Help for the Case Analysis with the Guide Question.

1 What do you think are the key factors influenc ing the price of car insurance? Use Figures 7.2 and 7.6 to help you structure your answer. 2 What are the advantages and disadvantages of opting out of allowing your products or services to feature on price-comparison websites, as Direct Line and others have done? 3 Are there any types of goods or services for which price-comparison websites might be inappropriate? Why? 4 In general, to what extent do you think that the easy online availability of price information and comparison is a good thing for marketing?

LAN: 3 I ULJY 4' YOU WANT TO GO COMPARE? SIMPLES ICine of the more interesting side-effects of the inter- net is that it has made it a lot easier to be price sensitive by taking the time, cost and physical effort out of 'shopping around' for goods and services. In the pre-internet days, if consumers wanted to shop around for a good deal on a new fridge-freezer, they might have to spend a couple of weekends doing a tour of local stores comparing specifications and prices, and perhaps travel a bit further afield to a bigger city or out of town shopping centre where there might be more choice or more competitive prices to be found. It was a similar story with serv- ices such as car insurance: an annual ritual of setting aside time to compile a list of brokers and insurance providers from the Yefl'ow Pages, then phoning round them all, going through the same basic information set with all of them, writing down all the quotes and details of what is or isn't included in the oover offered, and finally making a decision and phoning one of them back. It would be hard to blame a shopper who decided that for the sake of saving a few pounds it wasn't worth the effort, thus effectively placing speed, convenience and lack of hassle higher up the decision-making-criteria list than price. lClince the shopper goes online. of course, it's a different story. Detailed comparison of product or service specifications, price and even availability across hundreds of geographically dispersed pro- viders is just a few clicks away, and once a buying decision has been made, it's equally easy to com- plete the deal online. The advent of price-comparison websites has made it all even easier, by effectively providing a one-stop marketplace for the shopper so that they can enter their requirementsfdetails just 286 ESSENTIALS OF MARKETING once and receive a structured comparison of a wide This could be particularly disadvantageous for the range of competing offers. consumer if online retailers are frequently adjusting A survey conducted by New Media Age (2011) their prices in response to competitive conditions, found that many respondents thought that the inter- demand patterns or other environmental pressures. If net was the cheapest place to buy things (ranging the price-comparison websites are not reflecting this, from 82 per cent finding it the cheapest place to buy then it's questionable whether they are actually serv- CDs/DVDs to 20 per cent for groceries), and that ing the shopper's needs as well as they could. 76 per cent used online prices as a reference point There is also a risk, particularly thinking about to negotiate prices for the same items in shops. financial services such as car insurance, that the focus So, for the shopper, at first glance this might seem on price diverts the consumer's attention away from like a fantastic idea. The price-comparison website the detail of what they are actually getting for their looks like the shopper's best friend, a neutral third money. The car-insurance market is potentially very party that does all the hard work and gives you a list lucrative for the price comparison sites as Mintel of the best deals for you, in order of appropriate- (2011b) reports that three-quarters of motorists look ness. Unfortunately, it's often not that transparent for a better deal when they renew their policies. But or simple, however. Few shoppers pause to think because of this focus on price, in order to make poli- about how the price-comparison websites make cies look like great deals, some price-comparison their money, for instance. The fact is that they gen- websites set a very high default level of 'voluntary erate revenue from commission earned from 'click excess' (i.e. the amount that the policyholder will pay throughs', i.e. if you find a deal you like the look of on towards the cost of any claim - if you agree to pay the the price-comparison website and click through to first #1,000 of a claim, your insurance premium will follow it up on the supplier's own site, then the price- be lower than if you are only prepared to pay the first comparison site gets paid. In financial services, for $250, for instance). On top of this, some policies also example, this, on average, might be $40 commission have a 'compulsory excess' hidden in the detail, which on an insurance policy or up to 2150 for a loan appli- again keeps the premium down, but will result in a cation (Wallop, 2009). This sort of arrangement gives nasty surprise when you make a claim if you haven't the price-comparison websites an incentive to feature read the small print. Car insurance can be complex, those suppliers paying the most commission more and it is difficult sometimes to tell whether you are prominently and, of course, there is no incentive at all actually comparing like with like when you are faced to 'push' the products of those suppliers who are not with a page of search results - it pays to engage with prepared to pay commission at all. A YouGov the fin stail before you buy! (reported by Marketwire, 2011) sug Page 303 Pn625 Consume@ aren't completely oblivious to all this, of average each shopper on price-comp tes course. A ich? survey reported by Cumbo (2009)generates $64.59 in commission, which amounts suggested that there is a healthy level of cynicism out to E652.5 million per year for the industry. And then there: just one-third of respondents said they trusted there's the revenue they earn on top of that from sell- the website to find the best price available, and two- ing on your personal details to other marketers. thirds thought that they would be presented with the The shopper might also imagine that the price- products that would earn the most commission for the comparison website has full coverage of the market, website. However, the YouGov survey mentioned earlier but this is not necessarily the case. In the financial- suggested that consumers seriously underestimate the services market, for instance, neither Aviva not Direct amount of commission that they are paying, with over Line, both prominent brands in the marketplace, 40 per cent of respondents guessing that it would be up have their products listed on price-comparison sites, to 10 per cent, when in fact that actual level is around and both make a virtue of this in their marketing and 24 per cent. Despite the mistrust, consumers seem to advertising campaigns. A further issue is that there have embraced the involvement of price-comparison might also be an assumption that because it's all websites, not least because of the proactive marketing online, the prices quoted are 'real time' prices. Again, strategies of some of the providers who are fighting for this is not necessarily the case. Many of these web- market share. A 'big four' group of price-comparison sites rely on the supplier of the goods to update the sites has emerged in the UK, comprising comparethe- pricing information, which means that prices could be market.com, confused.com, gocompare.com and several days out of date so that the consumer clicks moneysupermarket.com all of whom spend very heavily through for what seems like a good deal only to find on television advertising campaigns, making it very dif- that the product is no longer available at that price. ficult for any other new entrant to be noticed.288 ESSENTIALS OF MARKETING one-quarter of price-comparison website users use the website to narrow the choices and then pick up Questions the phone and contact the insurer direct. In some cases this is about the reassurance and security of human contact, and the ability to probe further what 1 What do you think are the key factors influenc they are getting for their money, but for others there ing the price of car insurance? Use Figures 7.2 is a perception that a further discount can be negotia and 7.6 to help you structure your answer. ated, using the internet price as a bargaining tool. 2 What are the advantages and disadvantages of Finally, here's a closing thought from the MD of an opting out of allowing your products or services advertising agency: to feature on price-comparison websites, as The simple truth is [that a price-comparison Direct Line and others have done? website] means a greater variety of products, 3 Are there any types of goods or services for more incentives, such as discount vouchers, which price-comparison websites might be softer benefits, such as consumer advice, and inappropriate? Why? a sense of community. This all leads to referred brand satisfaction. So, again, why cut out the 4 In general, to what extent do you think that the middleman?' (as quoted by Marketing, 2010) easy online availability of price information and comparison is a good thing for marketing? Sources: Cumbo (2009); M2 Presswire (2009); Marketwire (2011); Marketing (2010); Mintel (2010a, 2011b); New Media Age (2011); Parsons (2010); Reactions (2011); Wall (2011); Wallop (2009)