What do car insurance and travel booking have in common? Each of these industries has largely cut out "the middlemen." Insurance companies like Geico, Progressive and State Farm make it simple and convenient to buy car insurance online and are successfully reaching customers directly through traditional and digital media channels. Sites like Expedia and Orbitz make it easy to book complete vacations and get great deals online—without the help of a travel agent.
Even Nike just announced that they will be selling direct to consumer, too (to the detriment of companies like Footlocker).
At our most recent Marketing Advisory Board meeting, held August 11th in Boston, Massachusetts, Carla Moradi of HUB International—a leading North American insurance brokerage—led a discussion on disintermediation. What can large, successful companies do to avoid being "cut out" as middlemen, like so many before them? How can these companies preemptively act as the disruptors themselves, stacking the deck in their favor?
In other words, Carla wanted some insight on what the role of the insurance broker should be moving forward and what steps she can take to get her own company on that path—through a lens of private equity that requires long-term plans be balanced with short-term wins.
Kay Lemon, Accenture Professor of Marketing, Carroll School of Management at Boston College, brought several examples from other companies that hold potential lessons for companies like HUB. Firstly, there’s Dell and EMC:
So, perhaps brands facing disintermediation should consider new partnerships or acquisitions. Aaron Chestnut, CMO of First Tennessee agreed that companies should have an open mind to what may seem like strange bedfellows. For example, financial technology companies may turn out to be valuable partners for financial services organizations.
Kay also discussed that there may be a lesson to be learned from Comcast, which was not so much facing disintermediation as it was a similar situation: new technology that was enabling customers to “cut the cord.”
In this instance, Comcast moved a highly successful employee into another area of the organization—customer experience—to bring about much-needed innovation and disruption.
Thirdly, Kay mentioned Capital One and IBM, both of which have implemented small pod-like divisions and operate on an agile scrum model. She suggested that using a scrum structure could be an effective model to help companies facing disintermediation to constantly scan for opportunities to innovate and stay ahead of the curve.
At the end of the day, Kim Whitler, Assistant Professor, University of Virginia, Darden School of Business, hit the nail on the head: it’s all about what value the company can bring to its customers.
Frank Grillo, Harte Hanks CMO, elaborated on Kim’s point by suggesting that careful segmentation will play an important role in HUB’s success, as well as that of other companies facing disintermediation. Rather than fight for the portion of the market that will inevitably buy basic insurance online, he says, “Refocus on being the high value insurance provider for the people who need it—and do it better than everyone else.”
What all Marketing Advisory Board Members agreed on was that the best approach is to focus on where the brand adds real value and on the right customers—those with needs the company is best positioned to serve. This can best be achieved with effective segmentation (learn how to do it here) and a focus on customers’ jobs to be done.