Case 4: Progressive Corporation 1. How has Progressive’s strategy evolved over time? Is it sustainable? Answer: Progressive began in 1937 by Joseph Lewis and Jack Green, and over the years, it became the number three player in the US private passenger auto insurance industry through competitive pricing and by continuously improving our products and services. Progressive’s customer value proposition was “Fast, Fair Better”.The Progressive was constantly looking for ways to provide insurance to customers at a reasonable price compared to competitors; using sophisticated data mining techniques t price its policy, which had proven very profitable.
In 1990, Progressive launched Immediate Response, the core of the concept was to get an adjuster to the policyholder as soon as possible after an accident occurred to help reduce the policyholder’s trauma. It also allowed Progressive to get an accurate estimate of repair cost and increased the probability of making a quick settlement without the additional cost of lawyer involvement.Through continuous improvement, the Immediate Response had reduced the average claim settlement cycle from 42 days to 6 days and reduced cost. In 1994, Progressive introduced a telephone customer claims service available 24 hours a day, 7 days a week.
In 1997, Progressive became the first insurer to sell insurance over the Web. In 1998, Progressive launched Personal. Progressive. com to help customers manage their policies.
Information transparency is key at Progressive.To differentiate sales through agents, in 2004, Progressive launched a second brand called “Drive Insurance by Progressive” to demonstrate Progressive’s commitment to the independent agency channel, and provided separation and clarity with respect to the carrier’s direct business, While executing on its Immediate Response, its standard policy writing program and its Internet initiative, Progressive continued to innovate with new products. In 2000, Progressive operated Concierge Service.Owners could bring their damaged cars to the Concierge center to repair, and Progressive would take care of everything, including an instant replacement car while the repair was done. The customer saved time and Progressive save money on storage and rental car costs. Progressive’s next step was to introduce a service, started called “Total Loss Concierge which replaced cars that had been totaled.
In 2000, Progressive started offering homeowner’s policies, which aimed to attract and retain auto consumers who preferred to buy auto and home insurance form the same insurer.But it was cancelled since the company couldn’t generate enough data to have a pricing advantage. Whatever, the heart of Progressive’s business philosophy was innovation, and it is this basic attitude that had allowed Progressive to accomplish numerous industry firsts. So it was sustainable based on the following financial fact: * Net income: it had been increasing from $313.
7 of 1996 to $1648 of 2006. * Performance indicator: Return on Average Equity: 25%, and Loss Ration: 66. 6% in 2006, which meant an underwriting profit. 2.What challenges does Progressive face in 2007? What would you recommend to CEO Glenn Renwick? Challenges: In 2006, insurance rates were softening but Progressive was determined to hold prices firm. Renwick argued that the recent high industry profitability was driven by unanticipated falling accident frequency and that this would not continue.
He also pointed out that the difference in price might not be big enough to reflect market share, there might be many reasons for this, but the important issue was that Progressive didn’t know the reason.The second challenge was that the customer’s perception of Progressive differed from the Company’s self-perception as a champion of its customers. While Progressives goal was to be the consumer’s #1 choice for auto insurance, JD Power and Associates gave the Company a below average score for the overall customer satisfaction and ranked it 14. Progressive also scored below average for collision repair satisfaction and also ranked 14.
The third challenge was consumer awareness of the Progressive brand. In 2006, Progressive had achieved 57% unaided brand awareness, up from 53%.This put the brand in the top four, but well behind GEICO(79%), Allstate (69%), and State Farm (74%) who had been advertising for many years. Moreover, the leaders were increasing their advertising support aggressively. Recommendation: The reality is that the standard of pricing sophistication among Progressive’s most important competitors has improved, as has the technology used to present rates and make the sale.
This means that it is imperative for Progressive to redouble its efforts to lead in the application of rating nd segmentation skills, while maintaining low-cost position for non-claims expenses and excellent claims resolution quality. Based on information about consumer’s conception of Progressive, its effort should continue to focus on customer satisfaction and loyalty, and Progressive should also improve effective and consistent communication with customers, thus they can accurately reflect what they think and how Progressive’s customers would best understand what Progressive said. Strengthen customer’s brand awareness through the explosive influence of brand building and advertising.Progressive can increase adverting investment and stimulate marketing team to design more attractive promotion strategy and advertising contents, or be more in sync with ad agency.
Increase the role of technology, and e-business. The Internet is well beyond the initial quote and sales, it can be used to facilitate more post-sale transactions. Beyond the sale, customers are increasingly using online service to make changes in their policy, check policy status and make payments.
