnings of IMC and Marketing as a whole. 2.2 MARKETING – A BRIEF HISTORY As describes by Perrault and McCarthy (2002:33-34) marketing evolved since the earliest stages of trade. Starting off in the simple trade era, moving to production era where money systems were introduced, going onto the sales era who helps the trading efficiency and marketing effectiveness even more (through word of mouth) ending in today’s marketing company era. When humans started to trade their excess goods that could not be consumed by then members of their households, they had to market these products to those closest to them (mostly neighbours) and convince them of the quality of their goods. As production increased, it however became more and more difficult to sell all goods. That when the first intermediaries were born. Those first marketers were traders that established trade routes and resold goods at centrally located points at a profit. These trades were however, mostly based on barter and later on monetary exchange for goods. The above mentioned went on until the industrial revolution and the beginning of systematic and mass production. It was now assumed that all products could be sold. At the time this may have been true since there was very little competition in the market place and pretty much every one that produced something, produced something new. This is where selling became an integral part of the marketers job. As mass production evolved and Ford built their first cars on a conveyor belt the competition grew and so did the need to outperform the competition. From there on marketing evolved quickly into one of the core functions of an organisation that it is today. While the sole purposes of a company used to be production and selling, we have moved to wholly integrated marketing corporations whose sole aim is the customers, customer satisfaction and retention. 11 2.3 MARKETING - TODAY Marketing today according to Perrault and McCarthy (2002:34) is described as the marketing company era. Unlike in previous eras marketers today develop long-term strategies and the whole organisation is guided by the principles set out in such strategy. According to Kotler and Armstrong (2006:5) today marketing is the “…process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. In order to achieve these two core functions of marketing today, Kotler and Armstrong (2006:5) suggest, that a company must follow five simple steps. These five steps are: 1. “Understand the marketplace and customer needs and wants” 2. “Design a customer-driven marketing strategy” 3. “Construct a marketing program that delivers superior value” 4. “Build profitable relationships and create customer delight” 5. “Capture value from customers to create profits and customer quality” By following these five steps value will be created for the customers and in return captured from the customers. All marketing activities, fall into two subcategories of the marketing environment, that marketer have to deal with. The marketing environment is defined by Kotler and Armstrong (2006:64) where “...actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.” Kotler and Armstrong furthermore distinguish between the micro- and the macro environment. Here Kotler and Armstrong (2006:65) define the microenvironment where: “The actors close to the company that affect its ability to serve its customers – the company, suppliers, marketing intermediaries, customer markets, competitors and publics.” They define the macro environment as: “The larger societal forces that affect the microenvironment – demographic, economic, natural, technological, political, and cultural forces.” As mentioned above, companies now a day’s are no longer making their products to sell but became and are becoming more customer-centric. Levitt (1960:50) and Kotler and Keller (2009:59) describe the contrast between the selling and the marketing concept as follows: “Selling focuses on the needs of the seller; marketing on the needs of the buyers. Selling is preoccupied with the seller’s need to convert his product into cash; marketing with the idea of satisfying the needs of the customers by means of the product and the whole cluster of things associated with creating, delivering, and finally consuming it.” 12 However, the developments of the 21st century are leading companies away from the traditional marketing concept to the holistic marketing concept. Kotler and Keller (2009:59-60) describe it as being “…based on the development, design, and implementation of marketing programs, processes, and activities that recognizes their breadth and interdependencies. Holistic marketing recognizes that ‘everything matters’ in marketing – and that a broad, integrated perspective is often necessary. The below figure shows the four broad components of the holistic marketing concept: Figure 2.1: Holistic Marketing Dimensions Adapted from: (Kotler & Keller, 2009:63) 2.4 CONSUMER BUYING BEHAVIOUR The South African Insurance industry is highly intermediated and hence most selling / buying / marketing activities are directed towards businesses and less towards individual customers. This however does not mean that one can ignore individual customers, since they purchase for example a life policy through an intermediary based on the reputation of the specific insurance company. 13 The Consumer buying behaviour is described by Kotler and Armstrong (2006:136) as the buying behaviour of final consumers – individuals and households who buy goods and services for personal consumption. All these buyers make up the consumer market. The consumer buying behaviour is influenced by five characteristics. The following figure shows Family Roles and status Age and lifecycle stage Occupation Economic situation Lifestyle Personality and selfconcept Motivation Perception Learning Beliefs and attitudes Buyer Reference group Psychological Social Class Personal Subculture Social Culture Cultural the different factors influencing this behaviour. Figure 2.2: Factors influencing consumer behaviour Adapted from Kotler and Armstrong (2006:138) 2.4.1 Cultural The cultural aspect is something that is learned by any human being. Kotler and Armstrong (2006:137) suggest that a child learns basic, values, perceptions, wants, and behaviours from the family and other important institutions. We are also largely influenced by the social standing of our parents which subconsciously will imprint certain behaviours modelled from them. Due to that model behaviour humans tend to favour brand already favoured by their parents. 2.4.2 Social The second characteristic is the social factor. As per Kotler and Armstrong (2006:141) a consumer’s behaviour is also influenced by social factors, such as the consumer’s small groups, family, and social roles and status. These groups can consist of peers, co-workers, family, sports 14 clubs and many more. An example in the insurance industry would be where the father always bought all his insurance policies from the broker around the corner. The odds used to be very high and still are in some income groups that the son will also buy his first policy from the same broker. 2.4.3 Personal A buyer’s decision making is also greatly influences by factors such as lifestyle, personality, economic situation, occupation and in what stage of the life-cycle he or she currently is. Obviously, since these factors are unique to each individual, they also have a unique impact on the consumer’s behaviour. Hence it is “important for marketers to follow them closely.” (Kotler & Keller, 2009:196) 2.4.4 Psychological Kotler and Keller (2009:200) identify four key psychological processes – motivation, perception, learning, and memory. Under the motivation factor they furthermore identify three well known theories by Freud, Maslow and Herzberg. Freud suggests, that a decision is not only made based on the obvious but also subconscious. He furthermore states that factors such as shape, size, material and brand name can have a direct impact on the decision we make. Maslow’s theory is largely build on his hierarchy of needs shown below. Figure 2.3: Maslow’s Hierarchy of Needs Adapted from Kotler and Keller (2009:203) 15 Herzberg’s theory distinguishes between two factors; the dissatisfiers and the satisfiers. It is said in Kotler and Keller (2009:203) that the absence of dissatisfiers is not enough to motivate a purchase, satisfiers must be present. Hence any seller must identify both, the satisfiers and dissatisfiers in order to increase sales. The second key psychological process is perception. “Perception is the process by which we select, organize, and interpret information inputs to create a meaningful picture of the world.” (Kotler & Keller, 2009:203). Perception is split into four different factors that influence our behaviour. 2.4.4.1 Selective Attention The idea behind selective attention is that humans are able to screen out stimuli received by all the different marketing messages every day. The task of the marketer is to stand out in the crowd and attract the consumer’s attention above all the other messages. 2.4.4.2 Selective Distortion Here the theory is, that we adapt the messages we receive to our own preconceptions of things. Kotler and Keller (2009:204) state: “Consumers will often distort information to be consistent with prior brand and product beliefs and expectations.” 2.4.4.3 Selective Retention Selective retention is based on the theory that we forget things about some products and remember things about others. This could be due to previous associations with a particular brand. 2.4.4.4 Subliminal Perception Here it is argued by Kotler and Keller (2009:204) that marketers embed covert, subliminal messages in ads or packaging. Without the customers consciously realising it, he or she will make a decision based on the received. 2.5 BUSINESS BUYING BEHAVIOUR According to Kotler and Keller (2009:222) the business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others. The insurance industry is one of the major industries falling into this category. 16 2.5.1 Business market versus consumer market The business market is quite different to the consumer market. Transactions within the business market involve significantly more money and items or services being transferred than the consumer market. In the table below it is shown what the most prominent difference between the consumer and the business market are. Table 2.1: Characteristic of Business Markets Marketing Structure and Demand Business markets contain fewer but larger buyers. Business customers are more geographically concentrated. Business buyer demand is derived from final customer demand. Demand in many business markets is more inelastic – not affected as much in the short run by price changes. Demand in business markets fluctuates more, and more quickly. Nature of the Buying Unit Business purchases involve more buyers Business buying involves a more professional purchasing effort. Types of Decisions and the Decision Process Business buyers usually face more complex buying decisions. The business buying process is more formalized. In business buying, buyers and sellers work more closely together and build close long-run relationships. Adapted from (Kotler & Armstrong, 2006:171) 2.5.2 Business Buying Behaviour In order to understand the business buying behaviour and the role players involved one should have a look at the below figure. Kotler and Armstrong (2006:176) distinguish between three different buying situations. The first one is the straight rebuy, the second one the new task and the moderate one is the modified rebuy. The straight rebuy is as the name says a buying situation where the buyer routinely rebuys a product or service without renegotiation or any amendment to the order. 17 A new task situation occurs when a buyer intends to purchase a product or service for the very first time. The new task is what every business strives for and which it fears at the same time. While every business wants to grow and expand it is also highly time consuming and involves many different parties until an agreement is reached. The modified rebuy situation occurs, when a current buyer wants to renegotiate their terms of purchase. This can include renegotiation of price or specifications of a product or service. In order to better understand the business buyer behaviour, one should look at the below figure. It shows the different factors that have an impact on the ultimate buying decision. Figure 2.4: Model of business buyer behaviour (Kotler & Armstrong, 2006:176) 2.5.3 Influences on Business Buyers Most business buyers are being influence by many different factors in their buying decision. These factors are not only environmental or organisational but also highly dependent on the unique circumstances of the buyer. Like in consumer buying behaviour, there are five major influences on the business buyers’ decision. An overview of those is given in the below figure. 18 Figure 2.5: Major influences on business buyer behaviour (Kotler & Armstrong, 2006:179) 2.5.3.1 Environmental Factors According to Kotler and Armstrong (2006:179) business buyers are influenced heavily by factors in the current and expected economic environment, such as the level of primary demand, the economic outlook, and the cost of money. Business buyers are also affected by technological, political and competitive developments. 2.5.3.2 Organizational Factors Each organisation has its own rules that buyers have to adhere to. The most prominent influencer in this category is probably the procurement department. However there are a few others such as systems which don’t allow or have to be adjusted to certain products (this is very prominent in the insurance industry) and the organizational structure. 2.5.3.3 Interpersonal Factors The third factor suggests that buyers are influenced by things such as authority, status or empathy. While that may be true, it is very hard to detect. Kotler and Armstrong (2006:179) that wherever possible, marketers must understand these factors and adapt their strategy to take these into account. 19 2.5.3.4 Individual Factors Individual factors are important and should be recognized as such. Business buyers may be influence by their position within an organisation that gives them a certain amount of power and authority. Buyers may also have their own agendas that are underlying to the motive of purchase. 2.6 RELATIONSHIP MARKETING Relationship marketing is defined as: “Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business.” (Kotler & Keller, 2009:60) The most important of building such relationship is for the customer to trust the company and its products. If that trust does not exist, the relationship doesn’t exist. Relationship marketing developed because sellers did no longer want loose customers after the initial sale. They wanted to bind them to themselves and their products. Kotler and Keller (2009:60) explain that there are four key constituencies to relationship marketing; customers, employees, marketing partners (channels, suppliers, distributors, dealers agencies), and members of the financial community (shareholders, investors, analysts). It is the task of marketers to identify the needs of each of the four constituents in order to create a return for all parties involved. Kotler and Keller (2009:62) name the ultimate outcome of relationship marketing as having an effective marketing network of all stakeholders. Only through this will a seller be able to identify the customer needs and create loyalty that hopefully lasts a life time. 2.7 THE MARKETING MIX The marketing mix represents everything and every way in which a company engages with its customers. Traditionally the marketing mix consists of the four P’s. The four P’s are Product, Price, Promotion and Place. Booms and Bitner then expanded these four P’s to seven P’s and added People, Physical Evidence/ Environment and Process. They called this the marketing mix for the service industry. The following figure shall give an overview of the seven P’s and their components. 20 Figure 2.6: The seven P’s of Marketing Adapted from (Business Fundas, 2012) 2.7.1 Product Kotler and Armstrong (2006:50) describe Product as the goods-and-services combination the company offers to the target market. Factors like variety, quality, design, features, brand name, packaging and services offered contribute largely to the consumer’s decision to purchase a product or service. While factors such as variety and packaging are not as important to business buyers in the insurance industry, services, brand name and features are even more important. Even though insurers call the things they sell a product, it should actually be called a service. The basic assumption for the creation of a life insurance product or rather service is that an insurable interest exists. The Ombudsman for Long-Term Insurance (2011:1) defines an insurable interest as follows: “‘Insurable interest’ is one of the basic concepts of insurance law. It refers to an insured’s interest or concern in the non-occurrence of the event insured against. What it precisely entails is not clear and there is indeed widespread uncertainty as to the necessity and import of insurable interest especially in the context of assurance on the life of another.” 21 Due to the uncertainty in the definition of an insurable interest, the insurance industry has to make its own assumption regarding product design, within the framework of the Long-Term, Short-Term and Financial Advisory and Intermediary Act. 2.7.2 Price Price is defined by Kotler and Armstrong (2006:50) as the amount of money customers have to pay to obtain the product. The influencing factors of Price are list price, discounts, allowances, and payment period and credit terms. In the life insurance industry, especially in the assistance business space, price is what make or brakes a deal. Funeral group scheme owners are highly price sensitive because with a small margin of increase in risk / underwriter premium their own profit is becoming smaller. However, it has to be mentioned, that the funeral insurance market has and is until today largely under- or unregulated. This is partially due to the fact that many group schemes operate in rural areas of the country and originate from Stokvel’s. The Financial Services Board attempts to regulate this specific market by forcing insurers to organise their clients. The big money in the industry however is made by the group scheme owners. While the FSB tries to regulate the profit margin of group scheme owner via the Treating Customers Fairly framework, this will not be successful in rural areas where no control is possible. Often group scheme owners charge their policyholders 4 or 5 times the actual underwriting premium they pay over to the insurer. Because policyholders are ill informed and many uneducated, they often don’t realise that this is basically extortion. 2.7.3 Place Kotler and Armstrong (2006:50) define Place as all company activities that make the product or service available to target customers. The influencing factors of Place according to Kotler and Armstrong are channels, coverage, assortments, locations, inventory, transportation and logistics. While in general terms Place is very important for physical products, it has a minor influence on the insurance industry because the least amount of its factors actually apply. The most important for the South African insurance industry is probably locations. People in South Africa still very much like to visit a branch and have face-to-face interaction with a consultant when purchasing an insurance product or claiming for such. This at least applies to individual customers. Business buyers on the other hand, while still valuing face-to-face interaction, mostly conclude deals telephonically or via email. 22 2.7.4 People Blythe (2009:130) describes the People element of the marketing mix as being crucial to success in marketing, particularly in services, where they usually are the product. It consists of factors such as employees, management, culture and customer service. In the insurance market and in general in the B2B market, it is essential to build long-term relationships with your client in order to be successful. Hence without the right people in the company it will be difficult to establish such and guarantee growth and success. In order to do that it is essential to constantly train people and make them as efficient as possible. 2.7.5 Physical Evidence / Environment In Key Concepts in Marketing (2009:131) Blythe states that is the lasting proof that the service has happened. In the case of a physical product, the product itself provides physical evidence, but in the case of a service such as life insurance the situation is less clear, which is why life insurance providers give new customers glossy policy documents. 2.7.6 Process Process according to Blythe (2009:131) is the set of activities that results in delivery of the product benefits. Process is subdivided into procedures, duration and sequence of activities. However there are many more factors affecting this part of the marketing mix. This is a very important factor of the insurance industry. Not only is it important to guarantee efficiency and timeous payment of claim but it is also a requirement from the Financial Services Board as set out in the Solvency Assessment and Management (SAM) roadmap. It furthermore is an Internal Audit requirement that all processes are mapped, kept up-to-date and that all staff is able to access these processes at any time. Process in the marketing mix sense is not only a factor affecting marketing but rather the entire organisation. 2.7.7 Promotion According to Kotler and Armstrong (2006:50) Promotions means activities that communicate the merits of the product and persuade target customers to buy it. Belch and Belch (2004:16) make up the promotions mix of six factors: 23 2.7.7.1 Advertising “Advertising is defined as any paid form of non-personal communication about an organization, product, service, or idea by an identified sponsor.” (Belch & Belch, 2004:16) Advertising is a way by which marketers attempt to inspire or develop a need within their customers. The aim is for them to want to belong to a group of certain group of people. Blythe (2009:136) calls these groups aspirational groups. He furthermore states that advertising commonly uses images of aspirational groups, associating images of a product with an aspirational group, thus implying that consumers of the product will move a little closer to being members of the group. Just like in consumer marketing, B2B marketing is an important factor that can’t be ignored. However, one should be aware that the day-to-day marketing rules don’t seem to apply to B2B advertising. Usually the business buyer is more sophisticated and requires more information in order to purchase. According to Belch and Belch (2004:19) Business-to-Business Advertising is advertising targeted at individuals who buy or influence the purchase of industrial goods or services for their companies. Industrial goods are products that either become a physical part of another product (raw material or component parts), are used in manufacturing other goods (machinery), or are used to help a company conduct its business (e.g., office supplies, computers). Business services such as insurance, travel services, and health care are also included in this category. 2.7.7.2 Direct marketing According to Belch and Belch (2004:18) direct marketing is the sectors, in which organizations communicate directly with target customers to generate a response and/or transaction. Direct marketing was not considered part of the promotions mix until recently but became an integral part thereof. Belch and Belch (2004:20) state that direct marketing involves a variety of activities, including database management, direct selling, telemarketing, and direct response ads through direct mail, the Internet, and various broadcast and print media. The Long-Term Insurance Act of South Africa sets out very specific rules regarding direct marketing. While many European countries actually ban direct marketing because they consider it a form of harassment, South Africa is still on the fore front of direct marketing (especially through call centres). 24 2.7.7.3 Interactive / Internet marketing “Interactive media allow for a back-and-forth flow of information whereby users can participate in and modify the form and content of the information they receive in real time.” (Belch & Belch, 2004:20) Interactive / Internet / eMarketing are is probably the biggest revolution within the field of marketing in the 21st century. Different platforms for consumer interaction appear every day and old ones disappear. Take email marketing as an example. According to MarketingProfs.com (2012) 47 per cent of B2B marketers that email marketing will still be relevant, 50 per cent think that it will be less relevant and 3 per cent think it will have no relevance at all. The 3 per cent of respondents think that all electronic communications will happen via social media sites such as LinkedIn, Facebook and Skype. 2.7.7.4 Sales promotion Sales promotion is defined by Belch and Belch (2004:21) as those marketing activities that provide extra value or incentives to the sales force, the distributors, or the ultimate consumer and can stimulate immediate sales. It is furthermore stated, that consumer-oriented sales promotion includes couponing, sampling, premiums, rebates, contests, sweepstakes, and various point-of-purchase materials. The insurance industry however would largely fall into the category of trade-oriented sales promotion. It is targeted toward marketing intermediaries such as wholesalers, distributors, and retailers. Promotional and merchandising allowances, price deals, sales contests, and trade shows are some of the promotional tools used to encourage the trade to stock and promote a company’s products. While there is a difference between promotion and sales promotion, many marketers use the term promotion to describe sales promotion. 2.7.7.5 Publicity / Public relations According to Belch and Belch (2004:22) Publicity refers to non-personal communications regarding an organization, product, service, or idea not directly paid for or run under identified sponsorship. Public relations however, is defined as “the management function which evaluates public attitudes, identifies the policies and procedures of an individual or organization with the public interest, and executes a program of action to earn public understanding and acceptance. While the two are very much alike and can be confused they must be separated from each other. Like advertising, publicity is a form of non-personal communication but unlike advertising, publicity 25 is not paid for directly by a company. It is rather a tool through which companies’ attempts to receive positive (or negative) coverage in different forms of media. This could be through news report and articles. Public relations on the other hand is as stated above, a planned function of business in order to control its image in the public and influence the nature of publicity. So while the two go hand-inhand they have to be distinguished from one another. 2.7.7.6 Personal selling The last part of the promotional mix is personal selling, which according to Belch and Belch (2004:23) is a form of person-to-person communication in which a seller attempts to assist and/or persuade prospective buyers to purchase the company’s product or service or to act on an idea. Unlike advertising, personal selling involves direct contact between buyer and seller, either face-toface or through some form of telecommunications such as telephone sales. 2.8 INTEGRATED MARKETING COMMUNICATION Integrated Marketing Communication is part of the promotional part of the Marketing Mix. Integrated Marketing Communication is “…a concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplines – for example, general advertising, direct response, sales promotion, and public relations – and combines these disciplines to provide clarity, consistency, and maximum communications impact.” (Belch & Belch, 2004:9) The four P’s however, are a simple classification of marketing activities, one of which IMC is an extension of. According to Kotler and Keller (2009:63) the Promotions part of the four P’s includes Sales Promotion, Advertising, Sales force, Public relations and direct marketing. This clearly shows the main aim of IMC to integrate the traditionally, separately performed activities of the Marketing Mix’s promotions aspect. IMC: The Next Generation (Schultz & Schultz, 2004) suggests that marketers should move away just from the 4 P’s and extend it by the 4 C’s of Customer, Cost, Convenience and Communications. Integrated Marketing Communication is essential in the complex markets of today’s world. As stated by Percy (2008:14) “Despite the fact that most marketers seem to agree that IMC makes sense, after 20 years there is very little evidence that it is being practiced by many companies.” He also mentions, “The lack of IMC, the lack of coordinated communications planning and the delivery of a consistent message, could lead to multiple portrayals of a brand in the market.” 26 It is the purpose of Integrated Marketing Communication to successfully coordinate all communications from an organisation in order to send a consistent and complete message to customers, be it individual or business. Over the past two decades Integrated Marketing Communication became an ever growing and important factor for marketers worldwide to consider. From being called a fad in the beginning, Integrated Marketing Communication emerged as what would be one of the greatest changes or adaptation marketers had to make in order to adhere to the need of customers in an ever changing marketing environment. 2.9 CONCLUSION This chapter gave an overview of common theoretical frameworks of Marketing. It clearly shows that marketing is a business function that cannot be ignored by any kind of business and deserves much focus and strategic work. The following chapter shall investigate whether the theoretical framework of the marketing mix analysed in this chapter does apply to the South African insurance industry and if so, how. 27 CHAPTER 3 MARKETING MIX APPLIED TO THE SOUTH AFRICAN INSURANCE INDUSTRY 3.1 INTRODUCTION Just like in all other industries, marketing is an important business function within a South African insurance company. This applies to Life and Non-Life Insurance companies. Due to the fact that most insurers are still highly intermediated, meaning they use the broker model in order to sell their products, but also sell directly to individual clients, insurers must ensure that the customer and business buyer needs are met in order to be successful. This chapter shall discuss how the marketing mix describes above is applicable to the South African Insurance industry. Insurance Marketing could be defined as the selling of an insurance benefit to an individual or group that has an insurable interest by ensuring customers satisfaction and profitability. An insurance company has three ways to make a profit on an insurance policy; underwriting profit, investment profit and administrative profit. 3.2 THE MARKETING MIX As stated earlier, the marketing mix for the service industry consists of seven P’s instead of the normal 4 P’s that is applicable if physical good are being marketed and sold. The seven P’s apply to the insurance industry of South Africa as described in the following sub-chapters. 3.2.1 Product Since the insurance industry is a service industry, one should rather call it a service than a product. However, insurers generally call their services a product; an insurance product. Insurance companies are providers of risk. Risk in this sense means insurance risk. Insurance risk is defined as: “The risk of loss due to actual experience being different than that assumed when an insurance product was designed and priced. Insurance risk exists in all our insurance businesses, including annuities and life, accident and sickness, and creditor insurance, as well as our reinsurance business.” (BMO, 2012) When building an insurance “product” or service, the insurer will load the risk that was determined based on actuarial models with expenses and a profit loading. Furthermore there can be extra benefits being added on, depending on what was determined as the customers’ needs. It should be the aim of every insurer to make an insurance product as easily digestible as possible. This is 28 enforced by the Financial Services Board through the Treating Customers Fairly, the Long-Term Insurance Act and the Financial Advisory and Intermediary Act. 3.2.2 Price The pricing strategy of an insurer is dependent on two major factors. The first factor is the mortality within the country of operation and within the province or region where the insured life resides. It is furthermore based demographic factors such as age, gender and level of education. This especially applies to the life insurance industry. The second factor is the underlying cost of administering a policy and making a profit as the insurer. A further factor is the current position of the insurer in the market, its brand recognition and reputation and in what stage of the life cycle the product currently is. Especially the group funeral insurance market is highly price sensitive. As mentioned earlier, the group funeral market, while regulated, is very difficult to control and persecute due the fact that group scheme often operate in rural area that are difficult to access and / or far away from bigger cities. 3.2.3 Place The place component of the marketing mix within the insurance industry is largely reliant on two factors. The first factor is the personnel of the insurer and the second is the accessibility to branches of the insurer. If the personnel, especially sales agents, are not managed in an appropriate manner, they can have a highly negative impact on the successful conversion of potential policyholders into actual policyholders. This negative impact can occur due to a lack of professionalism, a lack of product knowledge and if the agent does not understand the cultural background of his client and their way to do business. Secondly, it is important to have a branch network that reaches as wide as possible. Whilst small insurers often do not have the resources to establish such branches, it is important to grow such network as soon as possible. The South African policyholder still prefers to interact with an agent face-to-face when purchasing an insurance policy. However, this can differ due to cultural background, age and other demographic factors. 29 3.2.4 Promotion In South Africa, with its high illiteracy rate, high unemployment and vast rural areas, it is essential to apply effective promotional measures. These have to consider all aspect of the promotions component. While some researchers say that a communications mix is only fully integrated once all components are considered, others say that only the ones appropriate and of importance to the respective business and industry should be included and fully synchronised and integrated. 3.2.4.1 Advertising In order to reach insurance B2B customers, there are not many platforms one can make use of in South Africa. There are three industry specific publications in South Africa. These are Cover Magazine, RiskSA and FANews. Many insurers make use of this platform to advertise to intermediaries and other industry players. In order to reach individual customers, many insurers make use of television, magazines and newspapers advertising. One of the reasons, that many small insurers are not present on these platforms, is the high cost that usually comes with producing and broadcasting/ printing such advertising. 3.2.4.2 Direct marketing Direct marketing is rapidly increasing form of promoting insurance products to the public. As mentioned above, many insurers still rely on brokers and other intermediaries to sell their products. However in recent years, many insurance companies (often subsidiaries of traditional insurers) have emerged in the South African market. According to KPMG’s Insurance Survey 2012 (2012:5) they observed that while Santam and Mutual & Federal firmly dominated the short-term segment in 2001, there were already signs of the direct marketers laying threat to the traditional broker models. The rise of OUTsurance, Auto & General and Dial Direct has been remarkable, with the brands acquiring the status of household names. Their offering is primarily in the personal lines segment, where some argue the consumer no longer requires the expertise of a broker to tailor their insurance products. More recently, the life segment has also witnessed the introduction of direct offerings, with brands including 1Life Direct, Frank.Net and OUTsurance Life. Direct marketers in the insurance industry in South Africa widely use call centres in order to sell their policies. 30 3.2.4.3 Interactive / Internet marketing In b) it was mentioned that direct marketers often chose the call centre platform in order to sell their products to individual customers. However more recently the internet (e.g. www.instantlife.co.za ) is also being used to sell policies. It must however be mentioned, that the products sold online are mostly targeted at higher income groups, that have access to the internet either via ADSL at home, 3G or via their smartphones. Due to the low internet penetration in South Africa compared to Europe this will remain the fact for an estimate five more years. The current South African internet penetration is at roughly 17% in 2012. 3.2.4.4 Sales promotion Sales promotion is one of the most vital parts of marketing in the insurance industry. While large insurers even have their own trade shows (e.g. Sanlam Symposium), there are many trade shows and conferences all over the country for all different units of the insurance business. There is the annually rotating conference hosted by the Institute of Retirement Fund for the Employee Benefits business, there is the annual National Conference of the South African Funeral Parlours Association for the Funeral insurance part of the business and there is the IISA/SAIA/FIA Insurance Conference for all business units within the insurance space. All these conference include exhibition space for the attending insurers While these trade shows are very valuable to the insurers, they are not the only form of sales promotion. Many insurers also do their own road shows where they often introduce new legislation to the industry players and obviously also present their products or use their own company in case studies. 3.2.4.5 Publicity / Public relations Publicity is ultimately linked to the activities explained in d). While trade shows, conferences and symposiums create relationship building and selling opportunities it also creates publicity for the participating insurers. The South African insurance industry is a fairly “small” industry when it comes to relationships. Most people within their fields know each other because there are a limited number of opportunities to network in South Africa. Hence most attendees that attend a conference will probably also attend others. While large insurers have large marketing departments that employ Public Relations specialists, smaller insurers mostly rely on retainer PR specialists in order to get their name out there. However, most small insurers don’t put too much effort into PR as it is a priority to generate sales and sales opportunities. Public Relations takes fairly long to make an impact on sales and brand recognition. 31 3.2.4.6 Personal selling Personal selling is essential in the insurance industry of South Africa. Many insurers employ many sales consultants that work on a small basic salary with commission making their main income stream. However, maintaining a sales force is very expensive. This is mainly due to the fact, that in the individual life space it is customary to pay upfront commission to sales representatives. While they have to pay commission back should the policy lapse, it is a huge initial capital outflow for the insurer. Hence, many small insurers rely on a small contingent of sales people, who sell to intermediaries. The intermediaries then resell the products to the end customers. The advantage here is that the commission payable to intermediaries is regulated and limited by the Long-Term Insurance, Short-Term Insurance and Financial Advisory and Intermediary Act. 3.2.5 People In the South African insurance industry it is very important to have the right people on staff. This is important for all levels in the hierarchy but especially in the supervisory roles and upwards to executive management. It is pertinent that employees are constantly trained not only regarding administration systems and other IT infrastructure but also regarding developments in legislation. Sales people should receive separate sales training and are required to have well developed intercultural skills and must have the ability to build solid, long lasting relationships with their clients. 3.2.6 Process While many processes, especially in the administration unit within the insurer, are dictated by the IT infrastructure and systems, it is also an internal audit and Solvency Assessment and Management requirement that all processes within an insurance company are recorded, constantly updated and that all staff is made aware of these. 3.2.7 Physical Evidence Since policyholders rarely come into physical contact with their insurance companies, this is not a crucial factor. However it cannot be ignored. The insurer has to make sure that its own sales representatives and also its intermediaries are presentable and have good communications skills. The factor links greatly into the other factors mentioned above. 32 3.3 CONCLUSION The previous chapter focused on an in-depth review of literature relevant to marketing and integrated marketing communication. In this chapter the researcher applied the marketing mix as set out in Chapter 2 to the South African Insurance industry. All different parts of the seven P’s of service marketing were analysed and adapted to the environment of insurance. It was found, that the complete marketing mix is just as essential to the insurance industry as it is to other industries. It was further found, that Product, Price and Promotion are the three most essential elements of the marketing mix impacting on the insurance industry. Due to the fact that there is a large amount of competitors operating in the South African market, it is essential to create an innovative product that sets the company apart. It is also essential that insurance products are correctly priced. This will ensure customer satisfaction, profit for the insurance company and compliance with the relevant legislation. The following chapter will introduce the different components of research process, design and methodology that this study is based upon. 33 CHAPTER 4 RESEARCH DESIGN AND METHODOLOGY 4.1 INTRODUCTION The previous chapter gave an understanding of marketing theory and how it applies within companies. It was indicated that it is essential to send a coherent message to customers in order to create loyalty, meet customer needs and ultimately be successful. The research explored the theoretical framework around Integrated Marketing Communication. The research described in this chapter shall explore whether it is actually possible and valuable for South African insurers to make use of the concept of Integrated Marketing Communication within their marketing strategies. The chapter will first introduce the research process. Following this, it will introduce the research approach and design. Finally it will explore the means of data collection appropriate for this study. 4.2. RESEARCH PROCESS The research process describes the process that a research follows in order to get from the wish to do research to submitting the research and presenting it. Saunders et al. (2009, p. 10) suggests that working through this process in a linear fashion won’t be possible and is not recommended as the research should constantly reflect back to the previous steps in the process. Wish to do research Formulate and clarify your research topic Critically review the literature Collect data Formulate your research design Understand your philosophy and approach Analyse data Write your report Submit your report Figure 4.1: The research process Adapted from Saunders et al (2009:11) 34 Figure 4.1 shows the research process as suggested by Saunders et al. Saunders et al furthermore state, that it will most probably be necessary to revisit stages in the process and even change research questions and objectives. 4.3 RESEARCH APPROACH When approaching a research project usually there are two different kinds of approaches to it, the deductive and the inductive approach. According to Saunders et al (2009:124) it depends whether the researcher decides to develop a theory and hypothesis and design a research strategy to test the hypothesis or instead collects data and develops a theory as a result of the data analysis. 4.3.1 Deductive approach The deductive approach is defined by Saunder et al (2009:590) as a research approach involving the testing of a theorectical proposition by the employment of a research strategy specifically designed for the purpose of its testing. They furthermore suggest that there are five stages through which deductive research will progress: i) Deducing a hypothesis from the theory ii) Expressing the hypothesis in operational terms, which purpose a relationship between two specific concepts or variables iii) Testing this operational hypothesis iv) If necessary, modifying the theory in the light of the findings 4.3.2 Inductive approach The inductive approach is defined by Saunders et al (2009:593) as a research approach involving the development of a theory as a result of the observation of empirical data. The inductive approach is a much debated research approach amongst experts. Where some feel that the deductive approach is to restricitve due to its rigid methodology other argue that the inductive approach is subjective and irrational. Saunders et al. (2009:126) state that an inductive approach is likely to be particulary concerned with the context in which events are taking place. Hence the study of a smaller sample might be more approriate than a large number as suggested in the deductive approach. 35 4.3.3 Types of data There are two different types of primary data that can be collected. According to Saunder et al (2009:151) quantiative is predominantly used as a synonym for any data collection technique (such as questionnaire) or data analysis procedure (such as graphs or statistics) that generates or uses numerical data. In contract, qualitative is used predominantly as a synonym for any data collection technique ( such as an interview) or data analysis procedure (such as categorising data) that generates or use non-numerical data. 4.4. RESEARCH DESIGN Saunders et al (2009:136-137) define the research design at the general plan of how to go about answering the research question(s). It will contain clear objectives, derived from the research question(s), specify the sources from which the researcher intends to collect data, and consider the constraints that the researcher will inevitably have as well as discuss ethical issues. 4.4.1 Exploratory studies An exploratory study is a valuable means of finding out ‘what is happening; to seek new insights; to ask questions and to assess phenomena in a new light. There are three basic way of conduction such research: A search of literature Interviewing ‘experts’ in the subject Conducting focus group interviews However the researcher doesn’t have to make use only of a single of the basic way. If needed and necessary, two or even all three should be combined in order to gain insight into the subject matter. This form of research design was chosen for this study, because it presented itself as being the best way to gather information required to answer the research questions and research objectives. 4.5 RESEARCH STRATEGY It is of utmost importance for any research study to have clear research strategy. Saunders et al (2009:141) distinguish between seven different strategies: Experiment Survey Case study 36 Action research Grounded theory Ethnography Archival research The case study strategy was used for this research report. 4.5.1 Case Study (Robson, 2002) defines case study as ‘a strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence’. Case studies are of special value to researchers if they wish to gain a rich understanding of the context of the research and the processes being enacted. (2009:146) 4.6 SAMPLING The research used sampling in order to deduce what technique to use and what respondents for the interviews to choose. Since the research couldn’t possibly have conducted a census, sampling became necessary. Saunders et al (2009:213) distinguished between probabiliy samples and non-probabily samples. With the help of Figure 7.3 “Selecting a sample” in Saunder et al (2009:223) the researcher identified, that non-probability sampling would be the most appropriate method for this study. 4.6.1. Non-probability sampling Saunders et al (2009:596) define non-probability sampling as a selection of sampling techniques in which the chance of probabily of each case being selected in not known. Using Figure 7.5 in Saunders et al (2009:234) the researcher determined, that the use of selfselection sampling would be the most approriate for this study. Self-selection sampling occurs when the researcher allows each case, usually indiviuals , to indentify their desire to take part in the research. 4.7 TYPES OF INTERVIEWS In this research report the researcher makes use of non-standardised, in-depth interviews (also call unstructured interviews). Saunders et al (2009:321) explain that non-standardised or unstructured interviews are informal interviews with the respondents. A researcher would use these in order to 37 gain in-depth insights into a general area of interest. The researcher identified this type of interview as the best way to gather the primary data for this study. Unstructured interviews have no defined list of questions but rather make use of general themes of discussion. These themes were introduced to the chosen interviewee via email as shown in Appendix B. 4.8 INTERVIEWS WITH INSURANCE MARKETING AND SALES EXPERTS The researcher has chosen three experts currently employed by South African insurers. Two of the respondents were chosen in order to represent marketing executives from one large and one smaller insurer. One of the interviewees was chosen in order to get an insight into the attitude of distribution executives towards marketing and integrated marketing communication in general. All interviewee have extensive experience in their respective fields and in other fields within the South African financial services industry. In the following subsections more insight will be given regarding the reasoning behind choosing the respondents. 4.8.1 Interview 1: Danny du Plessis – Sanlam Employee Benefits Danny du Plessis is the Regional Manager (Western Cape) for Sanlam Employee Benefits Distribution. The products sold by Mr du Plessis and his team are lone standing pension, provident and preservation fund as well as the Sanlam Umbrella funds. Sanlam is South Africa’s second largest insurance company trailing behind Old Mutual and followed by Metropolitan Momentum Holdings. According to Datamonitor (2013:3) Sanlam Life Insurance is a wholly owned subsidiary of Sanlam Limited and is engaged in providing various life insurance solutions across South Africa. The company provides long-term insurance, investment management and other related financial services. Sanlam life insurance includes the activities of Sanlam Personal Finance, Sanlam Employee Benefits and Sanlam Emerging Markets. The company primarily operates in South Africa, where it is headquartered in Bellville. Mr du Plessis is the Regional Distribution Manager in the Sanlam Employee Benefits subsidiary of Sanlam Life Insurance Limited and is responsible for all Employee Benefits sales in the Western Cape Province and for all strategic decision within his division. 4.8.2 Interview 2: Danie Scholtz – Sanlam Employee Benefits Danny du Plessis is the Regional Manager (Western Cape) for Sanlam Employee Benefits Distribution. He is responsible for all strategic marketing decisions and frameworks within Sanlam Employee Benefits and reports directly to the Sanlam Group marketing executives and directors. 38 4.8.3 Interview 3: Adele Joubert - Lion of Africa Insurance Company Limited Adele Joubert is the Manager: Marketing, Brand & Communications at Lion of Africa Insurance Company Limited. She is responsible for all marketing, branding and communications strategic decisions and report directly to the Chief Executive Officer and the Chairman of the Board of Directors. Lion of Africa Insurance is one of South Africa’s leading short-term insurers, operating in the commercial and personal lines market segments with a range of specialist insurance products. Lion of Africa Insurance covers many of the Top 100 JSE listed companies and are also the largest insurer to the local authorities sector. It was founded in 1999 and in 2010 became the first local short-term insurer to achieve Level 1 Broad-Based Black Economic Empowerment (B-BBEE). 4.9 CONCLUSION In this chapter the research described the research methodology of the study. Furthermore the research question, research objective and research design was set out. Moreover the interviewing method was described and the different interviewees were introduced to the reader. In the following chapter, the researcher will analyse the conducted interviews (see Appendix A) and elaborate on the findings from the primary data collection. 39 CHAPTER 5 RESEARCH RESULTS 5.1 INTRODUCTION All interviews were recorded with a Dictaphone and afterward transcribed by the researcher. Once the transcripts were done, the researcher used content analysis to identify codes, derive categories and finally arrive at conclusions and recommendations. 5.2 ANALYSIS OF INTERVIEWS As discussed in 4.6., the interviewees were chosen based on their experience in the insurance industry of South Africa. Interviewee 1 has a Sales background within the South Africa Employee Benefits space, Interviewee 2 is the Marketing Manager within the Employee Benefits unit of a large South African insurer and Interviewee 3 is the Marketing Manager for a smaller South African insurer. During the analysis of the interviews as shown in Appendix A, six themes close to the themes set out in Appendix B emerged of which the findings will be shown in the following subchapters. 5.2.1 Theme 1: Awareness of integrated marketing communication The first general theme that emerged from the analysis of the interview transcripts is ‘Awareness of Integrated Marketing Communication’ as shown in Appendix A. There is awareness of the concept of Integrated Marketing Communication amongst all respondents. However some seem to have more detailed knowledge of the framework and its implementation than others. When asked if he was aware of the concept of Integrated Marketing Communications, du Plessis (2012) could not give a precise answer and rather talked around the departmentalisation of Sanlam and its hierarchy as shown in Appendix A. Scholtz (2012) as shown in the transcription of his interview in Appendix A, was definitely able to elaborate on the concept of Integrated Marketing Communication and set out its purpose. Joubert (2012) went into even more detail than Scholtz (2012) when asked to elaborate and details the typical components of IMC and highlighted, that eMarketing as part of IMC is still small in South Africa due to low internet penetration in the country. It can generally be said, that there is awareness of the concept of Integrated Marketing Communication within large and small insurance companies. This applies to the respondent operating in marketing departments but not in distribution or sales. 40 Kotler and Keller (2009:531) define integrated marketing communication as a concept of marketing communications planning that recognizes the added value of a comprehensive plan. Such a plan evaluates the strategic roles of a variety of communications disciplines – for example, general advertising, direct response, sales promotion, and public relations – and combines these disciplines to provide clarity, consistency, and maximum impact through the seamless integration of messages. This definition seemed generally coherent with the responses of the interviews while one lacked some specific knowledge. 5.2.2 Theme 2: Implementation of integrated marketing communication The second theme identified within the transcriptions of the interviews shown in Appendix A is whether or not the interviewees believe that an implementation of integrated marketing communication within the South African insurance industry is indeed a realistic prospect. There were split opinions, while the interviewees from large insurers were sceptical towards a full integration of all communications channels, the interviewee from a young and growing insurer was much more open and towards the idea. When asked whether or not he thinks it is realistic to implement integrated marketing communication within Sanlam, Scholtz (2012) that he doesn’t believe it is not realistic within the South African financial services industry, especially within Sanlam. This is especially due to the fact that it is a highly intermediated industry. Sanlam has a sales force that deals with the clients (mostly B2B) and marketing focuses on brand building and communication. Within Sanlam and many other large insurers in the country, these two are totally separated from each other and are even different legal entities within the Life Assurance companies. Scholtz (2012) further stated (see Appendix A) that within Sanlam there is no real cohesion between Sanlam’s distribution and marketing departments. It was also stated by du Plessis (2012) that each small business units within the Sanlam Employee Benefits department has separate communications departments that operate fairly independent from each other and the overall marketing department. On the other hand it was stated by Joubert (2012) that she believes, that it is absolutely possible and essential for insurance companies to integrate their communications efforts. She however, speaks from the perspective of a smaller insurance company. Joubert (2012) further states, that an implementation requires a certain amount of willingness and change management within a company. According to Percy (2008:225) the most important consideration when implementing integrated marketing communication in a company is the actual communication objective. Hence it is not possible to implement without a strong underlying marketing strategy and sufficient research to 41 actually know whom to target. Belch and Belch (2004:25) make a similar statement saying that a company wanting to implement IMC needs to review its marketing plan and before developing a promotional plan, marketers must understand where the company (or the brand) has been, its current position in the market, where it intends to go, and how it plans to get there. There were mixed responses amongst interviewees about whether or not Integrated Marketing Communication is a framework that can be implemented within their companies. It seems that especially large corporations are too inflexible to make changes quickly. This however does not apply to smaller insurance companies questioned in this study. It seems that the willingness and ability to change is there and that Integrated Marketing Communication is something that is appreciated. 5.2.3 Theme 3: Progress of implementation of integrated marketing communication The third theme identified within the interviews identifies the progress that is made to date regarding the implementation of integrated marketing communication. While some interviewees stated that they don’t believe it is actually possible to fully integrate marketing communications, all of them said that marketing and sales are moving towards each other even if ever so slowly. When asked what Sanlam is doing to integrate marketing communications, du Plessis (2012) mentioned the different function that the marketing department fulfils on his behalf. He however mentioned that the different departments involved in communications have a panel that consists of the heads of the department. In these panel sessions, they exchange ideas and strategies in order to grow closer together. From his statement one can however not recognise any knowledge of specific activities leading up to integrated marketing communication. Scholtz (2012) made a similar statement to du Plessis (2012). He acknowledged that during meetings and panel discussions, sales and marketing are comparing notes and strategies. He also stated that he feels that the different elements of IMC are moving closer together and are becoming more cognisant of each other. However one cannot speak of any identifiable integration efforts. The biggest problem is that sales will do anything to achieve or exceed the set targets and then forgets about agreed upon joined strategies. It is often also difficult to communicate with sales representatives in the lower ranks. According to Scholtz (2012) the biggest communications opportunities lie within conferences and trade shows. Contrary to du Plessis (2012) and Scholtz (2012) much more activity was described during the interview with Joubert (2012). She elaborated, that they make every effort to communicate with their clients as often as possible. They also make use of a customer relationship management 42 (CRM) system through which they are able to track all their communications and contact with their clients and sales people receive automated reminder when it is time to visit or contact a client. She furthermore confirmed that integrated marketing communication is a part of their marketing strategy and has been almost from the start. She highlighted that there is still a lot of work to be done even though they are working on a full implementation for quite some time already. Joubert (2012) also mentioned that she believes all element of the promotions component should be taken into account when implementing IMC. If that does not happen, all the past effort could be impacted on. Lion of Africa also makes an effort to measure the effectiveness of all their marketing activities, not only promotions activities. Lion of Africa decided on a clear message that is used throughout the entire company’s communication efforts. These include the Lion of Africa Ladies Yacht Race in Cape Town, the Lion of Africa Mountain Bike challenge and the Lion of Africa Cape Town Open as part of the sunshine tour. Contrary to the opinion of Joubert (2012), Percy (2008) as well as (Belch & Belch, 2004) believe that is not necessary to make use of all promotions components with IMC. A company should rather choose the right tools for their product suite and focus on these. Once the right components were identified a company should structure its IMC mix around them. While not all interviewees think it is realistic to fully integrate all marketing communications within their companies, all of them indicated that attempts are being made to at least align the strategies of the different departments, especially sales and marketing. This includes panel discussion between the different heads of department as well as ad-hoc collaboration between the two. However it was found that smaller companies seem to make more progress and effort in integrating their marketing communications. 5.2.4 Theme 4: Divide between sales and marketing departments From the interviews it became clear that within large organisation, there is still a distinct divide between Sales and Marketing. It also became apparent, that Sales people sometimes see the activities they perform as marketing rather than it being a part of a part of marketing or the marketing mix. When asked about the relationship between the distribution and marketing departments in Sanlam, du Plessis (2012) made some comments that made it apparent to the researcher that the distribution department feels that while it works hard and brings in the money, the marketing team is at leisure at head office and only has to think of the next newspaper ad. While this was not said directly, one could recognise a certain amount of under appreciation of the work done be the two different departments. 43 Scholtz (2012) stated that while Sales and Marketing are becoming “more cognisant of each other”, Sanlam still “has its Marketing strategy and its Sales strategy” which are different documents, meant for different departments. During the interview, the researcher realised that there much more appreciation from marketing towards sales than there is from sales towards marketing. Marketing appreciates the inputs regarding market trends and uses it to adjust its strategy while sales seems to be more interested in meeting its targets than to follow the company’s long-term strategy. While two of the interviewees indicated that they either are using the theoretical framework of IMC to integrate the marketing communications of their respective companies or at least attempt to increase internal collaboration to increase integration, it became evident that Sales and Marketing are still completely separate units in large insurance companies. Scholtz (2012) and du Plessis (2012) indicated that the willingness is there (while more from the marketing department) but that full integration is not a realistic goal to strive towards. 5.2.5 Theme 5: Challenges of integrated marketing communication – B2B vs. B2C In the interviews it emerged that it is difficult for insurers to find the balance between B2C and B2B marketing. According to du Plessis (2012) when marketing to an intermediary, or rather B2B client, Sanlam uses its credentials as a big insurer with a huge Capital Adequacy Ratio (CAR) in order to attract clients. When approaching an employer or individual however, Sanlam makes use of its brand recognition and the trust that comes with it in order to win the client. He furthermore mentioned that the approach of a direct client would be based on giving advice and using Sanlam’s expertise rather than being the mere product provider when approaching a client. In the case of B2B marketing the actual product offered and its pricing have a far higher impact than communications efforts. However du Plessis (2012) also states that the strong brand of Sanlam often opens doors to him or his sales team. Scholtz (2012) states in his interview, that the main difference between B2B and B2C marketing is the understanding of the audience. He furthermore said that the decision making processes are significantly different. While marketing to individual or direct customers is fairly informal and in advertisements often based on emotions, the business approach is still very formal. The intermediary market, while getting older in age, is still greatly based on long-term relationships. Another big difference is the time it takes the different buyers to make a decision. While a trustee board might take up to 18 months to conclude a deal, a direct customers often makes ad-hoc decisions. This has to be taken into account and is shown in Chapter 2. 44 Joubert (2012) mentioned that for Lion of Africa it is the biggest challenge to have regular communication with their clients, be it personal or non-personal. All interviewees confirmed in their interviews that they adapted their marketing strategies to such an extent that B2B and B2C customers are targeted in the right way but also confirmed that it is often difficult to distinct between the two and balance the communications efforts so that the two can be separately targeted. 5.2.6 Theme 6: eMarketing and integrated marketing communication When discussing the current and possible future activities with regards to eMarketing, there was a strong consensus between the interviewees. While some companies currently make more use of eMarketing than others, the interviews revealed that companies are still on the back foot. This is due to scepticism and a lack of knowledge towards eMarketing. However most of them stated also that the clientele they usually deal with is not active enough yet in order to justify a wide spread eMarketing or Social Media strategy. It became clear in the interview with du Plessis (2012) that the eMarketing activities of Sanlam from his point of view do not go further than having a website and regular email communication with clients. He however mentioned that there is slightly more activity on the individual life side of the business. Scholtz (2012) however stated that Sanlam has realised that there is a new world out there and that action has to be taken. Consequently, Sanlam established a separate business unit that is now looking into developing an ecommerce strategy for Sanlam Group. He furthermore stated that there have been activities on social networking sites such as Facebook and Twitter but that these have been unaligned and have all been stopped until such time that the new strategy has been completed. “Until recently we had a lot of unaligned Facebook campaigns and Twitter campaigns and digital strategies from different business units … they have all been stopped” When asked whether he believes that eMarketing can work in the B2B environment Scholtz (2012) stated that there are often trustees that have been appointed by the employees who are not well educated and even illiterate. That makes it quite difficult to use eMarketing. While “most of them have a cell phone but not necessarily a smart phone with internet capability.” Furthermore “a lot of our B2B clients prefer to have the personal relationship.” 45 Joubert (2012) also stated that there is currently not much eMarketing or social media activity besides websites, email communication and a Facebook page. According to PriceWaterhouseCoopers (2012:17) customers will become more internet savvy and shop around more. This will further enhance the importance of price in insurance shopping. There will be more ‘self service’ for commodity products using mobiles and tablets and face-to-face interaction will be confined to investment advice. Major change is not expected by 2015, but there will be a seismic shift by 2020. The limited broadband footprint represents a key challenge. All interviewees acknowledged the future importance of eMarketing and the use of Social Media. At present however, it seems to be difficult to successfully implement eMarketing strategies due to the economic situation of many of their customers, a low adoption rate of fixed line and mobile internet and a general lack of education. 5.3 CONCLUSION This chapter provided a detailed analysis of the primary research data that was collected during several unstructured, in-depth interviews. The analysis was based on transcription of the interviews shown in Appendix A and the interview schedule shown in Appendix B. Through coding and categorising of the data, a few clear themes emerged. However there were also themes that weren’t anticipated and provided further insight into the experts’ opinions. It became clear, that the concept of integrated marketing communication is appreciated by most of the interviewees. It also emerged that there is a distinction has to be made between large and smaller insurance companies. While the larger insurers seem to appreciate the concept, they don’t think that an implementation would be a realistic goal to aim for. Furthermore, it became apparent that due to the traditional role of sales personnel in the insurance industry, there is still a big divide between sales and marketing. Sales people often speak of marketing as if it is a function they fulfil whereas they are merely a part of the bigger marketing picture. With regards to the balancing of the marketing and communications effort between B2B and B2C customers, it became clear that some work needs to be done and that this is something all insurers seem to neglect. While eMarketing was acknowledged by all as a potential, new method of communication to and attracting customers, all of the interviewees agreed that it is not a priority within the South African insurance space due to low internet penetration in the country. This chapter analysed the interviews that were used to collect the primary data that is needed to answer the research questions and objectives as set out in Chapter 1. The final chapter of this 46 study will provide a summary of key findings and provide recommendation for future research regarding the concept of integrated marketing communication in the South African insurance landscape. 47 CHAPTER 6 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS FOR FUTURE RESEARCH 6.1 INTRODUCTION The primary objective of the study was to analyse and determine whether it is possible and valuable for South African insurance companies to implement an Integrated Marketing Communications strategy as set out in Chapter 1.4. Hence the research used the relevant theoretical frameworks and the findings of the research to answer the research questions. The study is based on the study of marketing literature and literature specifically relating to Integrated Marketing Communication. During the exploratory phase of the research study the research conducted in-depth, unstructured interviews with individuals from large and small insurers that were selected due to their long experience in the field of insurance marketing. The collected data was then analysed and conclusion have been drawn with regards to the primary and secondary research questions. 6.2 SUMMARY Chapter 1 gave an overall introduction of Lion of Africa Life Assurance, the South African insurance industry and a briefly introduced the research problem, design and methodology of the study. Primary research question Is it possible to implement and if so is there value in implementing an Integrated Marketing Communications strategy within a South African insurance company? , that is mainly operating in an intermediated market (B2B market), without slowing down the growth of the organisation and staying within the legislative and regulatory framework? Secondary research questions How can a South African insurance company balance its marketing effort between individual (B2C) and business (B2B) customers? Are South African insurers making progress towards the implementation of Integrated Marketing Communication? Can and should a South African insurance company make use of eMarketing? 48 In Chapter 2 the researcher conducted an in-depth literature review introducing basic marketing principles and going into further detail with regards to integrated marketing communication as part of the promotions component of the marketing mix. In Chapter 3 the researcher applied the marketing mix to the South African insurance industry and showed relevant area where such can be implemented and made use of. It found that, while not all components of the seven P’s of the service marketing mix are equally applicable to the insurance industry, they may not be ignored and wrong implementation may cause a business to stagnate or even fail. The purpose of Chapter 4 was, to discuss the research design and methodology of the study in detail In chapter 5 the data gathered during the interviews was analysed and results shown. The interviewees were chosen based on the researcher’s judgement and in-depth, unstructured interviews were conducted with all of them. The final chapter presents the findings of the study and their implication and furthermore gives recommendations for future research. 6.3 KEY RESEARCH FINDINGS 6.3.1 Introduction This chapter shall provide an overview of the finding of this study. The findings are based on the literature review and the qualitative data analysed in chapter 5. 6.3.2 Possibility of implementing Integrated Marketing Communication The first part of the research question asked, whether or not it is possible or realistic to implement Integrated Marketing Communication within a South African insurance company as introduced by Belch & Belch (2004:9). While literature suggested that in implementation should be possible in any type of organisation since the basic principles of marketing apply to all, the interviews found different opinions. Interviewees from large insurance companies were very clear in saying that a full integration within their organisation is not possible due to size and inflexibility. Interviewees from smaller insurance companies however suggested that in their mind it is definitely possible and necessary to be implemented. The following statements were made: “No, not in the Financial Services industry in South Africa.” (Scholtz, 2012) “Yes I do. It is hard work but I believe it’s possible.” (Joubert, 2012) 49 6.3.3 Value of implementing Integrated Marketing Communication While some interviewee stated that an implementation of the framework is unrealistic within their organisations, neither of them, especially Scholtz (2012), dismissed the value that would come of such implementation. The interviewees stated that even in large companies, marketing and sales are moving ever closer together and give each other input in their respective strategies. Literature and interviewees agreed, that and implementation would or does have great value to an organisation, since it strengthens relationships with their clients and send a clearer, more unanimous message to their clients. This in turn leaves customers less confused. “…you make absolutely sure that all messages you send out are aligned for one purpose, one objective and one underlying strategy.” (Scholtz, 2012) Furthermore the long-term relationships built through the sales promotion and personal selling elements are further strengthened because the underlying message of the sales is often known before there is even a personal contact between insurer and B2C customer or B2B client. 6.3.4 Progress of Integrated Marketing Communication implementation As stated above, some insurers might only attempt to increase and integrate communication between the internal departments at this stage. “…in the last couple of years there was more moving towards each other and comparing notes and strategies…” (Scholtz, 2012) However the interviewee from the smaller insurer, state that in her opinion her company is at a six on a scale where 1 means no integration at all has happened and 10 means fully integrated. This is encouraging for this study since the company introduced in Chapter 1 is a small life insurance company and once can derive from the statement that an implementation well is possible in such company. 6.3.5 Integrated Marketing Communication – B2C vs. B2B The study found, that whilst a quite informal approach is used in the B2C environment within the insurance industry, a still very formal approach is being used. Furthermore it must be stated, that B2C customers still see insurance as a grudge purchase and try to have as little as contact as possible with the insurer. However the relationship has to be strong and established enough to satisfy the customer’s needs at claims stage. Furthermore, B2C as well as B2B customers are highly price sensitive to insurance products. The literature review revealed that insurers don’t have much of a choice when it comes to the fair treatment of customers going forward. The Treating Customers Fairly framework introduced by the 50 Financial Services Board as a new regulation also ensures that customers are not being extorted by inflated prices charged by intermediaries or insurers. This has been further discussed in Chapter 1. 6.3.6 eMarketing in the South African insurance industry The study found that eMarketing, while recognised by all interviewees as an important tool for future marketing efforts is not regularly used and/or implemented to its full capacity within South African insurers. The literature review confirmed that the financial services industry is one of the industries still lagging behind when it comes to making use of Social Media marketing and eMarketing. The research discovered however, that eMarketing plays an ever increasing role, especially in the direct marketing of insurance policies. Companies such as Instant Life make use of a purely online based distribution model and made great advances with that. Discovery was the pioneer within the South African insurance industry and perfected its business model to such an extent that today it is using both direct marketing and intermediaries to sell its products. However, according to PriceWaterhouseCoopers (2012:17) major change is not expected by 2015, but there will be a seismic shift by 2020. 6.4 IMPLICATIONS FOR LION OF AFRICA LIFE ASSURANCE Lion of Africa Life Assurance is currently in the process of developing its marketing strategy for the next 3 to 5 years. During the process of strategizing, the management of Lion of Africa must be aware of the concept of Integrated Marketing Communication and all its details. Furthermore Relationship Management should play a key role and should make up a joined part of the strategy with Integrated Marketing Communication. Due to the low adaption rate of Integrated Marketing Communication in the South African insurance industry, management might not be aware of the advantage and disadvantages that Integrated Marketing Communication brings with it and might miss out on great business success in the future. In order to successfully implement Integrated Marketing Communication into the overall marketing strategy it is necessary to implement change management processes to ensure acceptance of the framework throughout the organisation and amongst all staff members. Each person of the organisation plays a vital role in a successful implementation and must stand behind management when doing so. 51 6.5 RECOMMENDATIONS The researcher believes that much more research must be done with regards to Integrated Marketing Communication within the financial services industry and especially the insurance industry. Many insurers still use old strategies that have been developed 10 to 15 years ago and insurers that are today amongst the biggest in the country might miss the boat and fall of the cliff of customer dissatisfaction. 6.6 CONCLUSIONS It can be concluded, that an implementation of a successful Integrated Marketing Communication strategy is vital to the sustainability of the insurance industry. The research questions can be answered with a positive response. It is however highly dependent on the attitude and willingness of key players within large corporations to make such implementation possible and successful. As it stand the implementation of Integrated Marketing Communication would disrupt a lot of people’s day-to-day work life and require a great deal of change management within large corporations. Smaller insurers that are still growing, learning and flexible should make use of their adolescence and implement the concept from the beginning. However, any company deciding to implement Integrated Marketing Communication must be aware that it is not a long standing theoretical framework but rather a framework that impacts on other elements of marketing outside of the promotions element. It has a big influence on relationship marketing, and the two should go hand in hand. When developing a long term marketing strategy the concept must be kept in mind at all times in order to “weave” it into the strategy. While there are other influencing factors, promotion remains one of the key element necessary to guarantee success within any company that sell service rather than physical products. 52 REFERENCES BMO. 2012. Glossary. Insurance Risk. 15 December. [Online] Available: http://www.bmo.com/ar2010/glossary.html#I Accessed: 02 December 2012 Business Fundas. 2012. 7Ps of Service Marketing. 15 December. [Online] Available: http://business-fundas.com/wp-content/uploads/2010/04/7Ps-of-Services-Marketing.jpg Accessed: 02 December 2012 Belch, G. E. & Belch, M. A. 2004. Advertising and Promotion: An Integrated Marketing Communications Perspective (6th ed.). Boston: McGraw-Hill. Blythe, J. 2009. Key Concepts in Marketing. London: SAGE Publications Ltd. Datamonitor. 2009. Life Insurance in South Africa. South African Insurance Association. Datamonitor. Datamonitor. 2013. Company Profile: Sanlam Life Insurance Limited. Datamonitor. du Plessis, D. 2012. Regional Manager (Cape), Sanlam Employee Benefits. Bellville: Personal Interview, 14 December. Financial Services Board. 2011. FSB TCF Roadmap - 2011 Final. [Online] Available: ftp://ftp.fsb.co.za/public/TCF/TCFRoadmapFinal231Mar2011.pdf Accessed: 25 January 2013 Joubert, A. 2012. Manager: Marketing, Brand & Communications. Lion of Africa Insurance Company Ltd. Cape Town: Personal Interview. 10 December Kotler, P. & Armstrong, G. 2006. Principles of Marketing. New Jersey: Pearson Prentice Hall. Kotler, P. & Keller, K. 2009. Marketing Management (13th ed.). New Jersey: Pearson Prentice Hall. KPMG. 2012. KPMG Insurance Survey 2012. [Online] Available: http://www.kpmg.com/ZA/en/IssuesAndInsights/ArticlesPublications/FinancialServices/Documents/InsuranceSurvey2012.pdf Accessed: 19 December 2012 Percy, L. 2008. Strategic Integrated Marketing Communications (1st ed.). Oxford: ButterworthHeinemann. PriceWaterhouseCoopers. (2012). PWC - Publications. Maximising value from today's opportunities. [Online] Available: http://www.pwc.co.za/en_ZA/za/assets/pdf/south-africaninsurance-2012.pdf Accessed: 05 February 2013 Robson, C. 2002. Real World Research (2nd ed.). Oxford: Blackwell. Saunders, M. Lewis, P. & Thornhill, A. 2009. Research methods for business students (5th ed.). Harlow, UK: Pearson Education Limited. 53 Scholtz, D. 2012. Marketing Manager. Sanlam Employee Benefits. Bellville: Personal Interview. 18 December Schultz, D. & Schultz, H. 2004. IMC: The Next Generation. McGraw-Hill. The Ombudsman for Long-Term Insurance. 2011. Insurable interest in the context of long-term insurance. [Online] Available: http://www.ombud.co.za/res/pdf/INSURABLE%20INTEREST%20IN%20THE%20CONTEXT%20O F%20LONG.pdf Accessed: 10 January 2013 MarketingProfs. 2012. B2B Email Marketing - Best-Practices and Trends. [Online] Available: http://www.marketingprofs.com/charts/2012/8524/b2b-email-marketing-best-practices-and-trends Accessed: 15 January 2013 54 APPENDIX A TRANSCRIPTIONS OF INTERVIEWS Awareness of IMC Is an implementation realistic? What is being done to work toward implementation? Divide between Sales and Marketing IMC and B2C vs. B2B eMarketing – Current and future a) Transcription: Interview with Danny du Plessis (Interviewee 1) Title: Regional Manager (Cape) – Sanlam Employee Benefits Date: 14/12/2012 Time: 9h00 – 9h25 Address: 55 Willie van Schoor Avenue Tygerforum B Building Ground Floor Tyger Valley 7530 South Africa Interviewer: Florian Heinrich (FH) Interviewee: Danny du Plessis (DdP) FH Mr du Plessis, I thank you very much for taking the time to talk to me today. DdP I read your email describing the themes of this conversation. As mentioned before, I am more in Sales than in Marketing but I will assist you to the best of my ability. FH Is Marketing done per Division within Sanlam? Hence; Individual Life, 55 Employee Benefits, etc. all have their own Marketing Department. DdP Yes, they all have separate Departments. FH So there is no overall Marketing Department? DdP There is a corporate marketing department. They do the actual brand management of the Sanlam brand and manage overall marketing activities. FH With regards to B2B business, would you go to individual companies or would you mainly work through intermediaries? DdP We do approach businesses (one sales person) but mainly we approach intermediaries. These can be big ones such as Alexander Forbes as well as smaller Employee Benefits brokers. Should we get an enquiry on our website for example, we will approach this business directly instead of referring to an intermediary as we might not get the business through the intermediary who supports several insurers. FH When approaching clients, do you have standardised message that the Sales consultants and Intermediaries were trained to use or do you give them free reign over their sales and marketing approach. DdP We do guide and lead the intermediaries and our own people in order to best sell our products. We would give them technical backup and if requested make our sales pitch / presentations available to them. However, big intermediaries, such as Alexander Forbes would primarily try to sell themselves before selling a Sanlam product. When going in directly we would obviously try and sell Sanlam as a product provider. However, our products are pretty standardised and little deviation is possible for the intermediaries. Only if a different need arises from the client’s side, will we analyse this need and adjust our product where possible. If the client is unhappy with our administration for example, we will then go in to rectify the problem and ensure customer satisfaction. We do all this for our umbrella funds, pure risk business as well as investment business. FH Do you offer pure pension fund administration (with an attached risk) to your clients or do you focus on the risk? DdP Nowadays, Sanlam hardly sells pure administration business anymore. We would only do this for large corporates that manage their own risk / assets and then only do the administration for them. Smaller companies would fall under 56 the umbrella fund which is better for us due to the minimised administration effort and for the clients as they benefit from the combined strength within the fund. FH How would you describe the difference in approaching a B2B partner such as an intermediary and approaching an employer as a direct customer? DdP When we approach a client we will use our expertise with regards to legislation, the benefits of Sanlam and working with us directly. Whereas, if we approach a broker, the broker takes the regulatory risk because he is giving the financial advice. When we pitch directly, which occurs significantly less than a broker pitching to the client, we will sell the Sanlam expertise and give the advice. When the broker pitches we merely supply the product and the broker is responsible for giving the best advice to the client. FH When you are selling to an intermediary, do you dictate to them how to sell your product? I’m asking because he might be selling himself first but he is also representing the Sanlam brand and hence creates a reputational risk for Sanlam. DdP Well there is a presale which happens between Sanlam and the intermediary. FH I’m certain that often intermediaries also approach Sanlam rather than Sanlam approaching them as the intermediaries try to use Sanlam’s size to their advantage and put themselves into a good selling space with the client. DdP Of course this happens often and due to regulation the broker has to be comfortable where he puts his clients, as the likelihood of Sanlam going bankrupt is much more unlikely than a small insurer going bankrupt. Often intermediaries are hesitant to place business with small administrators due to the earlier mentioned risk. We use our Capital Adequacy Ratio (CAR) to our advantage and give the intermediaries the required peace of mind. Sanlam’s CAR is way higher than required by the Financial Service Board (FSB), so if something does go wrong we have the resources to back up our claims several times. FH You mentioned that Sanlam Employee Benefits (SEB) has its own marketing department. What do they do for you? DdP They would supply the generic branding to us. They would also do generic advertising and public relations on our behalf. If we have a golf day or sponsor 57 a function they will supply us with the branding materials such as flyers, banners, etc. to make this happen. The also manage the invites if necessary. Their biggest event of the year however is the Sanlam Benchmark Symposium. It’s a national event and there are 1000 attendees. They will manage that whole event. The department would also see that we as the distribution department will send a message to a client that is in line with the generic advertising and PR. However this is more often than not unrealistic. We also have our own Marketing coordinator who oversees that we act within the Sanlam brand manual and that we adhere to the guidelines given by SEB and Sanlam marketing. The Sanlam Umbrella fund also has their own communications function, through which all communication the specific employers is flowing. So the Umbrella fund, the group risk department and the administration departments all have their own little communications departments to ensure that all communication that is leaving Sanlam is compliant with the internal rules. However all these departments make use of the SEB marketing department based in Bellville. So you could basically say that the communication functions within the departments work in conjunction with the SEB marketing department and execute their rules. FH Does your marketing department do eMarketing campaigns on your behalf? DdP Not really. That would usually happen more on the Individual Life side. We have a website where people can enquire about our products and we have a thing called cross collaboration. That means that all Sanlam’s business units collaborate on one client if necessary. For example if we have a client who also requires payroll services or investment advice we will give the needed advice as far as possible and then inform the specific departments to go and see the client. Sanlam would also identify individual clients that they know have businesses and give us this lead to see if we can get them under our umbrella funds. From a communications perspective we do quite a bit. Firstly we are “forced” by legislation to update all our clients on a regular basis with their benefit statements. With that we often send new product information or information about changes. We also send out quarterly newsletters to all the employers who pass it on to the employees. FH What does Sanlam to with regards to Integrated Marketing Communications? DdP Sanlam has a panel which consists of the heads of each department and the marketing team. The panel ensures that all different departments send the 58 same message to our clients, i.e. if someone from Sanlam Investment Management goes to Alexander Forbes and is asked about SEB, they will give the same answer and message that me as the SEB Distribution Manager would give (at least on a basic level). FH To come back to my previous question. To what extend does Sanlam try to extend their marketing / branding reach to the end consumer or at least to the employer? DdP It depends on the intermediary. With an Alexander Forbes it is difficult because they have their own power in the market place and while they still need a Sanlam to provide a product they will always push their brand. With a smaller intermediary we offer them to go with them to the client and present and mostly it is accepted. In my opinion this is because we can give more qualified answers in some cases and make the client look good. FH Alright. This is all from my side. Thank you very much for your time today. DdP It’s a pleasure and good luck with your thesis. 59 b) Interview with Danie Scholtz – Interviewee 2 Title: Marketing Manager – Sanlam Employee Benefits Date: 18/12/2012 Time: 15h30 – 15h53 Address: Sanlam Head Office 2 Strand Road Bellville 7530 South Africa Interviewer: Florian Heinrich (FH) Interviewee: Danie Scholtz (DS) FH Good Afternoon Mr Scholtz. Thank you very much for taking the time today to talk to me about my thesis and Integrated Marketing Communications. DS It’s a pleasure. FH As described in my email, the aim of my thesis is, to find out whether there is value in Integrated Marketing Communication in the Life Insurance sector of South Africa with special focus on Business-to-Business (B2B) marketing. The interview will be an unstructured interview. That means that there are no set questions but rather themes of discussion. The overall themes would be Integrated Marketing Communication (IMC) IMC in the SA Life Insurance industry Progress of IMC implementation within Sanlam Difference between B2B marketing and B2C (Business-to-Consumer) marketing within IMC eMarketing / Social Media marketing and its current and future role within IMC 60 As mentioned above these are just general themes and a deviation is possible and even welcome if necessary. FH I assume that you are aware of the concept if IMC? DS I am aware and familiar with the concept of IMC. It is where you make absolutely sure that all messages you send out are aligned for one purpose, one objective and one underlying strategy. FH Do you think the implantation of IMC is a realistic goal? DS No, not in the Financial Services industry in South Africa. If you have an intermediated industry, then you have a sales force, dealing with your client and they mostly do their own thing. They don’t report into marketing. You have marketing doing branding and communication, as best as they can in terms of how they understand the target audience. However, they don’t report into distribution/ sales either. So both of them within Sanlam and certainly in most other life insurance companies in South Africa, report into different parts of the business but in a way they are targeting the same end client; whether it is through their marketing strategy, advertising, communications, PR, whatever and whether its sales which is target driven. They target the same but there is no real sign of cohesion between the two. There is no unilateral strategy saying that’s what we going to do and that’s how we are going to do it and all of us are going to adhere to this message and that will be signed off by both side. No. This doesn’t happen. FH In your opinion, is there a way to implement IMC or does Sanlam say: ‘No, we are happy how it works at the moment and we going to stick to our recipe.’? DS Well, obviously it has worked for Sanlam for a very long time and it is still working for them. It would be very difficult for someone to come and say, we are going to underdo with what we have done in the past 40 – 50 years, we will now follow a wholly integrated model. There would have to be a lot of change within the organisation for that to happen and I think it might just be a bridge too far in terms of coordinating everything. Distribution is a huge part of the organisation. While marketing and communication is also big but much smaller than the distribution part (this brings the business). But for the two to see eye to eye and sort of have a common view of the customer and the end client would be a very big ask. Whilst I’m saying this, in the last couple of years there was more moving towards each other and comparing notes and strategies and evolving one another in campaigns than any time previously. For example, if we take a brand architecture. We are currently working on such architecture. The distribution guys have been involved working on that since day one. 61 There are a couple of bigger strategies were they are being included. This is mainly because of their understanding of the end client and ultimately the market. This is absolutely important. They have been brought into the fold and they are given the opportunity to put forward their requirements and their view. As far as possible this is incorporated into the overall strategy. However, we are still talking of two different organisations within Sanlam, with two different executive committees and two different reporting lines. However, the two are definitely more cognisant of each other. Thanks to that we realised, that wait a minute, the end consumer is sitting over there and is getting bombarded with all kinds of information from the same organisation we better start talking to one another and get these things aligned otherwise the consumer gets confused. Otherwise, the consumer gets confused and rather goes and buys is Retirement Annuity (RA) from Allan Gray which is a small organisation and is more customer centric. To conclude; Yes I think it is still the way it was in the past but there is a mutual understanding that somehow we have to find a way of working together. FH Do you think it would be easier to implement IMC per business unit first, i.e. Employee Benefits (EB), Individual Life, etc.? DS Well on the EB side it’s a bit more complex. We have our own distribution force. They are distributed all over the country. Obviously we also use the Individual Life distribution force to an extent but we have our own force that targets the EB brokers and EB business out there. I have to give both of the recognition because the EB and Individual Life distribution force hold regular meetings in which they coordinate their effort to ensure that they use the synergies between the two units as much as possible. Just to emphasise again, there is a group marketing department, there are marketing departments per business units and there are the various distribution forces. Furthermore, I must say that, our current strategy is the best we ever had and it has never been better in the past. There is more a feeling of a Sanlam communication theme or message and everybody ‘plugs’ into that. FH So to recap; There are attempts to bring the different units together but in your opinion it will be almost impossible to ever fully integrate all channels within Sanlam due to its size. DS Exactly. When distribution sets out their targets for the year, they will do anything to achieve this target and don’t worry much about the underlying communications strategy. As mentioned before, they might sit with marketing so the two can get a better idea of what they will be doing in the year and they might tweak some ideas in order to move closer to one another but you won’t find one single document within Sanlam describing the way forward between the two units. Sanlam has its Marketing strategy and its Sales strategy but 62 they are separate documents and different players within the organisations plug into the relevant plans. FH I’m sure you are aware that eMarketing and Social Media marketing is a new feature within the promotions part of the Marketing Mix. With regards to that, where is Sanlam at the moment and how do you think it will develop in the future? DS Well, firstly we realised as an organisation that there is a new world out there in terms of ecommerce and the digital space. There is a separate business within Sanlam that is now looking into developing an ecommerce strategy for Sanlam Group. Until recently we had a lot of unaligned Facebook campaigns and Twitter campaigns and digital strategies from different business units. They have all been stopped now and there will be one overall ecommerce strategy for the Sanlam Group in the future. Obviously the people that come into that team have to first understand the size of the Sanlam Group, not only in South Africa but also internationally. They also have to get a feeling for what is out there. Once the overarching strategy is developed, they will look into the separate business units in order to adjust the strategy to suit the specific field. So, currently we are putting together an ecommerce strategy for the entire Sanlam group and hopefully that will be completed very soon, in the beginning of the new year, so we can get cracking. We will hopefully be able to use that as one of our main marketing communications channels. FH Do you think that eMarketing and ecommerce can work on a B2B level as well? DS It can but currently in South Africa it is a bit difficult. I have gone around the block for a couple of years, understanding who our target audience is. Just consider that retirement funds consist of two types of trustees. You have trustees appointed by the employer and trustees appointed by the employees. Some of the employees appointed trustees come from trade unions. Some of these trustees are illiterate, they can’t read or write but they are there because they represent the members of the fund. One of our projects for the next year is to conduct a limited market study in order to better understand the decision maker for retirement funds. Everyone around the boardroom table, whether he is in EXCO (Executive Committee) or a worker, has their opinion. They have their own relationship and social backgrounds. However we don’t have one common view of the decision makers out there. To come back to your question; Yes most of them have a cell phone but not necessarily a smart phone with internet capability. Hence they might respond to an SMS but a most of them don’t have access to internet. Also a lot of our B2B clients prefer to have the personal relationship especially on the trade union side. Their way of doing business is to sit down in a meeting and discuss whatever is on the agenda and have face-to-face meetings. One 63 surely can try via the phone but in my opinion within the B2B Employee Benefits environment there is no real opportunity for ecommerce and eMarketing at the moment. The problem is also, that firstly only a small number of South Africans are actually member of a retirement fund and an even smaller number of that actually would be willing or able to communicate with an insurance company online. There are a few online forums where discussions happen but on these it’s mainly product suppliers, EB administrators and some intermediaries but very little Trustees. These are more platforms for the industry to discuss current issues amongst itself. You won’t find many people in the EB space to have discussion on public forums or social media. I think it also has to do with the fact that a lot of information is confidential such as medical and salary information. FH I would like to turn back to IMC overall. Do you think that the difficulty of integrating marketing communication in South Africa could have to do with the multiculturalism in the country? For example, someone from an African background probably has different needs and wants than a person from a European or Indian background. DS This is definitely the case. Our Developing Markets unit has a completely different approach to marketing than us due to the completely different socialisation of the decision makers in these units. The marketing message doesn’t only differ across borders but also across regions within South Africa. We for example have a different approach in Limpopo, Kwazulu-Natal and in the Western Cape. In many cases we have to ensure that the message we are trying to bring across is in a digestible format and that it has meaning for them. Sanlam has branches in Namibia, Botswana and Zambia and for each country one has to perfectly understand the target audience in order to successfully communicate the message. FH Are you personally also responsible for the other SADAC countries? DS In theory yes, however our Emerging Markets unit is more active at the moment. They are scouting the market and see where we can assist. It was however communicate internally that SEB Marketing will have to get more proactive in these markets within the next one or two years. The Employee Benefits market and the legislation around it is developing extremely fast within the SADAC countries and in due course, we will become more and more active there. Our current marketing and communications opportunities lie in the South African EB conferences. There we have attendees from all these different countries. Not only employers and brokers but also government officials. At these conferences we get asked a lot of questions about the functioning of the South African system and how we think it could be developed in their countries. 64 FH What in your mind are the biggest differences between B2B and B2C marketing within your field? DS For once it is the understanding of the audience. The decision making processes are significantly different from each other. Also the way of approaching clients is different. While with individuals there is a more informal approach recommended whilst with business or intermediaries the approach is very formal. Whilst the individual market used to be heavily based on relationships over generation (“My dad bought his policy from this broker and when I matriculate I will buy my policy from him.”) the B2B market is still greatly based on long-term relationships between insurer and intermediary or client. The distribution channels vary significantly as well. While Sanlam can approach “Joe Soap” and try and sell him a Life policy, we will most probably not be successful calling on the CEO of Sasol directly. It is most important to understand the conventions of the industry in order to adjust the communications strategy accordingly. Also the time to make decisions differs significantly. While a trustee board and employer may take up to 18 months to conclude a deal an individual sale is done within days. In the B2B market you can’t place an advertisement in a newspaper and hope business will come. You have to make use of mediums such as conferences and use the opportunity to build new relationships. FH Alright, that is it from my side. Thanks you very much for your time and your input. I really appreciate your support. DS It’s a pleasure and it was nice to meet you. 65 c) Interview with Adele Joubert – Interviewee 3 Title: Manager: Marketing, Brand & Communications at Lion of Africa Insurance Company Limited Date: 10/12/2012 Time: 16h30 – 17h00 Address: via Skype Interviewer: Florian Heinrich (FH) Interviewee: Adele Joubert (AJ) FH Hi Adele, Thanks a lot for your time to chat to me about my thesis. FH As mentioned in my email I’m writing my thesis about Integrated Marketing Communications. IMC consists of 5 to 6 different fields of communication depending who you ask. These would be: 1. Advertising 2. Sales promotion 3. PR 4. Personal selling 5. Direct Marketing and some count: 6. eMarketing FH My first question would be, if you as the Marketing Manager for Lion of Africa Insurance are actually aware of the concept of IMC. AJ I am aware of the concept and I think it is very important that it is implemented right and that all parts of the concept are covered. 66 FH Could you elaborate? AJ As you said earlier, IMC consists of 5 parts - Advertising, Sales promotion, Public Relations, Personal Selling and Direct Marketing. While we recognize the future importance of eMarketing and Social Media marketing and also have presence on the web and on social media sites, it is still very small and very young in South Africa due to the low internet penetration. But what I actually am trying to say is that, if a company is implementing IMC it should make sure that all 5 points are covered. Otherwise the effort and money spent is not worth it. This is because the one factor that may not be integrated with the others can ruin the effort done within all the others. Whilst it is definitely difficult to implement and not always easy to stick to your plan the result is worth the effort. FH Do you think it is a realistic effort to actually fully integrated marketing communications within the South African insurance industry? AJ Yes I do. It is hard work but I believe it’s possible. Especially young and smaller companies like us should take the opportunity while they are still flexible to integrate all their communications effort in order to be able to compete with the big inflexible companies such as Old Mutual or Sanlam. FH I spoke to other people form large Insurers such as Sanlam and they reckon that for them it is quite a challenge to all parts within their organisation due to mere size. Their main challenge is to bring together Marketing and Sales. They have panels that consist mainly of head of departments where the marketing strategy and ideas are being discussed and shared. However within their organisations they find it difficult to communicate the challenges that marketing faces to their Sales staff. In your opinion, as a small insurer, what are the biggest challenges and the biggest advantages when implementing IMC? AJ The biggest challenge for us is probably that we are still very much a learning organisation. Whilst we do not change our products often but rather get one thing right and the move to the next, our environment changes much quicker than that of large insurer. This mainly comes with signing up clients that operate in industries we have no previous experience in. FH What kinds of clients make the biggest share of your client base? 67 AJ We mainly deal with large brokerages such as Alexander Forbes, Bank as well as Government. While it is fairly easy and straight forward to market to the first two, it is slightly more difficult with government. However we had great success which is also but definitely not only due to our Level 1 B-BBEE status. FH How do you market / communicate with your intermediaries on a “day-to-day” basis? AJ Due to the lack of face-to-face time, it is not always easy to market to the intermediaries. Once your product is on their platform and they started marketing it to the end client, companies often lose touch with their intermediaries. Lion of Africa Insurance is definitely running a broker model. This means that we rely to a large extend on our brokers to bring in business. Our own Sales force is mainly there to either find new brokers and also to support brokers, especially small ones. We communicate with our current clients on an on-going basis, through regular e.g. e-mailers, giving them updates on product and legislative developments. We also use a CRM system which helps especially our sales staff to schedule their time and ensure that intermediaries, especially key account, are being visited as often as possible without being annoying to the clients. We discovered that real relationship building only happens face-to-face though. FH How do you make sure that you spend as much time with your clients in person as possible? AJ In the past two to three years we started sponsoring more and more event nationwide. Amongst others we sponsor the annual Lion of Africa Ladies Yacht Race in Cape Town, the Lion of Africa Mountain Bike challenge and our latest and proudest addition is the Lion of Africa Cape Town Open as part of the sunshine tour. These events are always a big success and give us the opportunity to get to meet our clients and potential clients in person and spoil them. FH Lion of Africa as a brand is still fairly unknown amongst the ordinary South African, how do you get your brand out there and make sure that you are sending the right message? AJ Well, we do a lot of Public Relations work. We use newspapers, radio and 68 industry related magazines, such as Cover, to create brand awareness. As the only Level 1 B-BBEE short-term insurer in the country we also made it our duty to give back to the communities that we originate and operate in. We also do a lot of skills development work, especially with previously disadvantage staff members of ours. FH On a scale from one to ten, 1 being “No IMC” and 10 being “Fully integrated” where do you see Lion of Africa Insurance? AJ I would give us a 6-7. While there is still much work left and I think a company is never done in the sense that one can stop doing it, I would definitely say that we are on the right path. In all our materials we are trying to send the same message. We also measure the feedback on our different activities in order to better understand them and improve when doing it again. Hence, you will find empathy and tenacity embedded in all our messages. We are a truly South African company and want to give back to the community we came from and operate in. Hence we chose this message to always be the underlying tone of all our communications. As mentioned earlier, we are a young, growing company and we are learning and adapting every day. FH With regards to eMarketing / Social Media marketing, what is Lion of Africa Insurance currently doing? AJ Currently we are not very active. Besides our website and our Facebook and Twitter pages we are not making great strides. However we are planning to formalise an eMarketing strategy during the course of the year 2013 and implement once done. However as mentioned above, we are following the broker model. A lot of brokers however are not very clued up when it comes to technology. A few older brokers don’t even use emails yet but control their business telephonically or via fax if necessary. So just to repeat, we are working on a strategy but don’t think it will have a great impact yet. I believe this will change over the course of the next five years but for now we are still pretty much in the “old world” with our brokers. In the individual client space it’s different. However even Facebook pages are not very successful in the insurance industry. Insurance is still a grudge purchase and not many people would like to be “Friends” with their insurer on Facebook as they tend to stay as far away from insurers as possible. Contacting an insurer is always connected with a negative event. Either it is about money owed to the insurer or it is about a claim which in itself is a negative event. 69 FH Adele, I would like to thank you again for your time today and thank you for sharing your insights. AJ It’s a please, any time. 70 APPENDIX B INTERVIEW SCHEDULE a) Themes of the interview as introduced to each interviewee The aim of my thesis is, to find out whether there is value in Integrated Marketing Communication in the Life Insurance sector of South Africa with special focus on Business-to-Business (B2B) marketing. The interview will be an unstructured interview. That means that there are no set questions but rather themes of discussion. The overall themes will be: Integrated Marketing Communication (IMC) IMC in the SA Life Insurance industry Progress of IMC implementation within Sanlam Difference between B2B marketing and B2C (Business-to-Consumer) marketing within IMC eMarketing / Social Media marketing and its current and future role within IMC As mentioned above these are just general themes and a deviation is possible and even welcome if necessary. If you don’t mind I would like to audio record the conversation in order to type a verbatim afterwards. The actual audio will not be released and is simply to ensure that nothing is missed when analysing the conversation. Once the interviewee agreed, appointments were made and the one-on-one interviews started.