PRODUCT DEVELOPMENT, MARKET EXPANSION AND PENETRATION

DR. AKIN OGUNBIYI GROUP MANAGING DIRECTOR

MUTUAL BENEFITS GROUP

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CHARTERED INSURANCE INSTITUTE OF NIGERIA 2014 INSURANCE PROFESSIONALS’ FORUM

TITLE

A PRESENTATION BY

September 11th 2014

AN APPRAISAL OF THE NIGERIAN CONSUMER TODAYAN APPRAISAL OF THE NIGERIAN CONSUMER TODAY

Population >170million

Urbanization 48%

Access to Internet >50million users

Telephone Lines 100million lines

Growing use of social media- Facebook, twitter, google+

Informal Sector >70% of the population

Bankability 1:9 formal to informal sector

AN OVERVIEW OF CURRENT SITUATIONAN OVERVIEW OF CURRENT SITUATION

BACKGROUND

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According to statistics released by NAICOM and NIA recently, Nigeria’s

Insurance Industry now contributes 0.6% to Nigeria’s GDP after the rebasing

of the national economy, a drop of one point from the earlier position of 0.7%.

Non-life average growth in the last ten years is 22.1% and life, 24.3% .

There is however, cheering news. There is appreciable increase in insurance

patronage by the public and the various tiers of government stemming from

innovations and improved services by the industry, increase in insurance

education and awareness, and a more robust regulatory framework.

Of course, we are still celebrating NAICOM’s enforcement of section 50 (1)

and (2) of the Insurance Act on “No premium, no cover”. This has brought

relative stability and confidence in the financial statements of the industry.

I want all of us to look the future in the eye and say: We are no longer foot soldiers

in the march of progress, We are revolutionaries! Although, there is no crisis in our

industry, we must use our capability to reinvent ourselves and our industry.

Incremental improvement programmes are better than no improvements at all, but

these are insufficient today when there is a yawning niche market space that we

need to quickly fill. Our industry must yield new earnings growth and deliver

sustained highly profitable growth. We must take evolutionary steps to achieve

revolutionary goals.

Our business concept and strategic initiatives must scale-up. We must embark on a

radical shift from mere procedures to creativity. Instead of being reductionist in

our competitive strategies, we should be expansive; inventive instead of

extrapolative and inclusive instead of being elitist.

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Let me summarize this introduction as follows:

Grow the insurance business through service-centred mass production and mass marketing

Provide sustainable competitive advantage through value-adding distinctiveness, competitive customer- focused capabilities

Up the ante to phenomenally adapt to unmet customer needs

Better and efficient business process with seamless IT infrastructure

Adopt competitive and best cost producer strategy for enhanced market share and salutary positioning.

Necessary investment in product development, market expansion for the long-awaited market penetration.

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Product Development, Market Expansion and Penetration are three (3) key

transforming coordinates that can be effectively engendered by our

courage, boldness, dedication, perseverance, to achieve positive

competitive moves.

Product Development

Physical expansion based on careful research and identification of customers and their potential needs.

Creation and design of products to meet identified un-catered or not-fully catered for risk profile of sectors, groups or associations or individuals.

Tailor-made products to suit the needs of income brackets and specific/target groups

Deliberate value–additions as pragmatic response to identified needs, new markets and sophistication of consumers.

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It is a strategic management process to achieve the following:

harness the fruits of innovations

replicate successful business patterns

generate profit and other benefits by identifying customer wants and needs and translating them to specified service deliverables

provide the desired market share within each identified market segments.

Product Development Process

To put an effective Product Development Process in place, you must monitor technology, competing pressures, customer purchase criteria, individual company’s capabilities, social, political, economic forces. Technical analysis, market analysis, timing and workforce profiling are key variables in decisions models.

The Relative Perceived Value (RPV) of the products must also be taken into consideration. Screening criteria for RPV are customer values, individual company values and capabilities. Each market requires an integrated approach.

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Positioning:

This implies the mental image which a service project has on a target market in relation to the images of other services competing in that market. It is what you do to the mind, not to the product.

It has the following characteristics:

an indispensable element in marketing planning and strategy for the company as well as for particular services.

practice segmentation– positioning in segments (segment dominance).

work around what is in the prospects mind

company and brand image– what does it connote (the service must perform the expected miracles in terms of value–addition)

your corporate name must be appropriate for the new service

superiority of a name over meaningless abbreviations- connotes value and essence of product.

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Market Expansion

This coordinate becomes useful as soon as you determine that sales to

existing customers and markets have been maximized. In other words, when

you have fully tapped your planned potential in a particular market; new

markets that you can easily reach in terms of contacts, relationships,

knowledge and experience can be considered.

The “new” markets must clearly offer carefully researched and identified opportunities for sustainable sales and growth based on:

consumer needs and wants

product characteristics and to what extent they meet the needs

competitive market structure

consumer characteristics

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formulation of rational media plans

identification of strengths and weaknesses of competitors and consequently the identification of segments that offer competitive advantages.

Management has to formulate and monitor market mixes for different segments, which sometimes complicates decision making.

Segmentation variables: these are

• price,

• quality,

• service,

• packaging,

• advertising etc.

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MARKET PENETRATION

SELL: -Existing products

-Hybrid of existing products

-Bundled products

GROWTH

Maximize potentials in terms of market share

Market Penetration

In the Nigerian marketplace, this growth strategy involves selling existing

products, their hybrid or bundled products into existing/expanded markets

to effectively grow market share.

Effects of Market Penetration

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DISTRIBUTION CHANNELS

These compose of a linkage of institutions which collectively perform the essential

functions to moving products from producers to consumers. It has two basic flows:

movement of services from the point of production to consumption

the informational flow both ways that precedes, accompanies and follows the

product.

These flows have 2 classes:

•deals with the purchase orders, invoices, payment for goods and all other transactions essential to exchange

•relates to the promotional information about the product or institution.

The timing, economy, accuracy and clarity with which these flows are administered

measure the efficiency of the channel.

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The traditional channels for insurance sales and marketing are:

¬Insurance Brokers:›controls over 75% of the established insurance markets {Corporate, Government, Complex Industrial and high profile risks}.›about 600 registered ›over 3,000 unregistered

The operation of the brokerage services in Nigeria presents a big limitation for insurance market expansion and penetration.

¬Insurance Agents:›Agency network in the industry is very weak and statistics indicate less than 10,000 agency workforce.›This is a veritable and most significant singular component of market expansion and penetration. E.g. South Africa, United State of America, India, Malaysia.

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¬ Direct Marketing:› pockets of sales from customers not going through any intermediary.

› experience in developed countries and the recent roles of information technology, telecommunications, social media, in transforming businesses in Nigeria; evidence of appropriate channels for insurance sales and marketing to achieve the objectives of NAICOM’s MDRI.

Penetration and business process virtualization (BPV) is an established medium for mass marketing and substantial reach. Also, It is the application of intelligent network-enabled automation to leverage what you already have, people and their intellectual productivity, capital and infrastructure. It is a wonderful paradigm that enables the effective use of computer platforms, combined with enabling software and high-capacity networks to reach several multiples of market in a swift.

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Effectiveness of the channel: provides for physical movement and achieves the greatest economymaximum effectivenessoptimum amount and quality of promotional information to all prospective buyers and provides an adequate feedbackhas the flexibility to adapt creatively to company innovations.is sensitive to each company’s role as it relates to the expectations of the other channel members.

Media Relations as Strategic Platform

This platform (print and electronic) has first-hand intimacy with the much-needed

publics.

No other medium offers comparable population (audience) size and breadth, day in, day out and also the range and depth of content.

Today, online additions and other innovative media products have, creditably expanded these “penetrating footprints”.

THE MUTUAL EXPERIENCE

The kernel of Mutual Benefits’ impressive growth, is strict adherence to the company’s

core values. We pride ourselves as unrepentant sticklers for Leadership,

Professionalism, Knowledge, Continuous Training and Ethical Practice.

As a result of the recapitalization exercise of 2006/2007, Mutual Benefits came up

with the “Wind of Change”, our terms of engagement with stakeholders. The primary

objective was fostering insurance as a vital financial instrument for national

development through:

Repositioning and deliberate change in strategy

Clear and compelling brand promise

Superior and memorable services

Clear, competitive differentiation19

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Conclusion

The Nigerian Insurance Industry must maximally utilize or lap-on to clear and

specific opportunities. We must continually move the ball forward to exploit the very

large available distribution space. We must wrap-in this considerable large number

of potential customers.

We have a niche gap in this country that must be filled because no matter how an

individual or organization sets its goals and executes its plans, the goals, at one time

or the other, may be thwarted by unplanned events. Our industry, can professionally

and effectively cushion or drastically minimize these fortuitous losses.

We therefore have what it takes in terms of competencies to enable and ensure

maximum profitability for organisations and lifetime successes for individuals as well

as families. We must dream, create, explore, invent, pioneer and imagine in order to

create new wealth and deliver sustained profitable growth.