Put Some Lipstick on That Pig

April 3, 2006 by bob.

Carriers are really stupid sometimes. Generally, they do a good job of what they are supposed to do which is pay claims. And they are reasonably efficient at managing the money and working on slim margins.

But some of the stuff they do defies logic.

We have a carrier here in Georgia that has done some pretty stupid things in the last few years. For starters, they change their name every 5 years or so. Just about the time the public figures out who they are they pay some advertising whiz big bucks to come up with a new logo and a new name.

What ever happened to Marketing 101 where a company takes years to establish a brand name that people can trust?

For years we had Esso gasoline, then it became Exxon. I am not really sure what that was all about. Esso is just an innocuous as Exxon, so why change?

We also had AT&T, also known as Ma Bell. About 20 years ago the courts broke up AT&T into smaller companies which are now coming back together again. The most recent announced merger is where AT&T proposes to buy Bell South. The only problem is, AT&T is not the same AT&T of 20 years ago, it is really Southwestern Bell renamed.

But this has nothing to do with names.

It has to do with market share.

Carriers will do many things to gain market share. The stupid ones do so by undercutting prices. That only works for about a year, maybe longer before the losses catch up with them. When that happens they either raise prices or leave the market.

We had a lot of churning like that and most of it has died off. But there is one carrier who has taken a different approach to market share. They do this by paying a significantly higher commission to agents than any other carrier.

Their product is OK but nothing outstanding. Their prices, at least here in Georgia are about 15% or so higher than comparable plans. They justify their price by offering a 2 year rate guarantee.

So what? The consumer is expected to pay 15% more for the privilege of paying an even higher rate next year?

So you trick the consumer into thinking they get a good deal and you pay a bounty to agents who sell this product over another, more reasonably priced product.

So far it seems to be working.

They have been running this game for about 2 years now and consumers are still buying.

I guess if you pay a bounty to sell a lesser product, enough agents will convince the consumer there is real VALUE in paying more for the same product.

Go figure.

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