Gearing for success: direct-response marketing has great opportunity to grow but must meet the challenge of managing change.

The insurance industry is facing barriers to growth including marketing clutter, a saturated target market, escalating costs and increased regulatory restrictions. We also are facing key consumer trends such as the changing family structure and aging of America, which have increased demand for product and distribution choices. Other significant trends are declining customer loyalty and expansion of technology.

Understanding our customers so that we respond to their needs will be an important factor for future success in direct-response marketing. Overcoming the obstacles to growth and effectively dealing with ongoing change require fundamental shifts in how we do business.

These seven strategies will be critical to success in the direct-response industry:

* Embrace lifetime customer value. Acquiring customers is expensive, so retention is important. Marketers should place a heavy emphasis on cross-marketing to existing customers. By learning more about current customers, we can effectively identify new needs as they occur during their lifetimes. This, along with sophisticated modeling and targeting techniques, enable us to offer the right product at the right time to the right person using the right media.

A recent LIMRA consumer survey indicated that many consumers would like to have periodic contact from "their" companies to see whether they are satisfied with current coverage and to determine whether they have additional needs. Call centers provide this type of personal touch and are predicted to have the greatest growth for marketing life and health products. The future will favor those companies that are customer centric, have a broad product portfolio and use diverse distribution channels.

* Actively manage customer contacts and relationships. With changing family structures, demand for choices and decreasing customer loyalty, marketing products that meet consumer needs is essential. Direct marketing frequently relies on an affinity relationship to build and protect the brand image with the customer. Through careful selection of marketing partners, it's possible to judiciously leverage their name to drive revenue growth by offering new sets of relevant products to their customers.

* Balance scale leverage with one-to-one marketing. Both mass advertising and one-to-one marketing have inherent limitations, but some of the principles that underlie these two approaches can be combined to create a new model for marketing. The need for insurance is heavily influenced by life events and changing circumstances. Companies with a customer-centric focus can maintain enough presence so that consumers are predisposed to purchase from them when the need arises. Scale, targeted marketing capability and a diverse product portfolio enable a company to meet consumers' needs at any given time.

* Focus on expansion and innovation in distribution. Consumers buy direct because it is convenient. Convenience means doing business the way the customer wants to do business, whether the preference is mail, phone, e-mail or direct-response advertising. Multiple channels are necessary to provide choice and to satisfy the preferences of individual consumers. Technology will continue to provide new channels to enable us to reach more consumers.

* Balance product value and price. The LIMRA survey also found that consumers are willing to pay more for a product if they believe it promises better customer service. That's why it's critical to know your customers, so that you know what value means to them. In many cases, value comes from customer service, creative distribution and product configuration. Value, not price, will be critical to expanding future market share.

* Actively manage regulatory barriers. Regulations create impediments, such as increased cost and reduced marketing pools. However, regulations will not eliminate marketing but force us to change the way we do business. Successful direct-response companies turn the challenges from increased regulations to opportunities.

* Open new market segments. Knowing your customers provides the chance to find markets within markets. Success in the direct-response industry will depend upon how well a company can develop and tailor products to specific market niches. To do this, it must know its customers' needs and offer unique solutions, instead of one-size-fits-all.

Today, only about 6% of insurance sales come from direct-response marketing. We have a great opportunity to grow, but along with this opportunity comes the challenge of managing changes that are taking place in the world, the regulatory environment, our industry and our customers.

Marilyn Carp is president and chief executive officer of AEGON Direct Marketing Services Inc. This article is based on a presentation she made at the 30th Annual Meeting of the Professional Insurance Marketing Association. She can be reached at [e-mail].