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State Farm Battles the Gecko

May 19, 2007

By Scott Miller, The Pantagraph, Bloomington, Ill.

May 20--BLOOMINGTON -- Chicago Cubs left fielder Alfonso Soriano trotted home to extend a late-inning lead in a recent game -- a "State Farm Insurance run," proclaimed WGN radio announcer Pat Hughes.

Those watching the game on television may have noticed the State Farm logo on the Wrigley Field bricks behind home plate.

It's another of a growing number of State Farm plugs, as the Bloomington insurer boosts advertising to maintain name recognition in an increasingly competitive auto-insurance market.

State Farm is just trying to keep up with the Joneses, or in this case, the Geicos.

Geico spent $499.5 million on advertising last year, dramatically pacing the insurance industry, according to TNS Media Intelligence, and the investment has returned a greater share of the auto-insurance market.

State Farm spent $270.4 million to advertise last year and has lost a sliver of its nation-leading market share, but Chairman and Chief Executive Officer Ed Rust said in a recent interview with the Pantagraph that the insurer will increase its advertising this year.

Rust didn't say how much ad spending would increase, but State Farm spent $270.4 million on ads in 2006, according to TNS.

The battleground

Geico has tapped the online sales market with its multimedia advertising platforms, making it particularly popular among young consumers.

The company's number of online business transactions continues to grow, said spokeswoman Christine Tasher.

State Farm, on the other hand, has a sales force of about 17,800 agents in offices across the country, and according to an informal Illinois State University marketing study, appeals to older consumers.

As a result, Geico is growing. State Farm is not.

Rust acknowledged the difficulty keeping up with Geico's vast advertising efforts, but said the Bloomington insurer has one asset others don't.

"Having (an agent) you know in your community you can reach out to still has significant value," he said.

Tasher reminded that Geico also has face-to-face relationships with customers.

"Geico has always worked directly with its customers for sales, service and claims since its beginning in 1936, either in person, through the mail or on the phone," she said. "Our online sales, service and claims is an extension of our direct connection with policyholders."

Consumers can debate who has the better customer service, but according to the numbers, Geico is winning the marketing fight.

Its share of the auto insurance market has nearly tripled in the last 10 years, according to figures from the Insurance Information Institute. In 1995, the company controlled 2.2 percent of the auto insurance market. By 2005, that number reached 6.2 percent, the most recent data available.

Progressive Corp. also posted steady gains during that period, rising from a 2.4 percent market share to 7.4 percent.

Allstate Corp. and Nationwide Insurance Co. also posted small gains during the same time period.

State Farm, meanwhile, has lost market share in recent years, said spokesman Dick Luedke.

In 1995, State Farm handled 19 percent of the auto insurance market, according to III figures. In 2005, State Farm's reach slipped to 17.7 percent, Luedke said.

Luedke attributed part of State Farm's decline to a reduction in auto insurance rates. Market share is calculated based on the value of premiums written, he noted.

"We've decreased rates a little more than the industry as a whole," Luedke said.

It's also likely, however, that State Farm is losing customers, or potential customers anyway.

While market share has dropped, customer retention rates have increased, so long-time customers are staying with State Farm, Luedke said.

But many younger consumers, particularly college students preparing to enter the insurance market, view State Farm as an older company for an older generation, according to an informal marketing study ISU conducted for State Farm two years ago.

That view is a product of the extensive multimedia advertising that has made Geico's gecko famous, marketing professor Linda Showers previously told the Pantagraph.

ABC even plans to launch a sitcom this fall based on Geico's "cavemen" ads.

State Farm now is following that lead, looking for opportunities on the Web and other multimedia platforms that will boost the company's popularity, Rust said. State Farm appears on MySpace, Yahoo Video and many Web sites.

Rust said the insurer particularly likes ads tied to sporting events that draw large audiences.

The insurer has signed deals in recent years with NASCAR, the National Football League, NCAA basketball and Major League Baseball, for example, and each event gives State Farm a little more exposure on the Web.

"You pick and play the venues you think will have the best reach," Rust said.


Ad dollars and market share

Chart shows the highest ad-spending insurers in 2005 and 2006, along with auto-insurance market share in 1995 and 2005:

Company...2005 ad spending...2006 ad spending

Geico...$403.4 million...$499.5 million...

State Farm Insurance Cos....$321.3 million...$270.4 million...

Allstate Corp....$289.6 million...$350.5 million...

Progressive Corp....$252.6 million...$265.1 million...

Nationwide Insurance Co....$83.9 million...$124.6 million...

Company...1995 market share...2005 market share

Geico...2.2 percent...6.2 percent

State Farm Insurance Cos....19 percent...17.7 percent

Allstate Corp....10.6 percent...11.1 percent

Progressive Corp....2.4 percent...7.4 percent

Nationwide Insurance Co.... 3.6 percent... 4.6 percent

SOURCES: TNS Media Intelligence, Insurance Information Institute and State Farm Insurance Cos.


Copyright (c) 2007, The Pantagraph, Bloomington, Ill.

Distributed by McClatchy-Tribune Information Services.

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