TalentZoo.com |  Flack Me |  Digital Pivot |  Beneath the Brand Archives  |  Categories
State of Regret: Getting Involved in Discount Wars
By: Andrew Davis
Bookmark and Share Subscribe to the Beneath the Brand RSS Feed Share
In an era of sales, BOGO, and discounts, it’s nice to see someone doing something…different. This is especially refreshing when it comes to car insurance. Geico set the standard for discount auto coverage in 15 minutes or less, and a plethora of companies have emerged to serve the low-end market with minimum coverage. 
 
However, State Farm is doing something different. Instead of joining the discount frenzy with insurance, State Farm is leveraging their human capital to build their brand. In a recent ad called “State of Regret,” former State Farm customer “Jerry” calls his old agent pleading for help after putting his car up a pole. When she can’t help him, he says: “It only took 15 minutes to sign with that new auto insurance company, but it’s taken a lot longer to hear back.”
 
By refusing to participate in the discount game, State Farm is avoiding the crowded, low-end insurance market coveted by companies like Geico, Progressive, Esurance, The General, and local agencies. However, by pushing service rather than discounted prices, State Farm is able to attract business from the high end of the insurance market. This means State Farm can still bring in new customers without dropping their prices.
 
In the end, this is a much better branding strategy because they aren’t locked forever into discounted prices and won’t have to keep dropping premiums in order to keep customers. Customers came to State Farm because even with higher premiums than say, Geico, customers know that an agent will be there. So long as State Farm delivers on their promise of service, they’ll keep customers.
 
Looking at the top 10 insurance companies by market share in 2010, State Farm is at the top, followed by Allstate — another insurance company that has directly attacked the “cut-rate” insurance game in their “Mayhem” campaign.
 
Brands can take a lesson from State Farm and Allstate: although there is money to be made by dominating the low end of the market, discounting is a trap that keeps your brand locked into low prices. Should you try to raise your prices, you’re likely to lose any sort of customer base you managed to build. 

   

Bookmark and Share Subscribe to the Beneath the Brand RSS Feed Share
blog comments powered by Disqus
About the Author
Andrew Davis is a Charleston, SC-based creative services consultant to small businesses and non-profits. Follow him on Twitter here.
Beyond Madison Avenue on

Advertise on Beyond Madison Avenue
Return to Top