Home (re) Insurance Latin America Should the Latin American insurance industry be investing in marketing and innovation in times of crisis?

Should the Latin American insurance industry be investing in marketing and innovation in times of crisis?

15 min read

According to what we can learn from previous crisis, the answer is very clear: YES. The Latin American insurance industry must invest in marketing in times of crisis

Even that many firms trend to cut marketing e innovation expenses (I prefer to use the word investment), many studies show that it is an incorrect approach.

Once again (it already happened in 2008, for instance) the need to link marketing with business performance has become more urgent as marketers have been forced to defend the value of their activities and budgets during times of economic recession.

As I previously wrote in other marketing articles related to the insurance industry, especially in Latin America and Miami, I would like to highlight again that marketing is not only about cocktails, golf tournaments and drinks.

According to the American Marketing Institute, Marketing is “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large”.

It includes market research, psychology of consumer behavior, promotion, branding, social media, benchmarking (in other words, to see what you competitors are doing and learn about it) and yes, also networking, public relations, new business cards, new brochures, drinks and golf tournaments. (But not only that)

Previously I spoke about research showing what to do during crisis. To start with, I am going to summarize PIMS study (Profit Impact of Market Strategies) It is a comprehensive, long-term study of the performance of strategic business units (SBUs) in 3,000 companies in all major industries. If you want to learn more about it, follow this link.

What PIMS study is shows is that even in times of crisis, innovation and marketing are not an option. On the contrary, it is during these periods that innovation and marketing are the real driver for success.

However, the return on investment is not immediate and therefore patience is required. It mostly takes place 2 years after investment. This is why really successful companies never stop innovating and don’t handle innovation as a 6-year cycle which only lasts for 2 years. It must be a continuous effort.

Success for business owners who won’t give up during crisis time – according to PIMS – in the years following the crisis through the acquisition of extra market share.

Results will in no way happen in the short term though and this is why the real difficulty is to show business owners, managers and directors that innovation and marketing budgets have to be maintained or even better, increased.

It is certain that the main inhibitor in that process is that managers are also driven by short-term issues in those difficult times, sometimes fighting for their own survival and therefore focusing not on marketing or other “non-relevant expenses” according to their business myopia.

Some people could argue that a database operating on information gathered in the period 1970 – 1983 is outdated. However data continues to be collected from participating companies and PIMS argues that it provides a unique source of time-series data, the conclusions from which have proven to be very stable over time.

Other could say that it only applies to large companies or that it does not apply to his/her company. This is applicable to a wide range of budgets and situations. As a matter of fact, I started my own marketing consultancy firm in 2009. Those were rainy days as you must recall. If you know that to do during rainy days, you will enjoy sunny days after the storm. I invested a lot of resources during the crisis and four years later, in 2013, I doubled the number of clients and projects. I worked as a marketing consultant on a project with the participation of the Chef José Andrés and a famous ready meal company in Spain… in May we won the National Marketing Award! Long term vision is crucial.

National Marketing Awards Gala Dinner

You could say that it was an isolated research and that my own case is not enough in order to convince you. In that case let´s see what happened with Kellogg’s in 1930:

Not enough? Ok, let´s see more evidence. Many researchers and reports suggest companies to increase marketing expenditures during period of crisis (Ang et al. 2000; Koksal & Ozgul, 2007; Srinivasan et al. 2005). It has been shown that those companies increasing or maintaining their level of advertising / promotion will increase sales, income and market share during and after a recession (Kim, 1992; Werner, 1991). As I previously mentioned, businesses should view marketing and advertising not as a cost but as an investment.

Of course it is difficult for firms to recognize and adapt to change when it is drastic, sudden, and externally forced like the Covid-19 crisis.

Once again, other researches say that it has been shown that those increasing or maintaining their level of advertising will  increase sales, income and market share during and after a recession (Kim, 1992; Werner, 1991).

“It has been shown that those increasing or maintaining their level of advertising will increase sales, income and market share during and after a recession (Kim, 1992; Werner, 1991). Businesses should view advertising not as a cost but as an investment”.

Although there is a large literature concerning general company measures taken in an economic crisis, firms normally react cutting marketing investment. A friend of mine told me the other day, some firms are cutting expenses (investments, you now know) “a machete”.

Still not sure about what to do? In that case, see below more evidence.

After that reading you should know what to do. (Or what to do not do).

David Roig
Managing Director iNLIP. Marketing and Consumer Behaviour Expert.
Spanish National Marketing Award Winner.

If you want to learn more about what to do in terms of marketing during crisis:

Abernathy, W., & Clark, K. (1985), “Innovation: Mapping the winds of creative destruction”, Research Policy, Vol. 14, pp. 3–22.
Ang, S.H. (2001a), “Crisis marketing: a comparison across economic scenarios”, International Business Review, Vol. 10, pp. 263-84.
Ang, S.H. (2001b), “Personality influences on consumption: insight from the Asian economic crisis”, Journal of International Consumer Marketing, Vol. 13 No. 1, pp. 5-20.
Ang, S.H., Leong, S.M. and Kotler, P. (2000), “The Asian apocalypse: crisis marketing for consumer and businesses”, Long Range Planning, Vol. 33, pp. 97-119.
Beaver, G. and Ross, C. (1999), “Recessionary consequences on small business management and business development: the abondonment of strategy”, Strategic Change, Vol. 8 No. 5, pp. 251-61.
Abernathy, W., & Clark, K. (1985), “Innovation: Mapping the winds of creative destruction”, Research Policy, Vol. 14, pp. 3–22.
Ang, S.H. (2001), “Crisis marketing: a comparison across economic scenarios”, International Business Review, Vol. 10, pp. 263-84.
Hannan, M. T., & Freeman, J. (1984), “Structural inertia and organizational change”, American Sociological Review, Vol. 49, No. 2, pp. 149–164.
Kim, P. (1992), “Does advertising work: a review of the evidence”, Journal of Consumer Marketing, Vol./No. 9, pp. 5-21.
Koksal, M. H. and Ozgul, E. (2007), “The relationship between marketing strategies and performance in an economic crisis”, Marketing Intelligence & Planning, Vol. 25, No. 4, pp. 326-342.
Laitinen, E.K. (2000), “Long-term success of adaptation strategies: evidence from Finnish companies”, Long Range Planning, Vol. 33, pp. 805-30.
Pearce, J.A. and Michael, S.C. (1997), “Marketing strategies that make entrepreneurial firms recession resistant”, Journal of Business Venturing, Vol. 12, pp. 301-14.
Quelch, J. (2008), Marketing Your Way Through a Recession, Harvard Business School, Working Knowledge, Research & Ideas, pp. 1-2.
Quelch, J. A., & Jocz, K. E. (2009), “How to market in a downturn” Harvard Business Review, Vol. 87, No. 4, pp. 52-62.
Roberts, K. (2003), “What strategic investment should you make during a recession to gain competition”, Strategy & Leadership, Vol. 31 No. 4, pp. 31-9.
Rosberg, J.W. (1979), “Is a recession on the way? It’s no time to cut ad budgets”, Industrial Marketing, Vol. 64, pp. 64-70.
Shama, A. (1993), “Marketing strategies during recession: a comparison of small and large firms”, Journal of Small Business Management, Vol. 31, pp. 62-73.
Shrager, C.A. (1991), “Corporate growth strategies in a recession”, The Corporate Growth Report, Vol. 9 No. 2, pp. 4-5.
Srinivasan, R., Rangaswamy, A., Lilien G. L. (2005), “Turning adversity into advantage: Does proactive marketing during recession pay off?”, International Journal of Research in Marketing, Vol. 22, pp. 109-125.
Tripsas, M., & Gavetti, G. (2000), “Capabilities, cognition, and inertia: Evidence from digital imaging”, Strategic Management Journal, Vol. 21, pp. 1147–1161.
Werner, L.R. (1991), “Marketing strategies for the recession”, Management Review, Vol. 80, No. 8, pp. 29-30.

Load More Related Articles
Load More By iNLIP
Load More In (re) Insurance Latin America

Check Also

InsuResilience Solutions Fund to support MiCRO and SBS Seguros Colombia

After successful pilots of an inclusive insurance product that helps families and microent…