September/October 2000

Special Report    

News Analysis: The New
Allstate Customized Offers
Option
“Be Careful What You Wish For,
You Just Might Get It”

by Debra Levy

At first glance, the new Customized Offers option (COO) being promoted by Allstate Insurance may sound to some like a bad April Fool’s joke six months early. But a closer inspection may reveal otherwise. AGRR magazine contacted a number of key industry leaders (none of whom wished to be identified by name) and provided an overview of the new option. Each person with whom we spoke made a quick assessment of what such a program might mean to his or her own company. Over the course of several discussions a number of common themes and conclusions emerged. Chief among them:

1. Consumer Preference Counts. COO honors consumer preference and choice. A conventional network system tries to eliminate consumer preference. This program does not—and it does not override consumer preference for price. Price only comes into play in those cases where the consumer has no preference. “This is a very good thing for companies that have a strong market presence,” said one East Coast company executive. “If you have done a good job of marketing your company, if you’re known and requested by name, you may be getting most of your referrals because of requests rather than a random rotation. And you’ll continue to get them without offering any additional discounts. But you need to know that before you decide whether or not to participate in COO and at what level. Conclusion: Track how Allstate customers come to you—through requests or rotations, know your market share and market presence and make pricing decisions accordingly.

2. The Internet Changes Everything. The technology that first led to the consolidation of the auto glass industry and the emergence of networks has now come full circle. “You really have to see what’s happening,” said one glass shop owner with multiple locations in the Western states. “In the beginning, the insurers hooked up with networks because networks could offer EDI, make adjustments electronically and provide information that way. The process provided an advantage to the larger companies that could make the necessary investments. The Internet has changed that now,” he added. “This is first time that shops have been able to take advantage of those economies on their own and I expect there will be more to come.” Conclusion: Invest in technology for the future that will provide you open access and full internet capabilities. Consider the back end too, and consider making arrangements for Electronic Funds Transfer (EFT). “People don’t always understand that EFT speeds payment directly to your account,” said Lisa Langford, manager of process integration for LYNX Services. “A very small percentage of LYNX participants take advantage of that right now.”

3. Haste Will Make Waste. Our experts cautioned against viewing the COO as some sort of an auction. “Companies that attempt to manipulate their pricing on a daily or weekly basis will have to live with their mistakes for four months,” said a shop owner in the Southwest, “and in this business today that’s an awfully long time to live with a mistake.” Another owner was more analytical and provided a hypothetical example. “Let’s say 60 percent of your Allstate business comes through consumer requests, and forty percent through a random rotation. You need to remember that any increased discounts effect all Allstate pricing. So when you reduce your prices, you’ve reduced on 65 percent of the work you were going to get any way.” Conclusion: Those companies that were relying heavily on LYNX random rotation to provide them with work will need to make some adjustments either in pricing or in increased marketing and sales efforts locally.

4. Efficient Companies Will Do Well. All of those with whom we spoke agreed that companies of any size efficient enough to do work at lower prices while at the same time marketing themselves will do well. Conclusion: Be efficient.

5. Repair is a Question Mark. Comments were mixed regarding how the new program would effect windshield repair pricing and repair-only companies. Some said that in the long run, it may help repair-onlies get more work … others that it may prove a ‘loss leader’ for replacement companies. Conclusion: The jury is still out. Get more and detailed information about how repair work is assigned before making any decisions.

6. The $10 Fee for Changes Stinks. “Adding insult to injury,” said one shop owner. “Making me fall on my own sword,” said another. “Probably a necessary evil,” said a third, “but evil nonetheless.”

 

MORE STORIES:

AGRR

Copyright Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.