On a global scale a number of insurers are competing and offering the customers a plethora of products. The customers are demanding quick and better service from the service providers. For the insurance companies to survive competition, they have to upgrade the quality, transparency and integrity to acquire and retain customers in long range. They need a set of offers and the value proposition to be delivered to the target potential customers, which needs a thorough market research to understand the needs of the customers and accordingly launching the products to match with customer’s expectation for which organisations must continuously search for the development of its product and services through marketing innovation and creativity. This will play a very important role in achieving competitive advantage especially in the insurance industry where competition is much stiffed, through the forces of change brought into the industry by recapitalization and consolidation. The study was carried out to find out whether marketing innovation and creativity has an impact on achieving competitive advantage in the insurance industry. The study shows that marketing innovation and creativity are crucial in organisational success. It also concluded that through marketing innovation and creativity, the insurance industry can satisfy their customers which will improve their businesses and achieve a competitive advantage.
Keywords: Marketing Strategy & Innovation, Competitive Advantage, Customer Satisfaction
During the last few years, the insurance industry has undergone a series of changes through financial reforms, advancement of communication and information technologies, globalization of financial services and economic development. Those changes have had a considerable effect on efficiency, productivity change, market structure and performance in the insurance industry. There is an established relationship between business strategy, innovation and organizational performance.
The marketing concept emerged in the mid-1950s. Instead of a product-centered, ‘make-and-sell’ philosophy the business shifted to a customer-centered, “sense-and-respond” philosophy. The job is not to find the right customers for your products, but to find the right products for the customers (Kotler and Keller, 2008).
The American Marketing Association, defined marketing as “An organizational function and set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders”. Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers by creating, delivering, and communicating superior customer value.
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Customers of any organization need to be assured that their needs are fully being catered for. This is very crucial in ensuring that the customers feel appreciated. An organizations’ marketing strategies is therefore very important. Each company normally chose the best marketing strategy for achieving its objectives depending on the environment in which it operates. Marketing strategies are the procedures and practices that allow a company to focus its limited resources on the greatest opportunities on order to increase sales, enhance its profits and accomplish a sustainable competitive advantage. Actually, the main goal of various marketing strategies used by an organization it to ensure maximization of profits and enhance customer satisfaction levels. The customer satisfaction level which the company reaches usually determines its success level. This is due to the importance of customer satisfaction as it is one of main goals of any company (McGrath, 2003). Customer satisfaction is a measure of how products and services which are supplied by a company meet the customers’ expectations. Customer satisfaction is the most important performance indicator within business and is part of the four perspectives of a Balanced Scorecard.
Innovation which refers to the use of a new product, service or method in business practice immediately subsequent to its discovery, influences economic success and market share in increasingly competitive global markets. In response to new technology-driven global markets, companies have increased their use of advanced technologies as well as their innovation efforts (Zahra and Covin, 1993). The increasingly competitive environment in the financial services market has resulted in pressure to develop and utilize alternative delivery channels. Insurance companies are now facing extreme challenges in the current competitive environment because the changes and new services became the base of marketing and in order to face those challenges, insurance companies started to go towards marketing innovation and creativity which includes creating new services, delivering insurance services to customer and promoting those services and delivering them to customers in the right time and place since time and speed became essential in the world of financial services and depends on innovation in this world of competition in order to deliver the best products and services to achieve competitive advantage and gain customer satisfaction and loyalty.
Review of Literature:
The marketing concept originated in the western developed countries after the industrial revolution. Over a period of many decades the concept of marketing has changed, evolved and passed through two distinct stages, production and sales orientation. At the end of the 1940s, production efficiencies were regarded as essential for achieving and maintaining a successful and prosperous business activity but in the 1950s researchers began to argue that marketers should pay more attention to the customers’ needs and wants (Svensson, 2001). This fundamental principle is often referred to as the ‘marketing concept’, which replaces the product (emphasising product quality), production (emphasising product availability), and selling (emphasising sales volume) oriented philosophies.
McKitterick (1957) asserted that the marketing concept is a business philosophy that challenges the previous concepts. According to him, marketing concept is a customer oriented, integrated and profit oriented philosophy of business. Consistent with McKitterick (1957) other authors identified three aspects of the marketing concept: (1) the customer as a focal point of business activities, (2) the necessity of integrating marketing activities across functions, and (3) the need for a profit orientation (Barksdale and Darden, 1971; McNamara, 1972). According to McNamara (1972), marketing concept is a philosophy of business management; based upon a company-wide acceptance of the need for customer orientation, profit orientation, and recognition of the important role of marketing in communicating the needs of the market to all major corporate departments. Kotler (1998) also supported the work of Barksdale and Darden (1971) and McNamara (1972) stating that, the key to achieving organisational goals consists in determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors. According to Kotler (1998), marketing concept rests on four pillars: (1) target market, (2) customer needs, (3) integrated marketing, and (4) profit through customer satisfaction. In this connection, Walker et al. (1992) also asserted that the marketing concept is the most effective means of attaining and sustaining a competitive advantage and of accomplishing company objectives, that initiate the planning and coordinating all activities for satisfying customer needs and wants. That is under marketing concept a company should place a major emphasis on the analysis of target market’s needs and wants and deliver the desired satisfactions more efficiently and effectively than competitors in order to maximise its current profit.
Considering the above discussion, marketing concept can be defined as a consumer orientation represented by the ability to recognise targeted customers’ generic wants, needs, and preferences and satisfy them by continuously creating and delivering superior value backed by an organisation-wide integrated effort of all functional areas within the organisation in order to achieve long-term corporate goals and objectives.
Competitive advantage is an organization’s ability to perform in one or more ways that competitors will not and cannot match (Kotler, 2000) and is realized by the organization’s marketing strategy, the implementation of this strategy and the context in which competition unfolds. The target consumers will be the core and center of the organization’s marketing strategy.
In the 1950s, framework such as the marketing mix was developed to make the most of market demand. The 4 Ps, product, price, place and promotion were use to describe the levers that if used appropriately could lead to an increase in company’s profitability.
The strategy to strengthen the relationship between the needs and wants of the user and the products and services offered by the organization is better known as the marketing mix. This mix incorporates four elements, namely, products, price, place and promotion. To put in another way, a typical marketing mix consists of product or service offering at a price, targeting a customer segment in certain place and a set of modalities to reach the target customer and promotion to tell the potential customer about the availability of the offering (McCarthy, 1978).
The 4 Ps represent the sellers’ view of the marketing mix variables available to influence buyers perspective, each marketing tool is designed to deliver customer benefits. Lauterborn (1990) suggested that the sellers 4 Ps corresponds to the customers 4Cs product corresponds with customer needs and wants, price responds with cost to the customer, place responds with convenience and promotion corresponds with communication.
The insurance and the economic growth of the country mutually influence each other. As the economy grows, the standard of living of people improves and demand for insurance products emerges. A well-developed insurance market promotes economic growth by encouraging risk taking.
Pfeffer (1965) in this study makes an effort to measure the profit potential of the new life insurance companies. The five types of strategies available to new companies are: grandfather strategy; hit and run; captive; brokerage; and traditional strategy. Although the evaluation of profit potential in case of new companies is practically impossible due to various reasons such as paucity of useful published data about the actual performance, it is concluded that out of many entrants, only a few are capable of doing business in the long run.
Peterson et al (1972) study the effect of marketing innovations in life insurance sector. The results show that flow of innovation is a two-step flow i.e. it flows from innovator firms to large firms in the industry and then to others. The relative advantage of innovating firms is short lived when the offering in unprotectable. Therefore future research on diffusion of competitive innovation among sellers must consider industry characteristics such as “ability to protect innovations.”
Meidan (1982) presents different marketing strategies for insurers, suggesting that the selection of an appropriate strategy should be based on the internal conditions and external forces facing the firm. The two broad categories of insurance marketing strategies exist: growth strategies; and competitive marketing strategies. Due attention should be given to the marketing organisational structure and its departmental responsibilities.
Browne and Kim (1993) identify the factors that lead to the variations in life insurance demand across nations. Important factors found to be dependency ratio, national income, social security provided by government, inflation, education level, average life expectancy, price of insurance and religion. The findings that life insurance is positively correlated with national income and negatively correlated with inflationary expectations, suggests that economic development and economic stability greatly increase life insurance consumption. Outreville (1996) presents some empirical tests of the relationship between financial development and the development of the life insurance sector and provides empirical evidence of the negative effects of a monopolistic market on life insurance growth. Skilled human capital is a source of competitive advantage because industries in developing countries suffer from a major handicap of shortage of skilled personnel.
Zimmerman (1999) in this study concentrates on the insurance industry and on insurance firms’ actions designed to cope with barriers to international trade. They find out that there are 26 barriers to insurance trade, which are discriminatory against foreign insurers. Respondents feel that barriers can become a critical factor if they create prohibitive costs or difficulties for the firm’s entry. A new market entry decision model has been proposed based on the findings. Saibaba et al (2002) study the perception and attitude of women towards life insurance policies. Nowadays many insurance companies are trying hard to woo the female population. The study finds that women feel that their lives are not as valuable as their husbands, they perceive insurance as a tool for risk coverage and not as a tax saving device, there is also lack of knowledge about suitable insurance plans.
Reddy (2005), in this article studies the customer perception towards life insurance companies’ policies. This study is limited to Bangalore city only. The results are that, majority of respondents feel that policies offered by private companies are up to their expectations but when compared with public companies’ policies very few policies are better alternatives. Sharma and Agarwal (2005) discuss the insurance sector in India in the pre-nationalisation era, post nationalisation era, post liberalisation era and emerging scenario. To be more competitive and responsive to the needs of the societies, the insurance players would be required to concentrate on the various strategies viz. environmental analysis, restructuring organisations, human resource development, efficient marketing strategies, distribution channels and corporate governance.
To study the impact of Marketing Strategies on the Service Quality
To study the impact of Marketing Strategies on Customer Satisfaction
H11- There is no significant impact of the marketing strategies on the Service Quality to win the competitive advantage.
H12- There is no significant impact of the marketing strategies on the Customer Satisfaction to win the competitive advantage
Research Methodology- A well-structured questionnaire was prepared to obtain the opinions from the respondents having the insurance policies. In total 300 customers were selected on systematic sampling basis and views were taken for analysis. The data are analysed and interpreted by using the statistical tools like chi-square test, factor analysis, ANOVA and co- relation.
Data Interpretation and Findings:
Table 1: Total Variance Explained
Extraction Sums of Squared Loadings
% of Variance
% of Variance
Table 2: Total Variance Explained (Extraction Method: Principal Component Analysis)
Rotation Sums of Squared Loadings
% of Variance
Through factor analysis, it is observed that out of 13 components describing the attractiveness of a policy five characters or factors like brand popularity, innovation in policy, quick response to customers, building relationship network, and financial security are the most influential which can attract the customers to buy a policy and to increase satisfaction.
The thirteen components from the questionnaire are given below such as : Nature of policy, time to time touch, better communication & clarity, Image of company/brand, innovative products, better financial security, better investment plans, better agents service, influenced by colleagues/peers, quick information & better response, transparency & honesty, awareness training of customers, quick settlement of policy. By the help of extraction method and principal component analysis, the cumulative percentage of variance within these five factors found to be 51.270 and most of the characters can be explained by these five factors.
Name of the factors are:
Factor 1= brand popularity for creating attraction for customers
Factor 2= innovative product delivery
Factor 3= quick and honest response
Factor 4= building relationship
Factor 5= financial security
Table 3: Organization- Wise
Birla Sun life
Birla Sun life
Birla Sun life
Birla Sun life
Birla Sun life
Observation and Analysis:
Confirming these findings, each factor is also analysed against these insurance companies under the study and it is observed that in each case the mean value of the views is found 4 and standard error is less than 1 against a five point scale. That means all the factors are responsible factors to satisfy the customers.
Table 4: ANOVA
Sum of Squares
The above table reflects that for factor 1; between the groups the variance is .185 and it is not significant.
For factor 2; between the groups f=5.848 and variance is .000, it means it is significant.
For factor 3; between the groups f=3.144 and variance is .015 which is significant.
For factor 4; between the groups f=2.951 and variance is .021 which is significant.
For factor 5; between the groups f=.940 and variance is .440 which is not significant.
Moreover, to achieve to the research objective the relationship between service quality and customer satisfaction should be assessed, and for this, the Pearson correlation was utilized. There is a relationship between service quality and customer satisfaction, with a correlation coefficient of =0.866. Thus, there is a mutual relationship between service quality and satisfaction, and the correlation coefficient =0.866 is at the 0.01 level (2-tailed). This relation is positive, meaning an increase in service quality resulting in higher customer satisfaction.
Table 5: Correlations between Customer Satisfaction and Marketing Strategies
**. Correlation is significant at the 0.01 level (2-tailed).
According to the earlier study, all service quality dimensions are in good relation to satisfaction, as well as with each other. Results show that among the dimensions, responsibility =.849) has the highest relationship to satisfaction. According to the table Standardized Coefficients, reliability is 0.837, empathy is 0.820, assurance is 0.811 and tangibility is 0.220 and all affect customer satisfaction (Mansouri & Sheikh Ahmad, 2012).
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The study shows that the independent variable (Marketing Strategies) which was tested through the hypothesis plays a major role in achieving competitive advantage & in satisfying the customers of the insurance sector. The study shows the innovation and creativity are crucial in organizations success through the innovation and creativity in services, prices, promotion, distribution and the role of the upper management and their encouragement and motivation of the staff and the clients in accepting the innovations. Marketing strategies in the insurance sector needs to be implemented and innovated for the sake of quick access, better service and delivering right offers at right time to the right customers .Research findings support that insurance companies are implementing better strategies for providing quality service to their customers in order to satisfy them and to be competitive in the global market. Research evidence also suggests that companies in the insurance sector are providing financial security to their customers along with building a proper relationship with their customers. In view of diversity of insurance companies worldwide, the extent of barriers to segmentation may vary widely. Even different insurance company serving similar market may have differing experiences of segmentation implementation. From the study findings, we can, conclude that creativity and innovation in providing new and innovative services as an important factor in order to satisfy the client’s need and that creativity and innovation in pricing and promotion and innovation and creativity in distribution , technological innovation are crucial in attracting new clients therefore the companies in the insurance sector requires for innovative marketing strategies which will serve the purpose of their existence with profitability and satisfied customers in the competitive environment.
Limitation & Further scope of the study:
The same study can be done on the comparative basis between private and public sector insurance industry. Moreover due to time constraint and discomfort in collecting data from the other cities we have conducted the research within our home town i.e. Indore and only on three companies in the insurance sector.
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