CHARTERED INSURANCE INSTITUTE OF NIGERIA 2014
INSURANCE PROFESSIONALS’ FORUM
TITLE
PRODUCT DEVELOPMENT, MARKET EXPANSION AND PENETRATION
A PRESENTATION BY
DR. AKIN OGUNBIYI
GROUP MANAGING DIRECTOR
MUTUAL BENEFITS GROUP
September 11th 2014
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AN APPRAISAL OF THE NIGERIAN CONSUMER TODAY
 Population
>170million
 Urbanization
48%
 Access to Internet
>50million users
 Telephone Lines
100million lines
 Growing use of social media- Facebook, twitter, google+
 Informal Sector
>70% of the population
 Bankability
1:9 formal to informal sector
AN OVERVIEW OF CURRENT SITUATION
 Total Premium Income N350bn (2012/2013)
 Contribution to GDP <1%
 World GDP Ranking 23rd (World Bank)
 49 underwriters
BACKGROUND
According to statistics released by NAICOM and NIA recently, Nigeria’s Insurance
Industry now contributes 0.6% to Nigeria’s GDP after the rebasing of the national
economy, a drop of one point from the earlier position of 0.7%. Non-life average
growth in the last ten years is 22.1% and life, 24.3% .
There is however, cheering news. There is appreciable increase in insurance
patronage by the public and the various tiers of government stemming from
innovations and improved services by the industry, increase in insurance education
and awareness, and a more robust regulatory framework.
Of course, we are still celebrating NAICOM’s enforcement of section 50 (1) and (2)
of the Insurance Act on “No premium, no cover”. This has brought relative stability
and confidence in the financial statements of the industry.
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I want all of us to look the future in the eye and say: We are no longer foot soldiers in the
march of progress, We are revolutionaries! Although, there is no crisis in our industry,
we must use our capability to reinvent ourselves and our industry.
Incremental improvement programmes are better than no improvements at all, but
these are insufficient today when there is a yawning niche market space that we need to
quickly fill. Our industry must yield new earnings growth and deliver sustained highly
profitable growth. We must take evolutionary steps to achieve revolutionary goals.
Our business concept and strategic initiatives must scale-up. We must embark on a
radical shift from mere procedures to creativity. Instead of being reductionist in our
competitive strategies, we should be expansive; inventive instead of extrapolative and
inclusive instead of being elitist.
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Let me summarize this introduction as follows:
 Grow the insurance business through service-centred mass production and mass
marketing
 Provide sustainable competitive advantage through value-adding distinctiveness,
competitive customer- focused capabilities
 Up the ante to phenomenally adapt to unmet customer needs
 Better and efficient business process with seamless IT infrastructure
 Adopt competitive and best cost producer strategy for enhanced market share and
salutary positioning.
 Necessary investment in product development, market expansion for the long-awaited
market penetration.
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Product Development, Market Expansion and Penetration are three (3) key transforming
coordinates that can be effectively engendered by our courage, boldness, dedication,
perseverance, to achieve positive competitive moves.
Product Development
 Physical expansion based on careful research and identification of customers and their
potential needs.
 Creation and design of products to meet identified un-catered or not-fully catered for
risk profile of sectors, groups or associations or individuals.
 Tailor-made products to suit the needs of income brackets and specific/target groups
 Deliberate value–additions as pragmatic response to identified needs, new markets and
sophistication of consumers.
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It is a strategic management process to achieve the following:
 harness the fruits of innovations
 replicate successful business patterns
 generate profit and other benefits by identifying customer wants and needs and
translating them to specified service deliverables
 provide the desired market share within each identified market segments.
Product Development Process
To put an effective Product Development Process in place, you must monitor technology,
competing pressures, customer purchase criteria, individual company’s capabilities,
social, political, economic forces. Technical analysis, market analysis, timing and
workforce profiling are key variables in decisions models.
The Relative Perceived Value (RPV) of the products must also be taken into
consideration. Screening criteria for RPV are customer values, individual company values
and capabilities. Each market requires an integrated approach.
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Positioning:
This implies the mental image which a service project has on a target market in relation to the
images of other services competing in that market. It is what you do to the mind, not to the
product.
It has the following characteristics:
 an indispensable element in marketing planning and strategy for the company as well as for
particular services.
 practice segmentation– positioning in segments (segment dominance).
 work around what is in the prospects mind
 company and brand image– what does it connote (the service must perform the expected
miracles in terms of value–addition)
 your corporate name must be appropriate for the new service
 superiority of a name over meaningless abbreviations- connotes value and essence of product.
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Market Expansion
This coordinate becomes useful as soon as you determine that sales to existing customers
and markets have been maximized. In other words, when you have fully tapped your
planned potential in a particular market; new markets that you can easily reach in terms
of contacts, relationships, knowledge and experience can be considered.
The “new” markets must clearly offer carefully researched and identified opportunities
for sustainable sales and growth based on:
 consumer needs and wants
 product characteristics and to what extent they meet the needs
competitive market structure
 consumer characteristics
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Objectives of Market Expansion
 to identify the consumer needs and wants
 determine the degree to which the product characteristics meet these needs and wants
 examine how the products may be modified or redesigned on new products created to
increase the degree to which consumer needs and wants are met, while at the same time
trying to minimize the impact of competing products/brands.
The following are key issues in market expansions:
 Target market:
It is possible to estimate the potential of the market by estimating the expected demand
based on the size and income and expenditure characteristic of the target market.
Market analysis and associated activities which include marketing research are central to
creating market opportunities. Also relevant are, market segmentation analysis and
market potential analysis.
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 Product life cycle:
This refers to the introduction, growth, maturity and decline of the product. Each stage
characteristically faces relatively distinct problems of profit potential and competitive
market structures.
 Market segmentation:
• Identification of homogenous subsets of consumers that could be treated as target
submarkets
• The accessibility of these subsets with distinct market mixes.
Advantages
‐ understanding of the market e.g. knowing who the customers are and why they
purchase the product
‐ identification of new opportunities that may be exploited
‐ enhancement of management’s ability to identify and plan for changing market
trends.
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 formulation of rational media plans
 identification of strengths and weaknesses of competitors and consequently the
identification of segments that offer competitive advantages.
Management has to formulate and monitor market mixes for different segments, which
sometimes complicates decision making.
Segmentation variables: these are
• price,
• quality,
• service,
• packaging,
• advertising etc.
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Market Penetration
In the Nigerian marketplace, this growth strategy involves selling existing products, their
hybrid or bundled products into existing/expanded markets to effectively grow market
share.
Effects of Market Penetration
GROWTH
SELL:
MARKET
PENETRATION
-Existing products
-Hybrid of existing
products
-Bundled products
Maximize potentials in
terms of market share
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DISTRIBUTION CHANNELS
These compose of a linkage of institutions which collectively perform the essential
functions to moving products from producers to consumers. It has two basic flows:
 movement of services from the point of production to consumption
 the informational flow both ways that precedes, accompanies and follows the product.
These flows have 2 classes:
• deals with the purchase orders, invoices, payment for goods and all other transactions
essential to exchange
• relates to the promotional information about the product or institution.
The timing, economy, accuracy and clarity with which these flows are administered measure
the efficiency of the channel.
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The traditional channels for insurance sales and marketing are:
¬ Insurance Brokers:
› controls over 75% of the established insurance markets
{Corporate, Government, Complex Industrial and high profile
risks}.
› about 600 registered
› over 3,000 unregistered
The operation of the brokerage services in Nigeria presents a big limitation for insurance
market expansion and penetration.
¬ Insurance Agents:
› Agency network in the industry is very weak and statistics
indicate less than 10,000 agency workforce.
› This is a veritable and most significant singular component of
market expansion and penetration. E.g. South Africa, United State
of America, India, Malaysia.
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¬ Direct Marketing:
› pockets of sales from customers not going through any
intermediary.
› experience in developed countries and the recent roles of
information technology, telecommunications, social media, in
transforming businesses in Nigeria; evidence of appropriate
channels for insurance sales and marketing to achieve the
objectives of NAICOM’s MDRI.
Penetration and business process virtualization (BPV) is an established medium for mass
marketing and substantial reach. Also, It is the application of intelligent network-enabled
automation to leverage what you already have, people and their intellectual productivity,
capital and infrastructure. It is a wonderful paradigm that enables the effective use of
computer platforms, combined with enabling software and high-capacity networks to reach
several multiples of market in a swift.
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Effectiveness of the channel:
 provides for physical movement and achieves the greatest economy
 maximum effectiveness
 optimum amount and quality of promotional information to all prospective buyers and
provides an adequate feedback
 has the flexibility to adapt creatively to company innovations.
 is sensitive to each company’s role as it relates to the expectations of the other channel
members.
Media Relations as Strategic Platform
 This platform (print and electronic) has first-hand intimacy with the much-needed publics.
 No other medium offers comparable population (audience) size and breadth, day in, day out
and also the range and depth of content.
 Today, online additions and other innovative media products have, creditably expanded
these “penetrating footprints”.
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THE MUTUAL EXPERIENCE
The kernel of Mutual Benefits’ impressive growth, is strict adherence to the company’s core
values. We pride ourselves as unrepentant sticklers for Leadership, Professionalism,
Knowledge, Continuous Training and Ethical Practice.
As a result of the recapitalization exercise of 2006/2007, Mutual Benefits came up with the
“Wind of Change”, our terms of engagement with stakeholders. The primary objective was
fostering insurance as a vital financial instrument for national development through:
 Repositioning and deliberate change in strategy
 Clear and compelling brand promise
 Superior and memorable services
 Clear, competitive differentiation
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Signposts of our approach include:
 Products availability- 102 products; 36 approved by NAICOM in a scoop in 2014
 Accessibility- 64 new offices opened in rural/remote locations
 Products affordability
 Employment Generation: over 7,000 Agents
 Empowerment- strategic alliances, cooperative cells
 Poverty alleviation
 Income at the bottom of the pyramid: extensive involvement with the informal sector.
 Consumer awareness:
communication
 Rapport building
 Networking
 Positive attitude through professionalism
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OUR RESULTS
 Gross Premium Income:
 Average N1.2bn premium monthly
 Unit Sales Volume:
 In 5 years, Mutual issued over 600,000 (six hundred thousand) individual policies.
 ALL ON ALTERNATIVE MARKET EXPANSION AND PENETRATION INITIATIVES.
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Conclusion
The Nigerian Insurance Industry must maximally utilize or lap-on to clear and specific
opportunities. We must continually move the ball forward to exploit the very large available
distribution space. We must wrap-in this considerable large number of potential customers.
We have a niche gap in this country that must be filled because no matter how an
individual or organization sets its goals and executes its plans, the goals, at one time or the
other, may be thwarted by unplanned events. Our industry, can professionally and
effectively cushion or drastically minimize these fortuitous losses.
We therefore have what it takes in terms of competencies to enable and ensure maximum
profitability for organisations and lifetime successes for individuals as well as families. We
must dream, create, explore, invent, pioneer and imagine in order to create new wealth
and deliver sustained profitable growth.
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