GEICO More Than Just Hype
The fundamental marketing strategy behind GEICO auto insurance is a direct to consumer marketing approach using toll free numbers and the World Wide Web. GEICO stands for Government Employee Insurance Company, but it’s been decades since they sold just to government employees. Even before investor Warren Buffett bought the company in 1996 and made it a subsidiary of Berkshire Hathaway, GEICO had been offering insurance to consumers for a long time. These days, GEICO uses the money they save on agent commissions to fund their extensive advertising campaigns, including the one featuring that clever little Gecko with the English accent. A study conducted by SNL Financial, LLC in 2012 estimates that GEICO spent just under one billion dollars on marketing in 2011.
Why does GEICO spends so much money on advertising? The auto insurance market is a highly competitive place and name brand recognition is crucial for growth. It’s no coincidence that since GEICO came up with its clever gecko campaign, Allstate has followed suite with their “mayhem” campaign and Progressive has done likewise with the likable Flo, and her “name your price” promises. So GEICO is more than competitive when it comes to highly entertaining ad campaigns, but what else do they have to offer? As it turns out, quite a bit.
The New Digital Marketplace for Auto Insurance
A key marketing strength that GEICO possesses is their strong internet and web presence. In the past, insurance companies relied upon agents to convince customers to purchase auto insurance, but according to a study on auto insurance buying habits conducted by J.D. Powers and Associates in 2012, agents are no longer necessary. The study found that 52 % of auto insurance shoppers start looking for information online without consulting an agent, and 73 % visit an insurers website at some time during their search. Furthermore, the study found that 34 % of shoppers preferred to buy their insurance policy online. In light of these facts, GEICO, along with other online insurers such as Esuarance, has positioned themselves very well to compete in precisely the area where more and more shoppers like to buy just about anything, namely, the digital, online marketplace.
The Switch and Save Game
Auto insurance companies have long recognized the fact that the market for acquiring customers without any car insurance is tiny compared to the market of customers who currently have coverage. One of GEICO’s bedrock promises is that if a customer switches to GEICO, they will save 15 % or more on their policy. But is that true for everybody? Even Warren Buffett conceded that in reality, only 40% of customers would save by switching to GEICO. The best strategy for the consumer is to compare prices by getting an online quote, a service that is offered through many websites, including at Progressive.com.
GEICO Rated Highly by AM Best
One final thing to consider when gauging GEICO’s competitiveness is its incredible financial strength. AM Best, an insurance research and analysis company, gives GEICO an A ++ rating, their highest financial strength rating, which isn’t surprising considering that the company is part of Berkshire-Hathaway. Best rates Progressive a bit lower, with an A + rating, and Allstate even lower with a rating of A-. One thing remains certain with GEICO, they certainly have the capital to reinforce the competitive auto insurance that they sell.
This piece was written by Frank Middlesworth, a freelance writer who focuses on automobiles, the auto industry, auto insurance, auto repair and upkeep, and other assorted topics. Those shopping around for information on auto insurance may want to view the resources available at www.Cure.com.