Tim Moran, editor in chief of CMO.com, recently had the opportunity to sit down in New York City with John Parker, chief marketing officer of Zurich North America Commercial, a part of $65 billion global insurance carrier Zurich Financial Services Group. Parker’s division alone accounted for $1.1 billion in business operating profit last year and, according to Highline Data, is the fourth largest commercial insurance carrier in North America, insuring companies with revenues typically between $75 million and $750 million. In addition to North America, Zurich has strong positions in personal, commercial, and corporate insurance in Europe, and growing positions in Asia-Pacific, the Middle East, and Latin America.
Commercial insurance has been around for some 400 years. Among Parker’s main challenges are bringing Zurich’s business—which in 2012 will have been active in the United States for 100 years—into the digital age while still maintaining the relationship marketing that has been the backbone of the business since the beginning. Read on to learn how he has been using digital marketing to achieve that goal.
Q: Tell me a little bit about Zurich and your role.
A: As CMO, my responsibility is the commercial business in North America, but now I've also picked up a lot of responsibility in Brazil. I go to Brazil every month to help with its marketing and customer-growth strategies, which is really a lot of fun.
In North America, there are two things that shape what we do and why digital marketing for us has taken the form it has taken—and also why it's so incredibly important. We have two brands in North America—the Zurich brand and the Farmers brand. The Farmers brand is the consumer brand, the B2C brand, and Zurich is the business brand, the B2B. I am responsible purely for the B2B strategy. Some, if not all, of our major competitors, particularly Hartford and Travelers, are both B2B and B2C. So that forces us to be fairly thoughtful about our strategies, particularly in relation to digital marketing. If it's one brand for both, then you have very different media strategies. They are advertising to consumers, and you get the halo effect on the brand for the business. But for me, the cost per view of someone who's likely to buy my product if I go to television is much too high. So that changes all of the economics of what makes sense.
Q: Tell us about the marketing role in finance and how it differs from other industries.
A: Financial services, particularly B2B financial services, have not been terribly marketing-oriented. It's much more sales than marketing, and it always has been. You have to take into account that we work through brokers. The big brokers are all independent, and they all represent multiple carriers. They build a relationship with a client, the customer, and then when it's time to renew an insurance policy, the broker presents multiple alternatives, of which we are one. Historically, we've been in a structure in which the carriers focus on the brokers, the brokers focus on the customers, and there is very little linkage between the carriers and the customers.
What we've done is actually change that. The part of the organization that we now describe as sales is working with the brokers, and the part that we consider marketing is the part that works with the customers. I've had the very good fortune to build the marketing function here the way I thought it should be designed. I've built our marketing function, largely, from a blank sheet of paper over the past three-and-half-years, and it has been really fun. When I got to Zurich, there was great debate about who was the customer—the broker or the end customer? One of my favorite things to do is type something into Google Dictionary for a definition, and if you type in "customer," it says, "someone who pays for goods or services." That's a pretty good definition. And we have a broker remuneration strategy that has a measurable correlation to the value the broker brings to Zurich and the customer. The broker doesn't pay us. The broker is incredibly important as it’s his duty to seek for each customer the best available and most sustainable proposition. We value our relationships highly, but the customer is the one that pays, and the broker is the one we work with. That's the big difference.
Q: How did Zurich’s marketing operation actually come about?
A: In brushing up on my marketing acumen before taking this job, I looked around at the literature, and Harvard Business Review had an excellent definition of marketing and marketing metrics and how to think about marketing now. It was a three-part model from John Quelch [the Lincoln Filene Professor of Business Administration at Harvard Business School]. First, he said that you must understand your customers’ needs. Sometimes you understand those needs better than they do—not what they tell you they want, but what they need. Second, given an understanding of those needs, you want to be sure that you offer products and services that meet those needs in distinct ways. Finally, given one and two, you want to build long-term, profitable relationships with your customers. And a good marketing organization does all three of those things.
Some of the best marketing thinking in the world is based on these three ideas. So that's how I approached the task, which was to build an organization that is good at all three. The opportunity, and the need, is to bring marketing to an industry that, like most industries today, is struggling for growth. Our customers are not growing in terms of the number of companies and their revenues. Zurich's 100th anniversary of selling insurance in this country is next year, so to grow you have to do something different and find new ways of doing things. We can grow in one of three ways: We can bring in new customers, we can expand our relationships with our existing customers, or we can improve our retention of those existing customers. So I try to figure out how we can do each of those three things, and, frankly, right now, new customers are hard to come by because there aren't as many new businesses being formed as there were in more prosperous economic times. You're fighting for share.
Metrics that Parker cares most about—and those that don't hold much weight.
Q: Can you talk some about how you use metrics to track the success of your strategies, as well as about how you use them for internal recognition from your C-level peers?
A: In an organization that, historically, has not been dependent on marketing, and you're doing something new, it's hard to increase your cost basis when you are not growing. There's a zero-sum gain when it comes to managing costs and you want to do new things. But, in the end, everything comes back to ROI. I think everything that we do needs to be measurable from an ROI perspective. This causes us to look at marketing metrics a little differently from just the old raw metrics. I always tie everything we do, ultimately, back to something that affects customers. We do things that improve the retention of our customers; we do things that cause our customers to buy more from us; and we do things that bring in new customers. Everything I do has to be connected to one of those three goals.
So there are a lot of intermediate metrics that I think classic marketers—particularly the brand-management portion of marketing—rely on that, frankly, I just jump over. It's great when I sit with our agencies and they talk about brand awareness, brand consideration, and all of the metrics that surround a brand. I don't invest a lot of time in those.
Because I'm not classically trained as a marketer, I don't use all the classic marketing metrics. For me, the value of a brand is that, when someone is faced with two choices that are otherwise equal, they recognize you, they know what you stand for, and because of that they choose you instead of the other guy. I track what we spend in a given month and how it, in turn, affects the number of opportunities we have to quote on business from our brokers and the number of policies we write for our customers. All of my media, all of my advertising, is directly tied to that. Consideration and awareness to me are abstract concepts that I don't really invest a lot of time in. I understand that if I put an ad in a publication, I can determine how much I am likely to get in increased volume of business. I know how much that ad costs, and I know the value of the volume I get in return because I've measured it and frequently update it. So I get an ROI right from that. That helps me understand whether I want to spend money on digital media, print, or broadcast.
Q: Do you use the same metrics to measure you campaign and strategy success that you use to make the case for marketing to the CEO and CFO internally?
A: Yes, although I will present them somewhat differently at times or will break it up differently. But I've got one core metrics activity that calculates the "R" and tracks the "I." And as long as I have the “R” and the “I,” I can produce the metrics I need to make my own decisions and describe the value of what we're doing to both my CEO and my CFO. And the CFO, at times, is tougher than the CEO, but that's his role. We respect that, and we have healthy creative tension at times. But then we hug and flip a coin and whoever loses buys dinner.
Q: Has the advent of digital media made all of this possible and easier?
A: Absolutely. I don't know what I would have done if I were in this situation 20 years ago. I couldn't have measured things the way I measure things now. It just wouldn't have been possible. That's the great advantage of digital—it’s all measurable. I can measure my return from digital in two major ways. When I place an ad on a digital publication, I keep track of the money that I spend. Then six or eight weeks down the line, I can look at my sales as a result of that and assume that one caused the other. That’s simple and obvious.
But the other thing we do is—and this is where our heavy investment in digital marketing comes into play— we’ve built a large system of people who respond to offers that we make through our digital-marketing system. We pull people into a nurture stream. Everything we do in the digital space will always have an offer—something like a free whitepaper on a topic of interest, or a webinar on a topic that really matters, or risk-management advice and insight. And now we're dabbling in membership and social-media communities. But in order to receive the offer, the customer has to register with our system so we know who the person is, and what the company is. They give us an email address and then are able to opt-in to a regular stream of insight and thought-leadership pieces—not product sales pitches.
None of this is sales-based; it's all about sharing knowledge. When someone responds and enters our nurture stream, they then get something from us once a month. This is relationship marketing via a nurture stream, and over the past two years we've had more than 50,000 people register who could potentially buy our products, and now they are getting things from us monthly. The advantage of a digital-marketing system is that all of the cost is in building the infrastructure and then developing the pieces of content that you send. That's where we spend all our money. It costs me a couple of pennies to send an email—maybe less because now it's all in-house. We in no way try to restrict who we send this stuff to—we're sending it to competitors, to brokers, to distributors who we don’t typically work with, to customers, to prospects—anybody who signs up gets it.
Content marketing and insight from email open rates.
Q: And you have no issue with having all of that original created content out there to everyone like that?
A: One of the things I learned at some event that brought this into focus is that once something's in the digital world, it's gone. Don't worry about managing it. If a competitor signs up for your stuff, that's great. Maybe it will work like recruiting, and we'll attract more talented employees. If I invest in superb content—and that is where we spend a lot of money—I want that piece to be seen by as many eyes as it can.
Q: So once these potential customers are in your nurture stream, you can track, over time, which ones turn into actual business?
A: Yes, and I can get the ROI straight off of that. And this is what's really so exciting. At one point we were worried that we were going to wear out our welcome. If we're sending something to somebody every month, aren't we afraid that, after a while, they'll view it as junk mail? Actually the opposite has happened, and this is what tells us we're on the right track. We track the open rate for everything we send, and we find that the more things someone has received from us, the higher the open rate. Our marginal return is rising. What that tells us is that our content is good because they opened it, read it, and they think, “Hey, this is useful, so the next time I get something I'm going to open it again.” As long as our open rate keeps rising, we know we are doing the right thing.
Every month we get tens of thousands of submissions for opportunities to quote on business from our brokerage channel. So we can match that to who has been getting some content from us every month. And because it's all data, we can hold up our submission flow and pick out the ones that are getting something from us. We can see what our win-rate is in terms of percentage of time we write the business, and the business from the group that gets content from us is dramatically higher—almost twice as high.
Q: Is this the way you determine the value of what you consider your brand?
A: Yes, it’s because they recognize us, and that's the brand. But this brand has nothing to do with the way a brand is traditionally thought of. Instead, we've created brand equity through digital marketing and content marketing. That's brand equity in the digital age. It's created differently. Then when we know the difference in the win-rate, we can calculate the value we've created.
Q: Can you talk a little about the actual system you've created to handle all of this?
A: We built the system together with the e-commerce unit within our global ad agency. I didn't want to get into anything custom that I would be tied to, so we integrated different pieces. We use Salesforce for our underlying data, and then we use Eloqua on top for our email. That tracks the response rate, and we build all the analytics in Eloqua. I needed a database system and an email system working together. But if I needed to switch to something else, I could—the data is what I want. I never want to get tied into a system because I want to be able to adopt new technology as it's developed. And all of this technology is evolving so rapidly. You don't want a whole new family of capabilities to emerge and you're locked into an old system.
Q: And this is the data and system you use to create all your reports?
A: I create the reports for myself. To do the actual ROI calculations, I work with the financial people on my staff with whom I meet on a pretty regular basis—at least quarterly, often monthly—to track the ROI, because the “R” comes from one system and the “I” comes from another. We keep a pretty close eye on it.
At the end of the day, I'm a problem solver, so the finance part, which is ultimately important to solve problems, is something I've become very comfortable with. One of the great difficulties in making all of this work is your overall approach to how you manage information in the organization. Gathering the information into a form from which you can extract what you need is ultimately important. Often, the different elements of the data you need to solve the problem at hand are tied up in different legacy systems. It requires a very good working relationship with your CIO and COO to pull the data out into a place that you actually make something out of it and then make useful decisions.
Q: Is all that data in the hands of the CIO and his team, or is it part of a marketing-data environment?
A: Well, the customer data, the prospect data, is in our marketing system. The transaction data is still on mainframes in legacy on-premises systems. So I have to be able to compare my digital-marketing data with the transaction data that's on that legacy system. There's a little bit of art and skill to that.
Digital marketing as a means for customer retention.
Q: That's very interesting. Where do you see things heading?
A: Well, let's talk about growth for a minute. Zurich is truly a global company—we are in 170 countries. But, internally, we're finding that building relationships with our customers, unsurprisingly, has a major impact on our retention. When you have, say, 100,000 customers, speaking in round numbers, it's hard to have relationships based on meetings and phone calls and going out to lunch on occasion, which is traditionally how our business has worked. And what that means is that the largest customers got a personal relationship and everybody else didn't get one. Now we are able to develop relationships through our digital-marketing approach and that, in turn, causes our retention to be dramatically higher. If you are trying to grow in a market that's flat, you've got to get your retention squared away first.
Q: So you are convinced that the advent of digital marketing has allowed you to do all this?
A: Absolutely. We can measure the difference in retention between those customers that we brought into our digital-marketing system and are sending content to on a regular basis, and those who have not come into the system yet, and it's different. We know that difference with a great deal of precision. Once again, that leads to ROI and growth.
But at a broader level, the corporate level, what's really exciting is that we're finding that the capabilities that we build in North America are incredibly appealing to our colleagues in some of the other international markets. In two of our major global growth markets, our colleagues are reaching out to us to take the same approach and leverage the infrastructure we've built. I'm sort of creating this network of people around the world, many of whom have worked with us here in North America. My philosophy of management is that the best thing you can do is get the people that work for you promoted.
Q: Can you give me just a little insight into what you are doing in the social area? I know it might not be perfect for your kind of business, but you must be getting your feet wet in some way.
A: I think we are in Chapter 1 of our social novel here—maybe Chapter 2 or 3. We have a number of initiatives going, but since there is an uncertainty about what form social will take to be ultimately meaningful to us, we have placed multiple bets. We see some value from Twitter, when it comes to pulling people into our digital-marketing system. And we've built a number of online communities—industry-specific—that have some level of activity, but they haven't exploded.
We have customer advisory panels that are tied into customer organizations, and we've built a social-media infrastructure for different customer organizations. They are starting to be used, so we're seeing how that all unfolds.
We have an online community for parties in the commercial real estate industry—brokers, customers, vendors, competitors, and anybody who's involved in commercial real estate, particularly commercial real estate risk management. And it's gradually getting critical mass and activity. We think we're better off running an open system that gets a lot of action than one that people go to once or twice and never come back. We haven't seen the ROI there yet, but it's one we're pretty sure will take a while to mature. But it doesn't cost much, so I put a modest percentage of my budget into social initiatives to learn.
Q: Any thoughts about where you see digital marketing going and what your biggest challenges are right now?
A: The level of skepticism in digital marketing is still really quite high internally, even when you show the data. We're in a business that started 400 years ago in a coffee house on the docks in London. There was a guy named Lloyd—Edward Lloyd's Coffeehouse—and he started a business that hasn't changed as much in 400 years as you would think. We will always be a business of personal relationships, and in no way do we ever think that that will change. So having digital find its natural place in a business that's based on personal relationships is not something that just happens overnight. There's no substitute for personal relationships. But I would certainly rather have a digital relationship than no relationship at all.