The evolving FS marketing trend. (financial services)

Oslo, Norway

The most significant global trend in financial services is its evolution from a sales-oriented business to a true marketing-oriented business, said an official LIMRA International.

"Unfortunately, we have for years used to the terms `selling' and `marketing' interchangeably, or have commented that terms such as `marketing oriented' are nothing more than business school jargon," said Walter H. Zultowski, senior vice president, LIMRA International.

He cautioned that this trend is much more than business school jargon and to "ignore it is to do so at great business peril."

Mr. Zultowski offered his thoughts on life insurance marketing during a speech at the recent annual meeting here of the Watford, England-based LIMRA Europe.

This trend will not influence the products and services provided, but will also significantly change the way "we deploy distribution resources to deliver our products and services."

What has changed such that industry needs to change its focus from sales to marketing? Mr. Zultowski said four major factors are driving the change:

* Market fragmentation. "The markets for our products and services are much more heterogeneous and complex than ever before," he said.

"A one-size-fits-all sales strategy has been fitting fewer and fewer people in the world/s more developed markets since the end of the second World War."

* Increasing consumerism in financial services and the resulting regulation. "This trend is manifested in such issues as financial strength and solvency, market conduct, commission and cost disclosure, and probably persistency and customer conduct."

As an example, he said that market conduct will evolve from the obvious issues of deceptive sales practices to the more subtle question of suitability, or whether the product sold fits the needs and lifestyle of the buyer,

* Technology. He suggested that technology, combined with consumerism, will drive commission and cost disclosure regardless of whether it is required by regulation.

In fact, regulations are often passed that legitimize what has already occurred in the marketplace as a result of competition, Mr. Zultowski said.

"Technology also will have a direct influence in driving us to become marketers," he added. "For increasingly, and over time, electronic commerce will provide another avenue by which certain types of consumers will buy certain types of products."

An increasing number of consumers will want to buy direct via electronic commerce, he explained in an interview, "As a result, companies will have to identify consumer-buying preferences."

The question is whether technology will replace or supplement the intermediary, he told the LIMBRA audience.

While some say that a machine could never replace a person in financial planning, others say that person and machine will merge in the future, as a "cybermediary," Mr. Zultowski said, nothing that some agents eventually will figure out how to market via the Internet.

* New competitors. He said he wasn't referring to other insurers nor to organizations from other sectors of financial services such as banks or investment firms, which "don't seem so non-traditional any more."

"I'm referring to organizations from outside of financial services [which] are looking to our industry as a good place to deploy capital," he said, pointing to retail groups or manufacturing companies that have ventured into financial services, such as Sony in Japan and General Electric or Microsoft in the U.S.

Player's from outside our business don't carry the baggage of doing things the way we've always done to them," he continued.

He predicted a future where new players will enter the market and radically change and reinvent our basic business franchise."

It follows, Mr. Zultowski said, that this evolution to a marketing-oriented business will have significant implications on products, the way markets are viewed and how distribution resources are deployed.

For example, Mr. Zultowski said, this new world of marketing will test the value that companies provide to their distributors.

In the eye of the consumers, the true value-added features--products and services--are provided at the level of the local distributor, he said.

"Thus, the challenge for companies will be to see how far down in the marketing chain they can provide value to their distributors," which helps gain and keep customers, he said.

Currently, many insurers provide sales support, rather than marketing support, he explained.

In the future, most value-added features in the consumer's eyes will continue to be developed and provided by entrepreneurs at the local distributor level. However, he added, companies will able to provide assistance in the area of market segmentation and target marketing.

He made another point about the changing marketplace. While one of the hottest current issues in the business today is the management of multiple distribution channels, that is likely to become even more of a problem in the future.

Currently, many companies are attempting to manage this issue by keeping the different distribution systems separate, or separating them by geography or by consumer demographics, Mr. Zultowski said.

But, he added, these are only temporary solutions. "As we increasingly recognized buyer preferences in the way in which we market, these buying preferences will cross demographic and geographic lines."

So, this issue is likely to become ever more continues, he said, "as competition in the marketplace drives us to offering differently priced products through different distribution channels."