Voices: the CMB Blog

Along with millions of Americans-patients,doctors,lawyers and, politicians-health insurers also waited with bated breath for last week's Supreme Court’s ruling on health reform. Now that the Supreme Court has upheld the basic provisions of the law, health insurers face the challenge of understanding how traditional markets will be impacted by the individual mandate and implementation of health insurance exchanges.  

Even with the ruling, there is still much that remains unknown about the law’s impact, and significant uncertainty about how the law will be enforced in each state.  But there are still critical questions insurers must consider now as they adapt to a new era in health reform, including:

• How will this ruling and the establishment of exchanges impact company revenue and profitability?  Are there ways to take advantage of this ruling and increase company margins and revenues?

• How do we compete effectively in an open exchange?  If price is the key criteria to consumer decision making, is there a way to minimize its influence and yet be successful?

• Is there a need to re-examine the existing client base beyond the traditional demographics? Will an alternate classification help create a competitive advantage?

• How do we move beyond the traditional employer sponsored channel?  How can we take advantage of technological shifts?

• How relevant is the present communication strategy? Is there an opportunity to approach the future in a new, cohesive way that complements the product and distribution strategy?

Addressing these questions and mitigating the coming challenges will not be easy; surviving and flourishing in a changing market requires a truly new and innovative approach. We believe insurers must:

• Reconsider how they approach product development – the insurers who will be successful in this new reality will be those who are able and willing to stretch boundaries of what insurance products look like to meet the needs of the customers, including offering supplemental insurance, wellness programs, incentives and monetary gains for meeting health goals, etc.

• Go beyond traditional ways of looking at the market – motivations, attitudes, goals, and behaviors will become as, if not more, important to understanding and effectively messaging to insurance customers. Alternate classification of consumers could help insurance companies underwrite consumers in a more effective and efficient manner.  This could be especially advantageous for smaller insurance companies that cannot compete solely on price; perhaps it is time to start looking at a niche strategy. For a more detailed look at alternative market segmentation for health insurance, read our white paper: A New Approach to Segmentation for the Changing Insurance Industry.

• Embrace the leaps in technology – insurers must explore the possibility of reaching consumers directly (internet, smartphone, etc.), and simplifying the purchasing process.  A simple product lineup with an easy buying process can go a long way in increasing an insurer’s favorability rating.

• Consider a new messaging strategy – the health industry’s transition is a great time to consider resetting the existing image. Great products and great service need great messaging.  What are the goals people are trying to achieve? What is it that truly motivates them? What is it that truly sets us apart and does it add value to our customers’ lives? Is there a need to have specific messages to specific groups of consumers? Think about the answers to these questions. Insurers in the end must be able to convince consumers that they are partners in this journey and are mutually dependent on each other’s success.

Amidst all the uncertainty insurers are facing, we believe that to mitigate the uncertainties of the reform landscape, insurers will have to go back to the drawing board, rethink how they look at the market, engage in product development and address the fundamental goals of their customers. Insurers must recognize and leverage core capabilities that others cannot replicate. Competitive advantages stem from not one but from a series of strategic decisions. The correct mix of product, distribution, message and market coupled with inherent operational strengths (e.g., knowledge of a local market, ability to underwrite at low costs,  relationships with existing customers) can set insurers apart from competition and pave the way to long term success.

Posted by Amy Modini. Amy is an Account Director for CMB’s Healthcare Practice, when she gets the time she loves going to the beach with her two kids.

This blog is first in a series, from CMB's Meg Gerbasi and Scott Motyka, exploring the latest in market research methods.

Imagine that you are given a glass of merlot at a wine tasting. You swirl the glass and breathe in the aroma, immediately picking up oak and then hints of cherry and dark fruits. Now tasting it, you detect cherry, blueberries, and blackberries mixed in with a blackpepper tone. Later the sommelier tells you that the wine was produced in India. Would you be surprised if we told you that you’d be more likely to buy a bottle of this Indian wine than if it was from Italy? Today we discuss a forthcoming paper in the Journal of Consumer Research by researchers Keith Wilcox, Anne Roggeveen, and Dhruv Grewal of Babson College.The Big Idea

Have you figured out why learning the Merlot was from India (instead of Italy) after tasting it would make you like it more? Wilcox and his team say they have the answer, but it’s a little complicated. When given product information prior to tasting, favorable information leads to more enjoyment of the product, but when product information is provided after sampling, favorable product information will lead to less enjoyment of the product.

This is counterintuitive, so let’s unpack it carefully. When given information about a product before you sample it, the information colors your experience of the product. When you taste something you expect to be enjoyable, for example, an expensive Italian wine, you actually enjoy the product more than if it were something you would expect to be less enjoyable, say, an inexpensive Indian wine. These findings aren’t new, several studies have shown similar results – Coke tastes better from a cup with a Coca-Cola logo, people enjoy movies more if they know they have good reviews, and drinks taste better when they’re purchased at full price.

What got us excited here at CMB were the results of what happens if you give a consumer product information after they’ve sampled your product – the results reverse!  That rich, fruity red with the silky smooth finish somehow doesn’t seem so great when you find out it’s $200 a bottle, does it? But it tastes even better when you find out that it is a Trader Joe’s “Two Buck Chuck.”  Wilcox explains that when we sample an experiential product that excites our senses causing an emotional reaction (think food, movies, music) it forms an immediate impression. The product information provided after sampling is used as a measuring stick of our initial impressions, causing favorable information to actually diminish our enjoyment of the product (“I expected a $200 bottle of wine to taste better”).

A 21^st Century Marketing Strategy?

What does this mean to market researchers out in the real world? As opportunities to demo video games, listen to music samples, and watch movie previews before purchase increases through internet, mobile, and OTT TV (e.g., Hulu) channels, this research has exciting potential to inform our digital marketing methodology. Through careful examination of both the impact and timing of the product information we communicate, we can maximize the digital experiences of our customers.  Should you provide your brand image, product name, or price at the beginning or end of a video game ad, before or after a person listens to a 30 second music clip? It depends. If you’re marketing a well-known brand or band, such as Call of Duty or the Beatles, you’d be better to let your customer know right off instead of leaving them hanging. If you’re trying to break into a new market, establish your brand, or present a relatively low-cost product, let the ad convert your potential customers first. In summary, this study reinforces the critical importance of companies to “hear” the voice of their customers through market research.

Posted by CMB researchers Meg Gerbasi and Scott Motyka. Meg holds a Ph.D. in social psychology from Princeton and specializes in the study of self-interest, psychometric validation, intergroup conflict, and decision making.  She has a passion for the color pink and the musical stylings of Lady Gaga. Scott is doctoral candidate in psychology at Brandeis University, his affinity for Lady Gaga is unknown.