You are now the Chief Marketing Officer of a brand-new insurer in Hong Kong. As approaching to its 1-year birthday, a new product initiative and marketing program are agreed to launch in the next six

(Applying to life insurance?) Other conditions favoring personal selling:

Ø Product situation Ø Market situation Ø Company situation Ø Consumer behavior situation Personal Selling System Types of sales persons Ø Order taker – inside order taker vs. outside order taker Ø Order getter – creative seller Ø Support personnel – missionary, trade and service sales person Management of salesforce Ø Agency : Your expertise!!! Ø Broker? Ø Bank? Personal Selling System Advantages High flexibility Minimizing wasted effort Measuring marketing effectiveness and determining ROI are far more straightforward Effectively respond to and overcome objections Able to offer many customized reasons that might spur a customer to buy Multiple tasks performance Personal Selling System Disadvantages High cost (consider further agent vs. broker vs. bank) Problem of finding and retaining high - quality people Message inconsistency Possessing different levels of motivation Personal Selling System Tied Individual Agent TR of Corporate/ Company Agent TR of Broker Bank to (with) Agent Bank to (with) Broker Affinity Partner to Agent Affinity Partner to Broker Personal Selling System Personal Selling System Electronic System Direct Response System Third -party System Insurance Distribution Systems Or “Digital Marketing” Digital marketing is an umbrella term for using a digital tools to promote and market products, services, organizations and brands. Unique capabilities:

Ø Interactive Ø Mobile and portable Ø Highly measurable and data driven Ø Shareable Ø Synergistic with other marketing activities Electronic System Providing general information Expressing the brand Demonstrating products, services and expertise Proof points Lead generation Communities and forums Publishing value -adding content Communication Shopping Recommendations Sales Capturing customer feedback Electronic System – Website Electronic System – Website Consider the following strategies:

Ø B2B (insurer’s digital platform connected with partner’s digital platform e.g. digital intermediary) Ø B2C (insurer’s digital platform directly connected with potential direct client) Ø B2B2C (mix of the above) Electronic System – Website Digital intermediary Ø Local intermediary( ies ) under insurer Ø SEA -based intermediary Discussion Ø Key issues Ø Channels’ distribution focus Ø Operating principles Ø Management actions Ø Ongoing monitoring B2B Case Advantages WE ARE HERE!!! Generating customer data and new business leads. Serving customers virtually anywhere in the world with internet access. Flexible and easy to alter. Trying out new strategies, content and tactics at relatively low cost Electronic System – Website Disadvantages Requiring some investment of time and money to set up and maintain. Costly to ensure their sites remain operational with good performance and uptime. Must be vigilant about information security to prevent hackers from stealing sensitive customer data. Electronic System – Website Search -engine Optimization (“SEO”) is the process of using Internet search engines, such as Google, Bing, and Yahoo, to gain notice, visibility, and traffic from people conducting searches using these tools. SEO: Boosting search rankings by identifying and applying SEO and content marketing strategies to the search terms. Content Marketing: Incorporating optimal search terms into the Web content. Electronic System – SEO & Content Marketing Electronic System – SEO & Content Marketing Advantages Easily tracking the results, see what works, and adjust course to improve outcomes. High -quality content leads to relatively inexpensive to achieve great results. Disadvantages Need ongoing feeding and care . Electronic System – SEO & Content Marketing 3 primary objectives:

Ø Creating buzz (developing and publishing messages in a variety of formats, e.g. text, video, and images) Ø Fostering community ( building ways for fans) Ø Facilitating two -way communication ( promoting and encouraging user participation) Common social media marketing tools like Blogs, YouTube, Facebook, Instagram etc. Electronic System – Social Media Advantages Identifying and cultivating advocates Measurable and trackable Virtually unlimited audience Easy to target and test the effectiveness of content Electronic System – Social Media Disadvantages Heavy monitoring Difficult to continually create “share -worthy” content Challenge on which platforms to use Difficult to control communication Who “own” the platform Electronic System – Social Media Reasons for growth Social/technological reasons Ø The Internet Ø Fragmentation of society Ø Proliferation of media Ø Greater consumer sophistication Ø Consumers want to be in control Electronic System Reasons for growth (cont’d) Business reasons Ø Ever more competition Ø Criticism of traditional marketing methods Ø Interest in customer retention and loyalty Ø Continuing drop in computer processing costs Electronic System Direct (2019 – Q1 2021) 2019 2020 Q1 2021 SPx10%+RP SPx10%+RP SPx10%+RP Rank Name of Insurer (HK$'000) (HK$'000) (HK$'000) 1 BOC LIFE 872,622 1,498,523 381,940 2 HKMC Annuity 163,083 253,793 88,796 3 Hang Seng Insurance 246,958 336,737 80,676 4 Blue 0 65,330 17,806 5 CIGNA Worldwide Life 40,688 54,873 12,362 6 Bowtie Life 2,776 24,647 10,829 7 Well Link Life 0 69,052 8,953 8 TPLHK 70 5,257 7,875 9 FWD Life (Bermuda) 119,385 9,560 4,863 10 HSBC Life 77,954 88,856 3,973 11 Zurich Assurance 0 6,821 2,413 12 China Life 163,414 6,404 254 13 Manulife (Int'l) 0 549 214 14 Liberty Int'l 103 79 42 15 AIA International 300 187 34 Market Total 1,774,310 2,467,407 621,031 "Direct" should include direct mail, telesales and internet sales Digital/ virtual licensed insurers Ø ZA, Bowtie, Avo, OneDegree Traditional licence carrying out Ø Digital business Ø Digital procedures IA consideration (sandbox) Ø B2C Ø B2B Digital Insurance Personal Selling System Electronic System Direct Response System Third -party System Insurance Distribution Systems Direct Marketing (“DM”) Ø Going straight to customers Ø Traditional direct marketing activities include mail, catalogs, and telemarketing. Ø Today, direct marketing overlaps heavily with digital marketing, as marketers rely on email and, increasingly, mobile communications to reach and interact with consumers. Direct Response System Purposes and Uses of DM Ø To reach and appeal directly to individual consumers and to use information about them to offer products, services and offers that are most relevant to them and their needs. Ø Post -purchase interaction, confirm orders, send receipts or warrantees, solicit feedback through surveys, ask customers to post a social media recommendation, and propose new offers. Direct Marketing When using DM?

Ø Primary distribution channel Ø Relying heavily on sales promotions or discounts, and it is important to spread the word about these offers to consumers Ø Standard advertising is not reaching its target segments Direct Marketing When using DM? (cont’d) Ø Better -targeted marketing communications are required to reach the right individuals; e.g. using direct mail to reach wealthier people Ø A company has a known “universe” of potential customers and access to contact information and other data about these customers Ø Heavily dependent on customer retention, reorders and/or repurchasing, making it worthwhile to maintain “permissioned” marketing interaction with known customers Direct Marketing Effectiveness: depending on using databases to capture the information of target customers (with electronic media, the information flow opens the floodgates) and the use of this information to extend ever -more - personalized offers and information to consumers (mobile marketing adds value). Electronic media: marketing databases capture when a consumer opens an email message and clicks on a link. Mobile marketing: Allowing the incorporation of location - sensitive and even activity -specific information into marketing communications and offers. Direct Marketing Advantages Tailoring customer experience in the market to things that most align with their needs and interests. A powerful tool for anticipating and predicting customer needs and behaviors. To understand their target audiences and market dynamics such that companies can develop more effective campaigns and offers. Easy to measure the effectiveness by linking it to outcomes. Mobile and email marketing tend to be inexpensive to produce once the underlying infrastructure is in place. Direct Marketing Disadvantages Cost of database and information infrastructure is not insignificant. Concerns about privacy and information security. People are only too willing to toss junk mail and unsolicited email into trash bins. Electronic spam filters screen out many email messages. Challenge of keeping databases and contact information up to date and complete. Costly to provide an acceptable level of customer service and interaction to win new customers and retain business. Direct Marketing Again: Direct (2019 – Q1 2021) 2019 2020 Q1 2021 SPx10%+RP SPx10%+RP SPx10%+RP Rank Name of Insurer (HK$'000) (HK$'000) (HK$'000) 1 BOC LIFE 872,622 1,498,523 381,940 2 HKMC Annuity 163,083 253,793 88,796 3 Hang Seng Insurance 246,958 336,737 80,676 4 Blue 0 65,330 17,806 5 CIGNA Worldwide Life 40,688 54,873 12,362 6 Bowtie Life 2,776 24,647 10,829 7 Well Link Life 0 69,052 8,953 8 TPLHK 70 5,257 7,875 9 FWD Life (Bermuda) 119,385 9,560 4,863 10 HSBC Life 77,954 88,856 3,973 11 Zurich Assurance 0 6,821 2,413 12 China Life 163,414 6,404 254 13 Manulife (Int'l) 0 549 214 14 Liberty Int'l 103 79 42 15 AIA International 300 187 34 Market Total 1,774,310 2,467,407 621,031 "Direct" should include direct mail, telesales and internet sales Personal Selling System Electronic System Direct Response System Third -party System Insurance Distribution Systems In cases involving an intermediary, there is a third -party sale. More difficult to understand and influence the sales process than direct response system. Third - party System Example: Nanette Lepore, a high -end clothing designer Both direct and third -party systems are executed: direct sales incentives vs. third -party sales incentives Direct: Entire sales system and compensation structure centering on Nanette Lepore Third -party: Carrying the most popular brands that are more likely to make the sale Producer loses significant control and influence in the third -party sale, while the third -party sales representative will gain control or power. Third - party System How can a marketer approach third -party sales most effectively?

Ø Understand and align incentives (optimizing existing structure rather than creating new structure) Ø Provide exceptional sales support Ø Create demand for product Third - party System TR of Corporate/ Company Agent TR of Broker Bank to (with) Agent Bank to (with) Broker Affinity Partner to Agent Affinity Partner to Broker Individual Tied Agent? Third - party System Summary of Distribution Systems Insurance Distribution Systems Distribution System Intermediary? Personal Selling ü Electronic ü / û Direct Response ü / û Third -party ü CASE STUDY European giant in 2014 Local development Ø Introduction of DM and affinity partnership model Ø Expansion of broker channel “Favourable ” market analysis Numbers of hardware requirements Great team hired Regional exposure Certain degree of overlapping with other channel Group’s multi -channel strategy Case Study (1) Key issues Channels’ distribution focus Operating principles Management actions Ongoing monitoring Discussion Same European giant in 2013 Group’s multi -channel strategy Regional development in Asia Case Study (2) Region Existing Strategy Channel Initiative China Tied agent, bank, cap broker, GM, TM Worksite marketing, captive agency, CRM India Tied agent, corporate agent, digital Mallassurance Indonesia Bank, tied agent - Case Study (2) Region Existing Strategy Channel Initiative Philippines Bank, tied agent - Thailand TM, tied agent, DM, broker Bank Vietnam Tied agent, strategic partnership TM, bank Hong Kong Broker DM and affinity partnership Key issues Channels’ distribution focus Value creation Management actions Ongoing monitoring Discussion Insurance Distribution Strategies Channel Characteristics Selection of Channels Distribution Intensity Channel Characteristics Insurers normally use a number of marketing intermediaries for taking their products to users. Sole selling agents, marketers, wholesalers, distributors, retailers, authorized representatives, brokers / commission agents… Insurance Distribution Strategies Channel Characteristics The channels of distribution, thus, add the following characteristics in marketing:

Ø Place utility Ø Time utility Ø Convenience value Ø Marketing tools Ø Supply -demand linkage Channel Characteristics Consider the representing capacity: Distribution Channel Representing Capacity Tied individual agent Insurer / Client TR of corporate/ company agent Insurer / Client TR of broker Insurer / Client Bank (to agent) Insurer / Client Bank (to broker) Insurer / Client Channel Characteristics Distribution Channel Characteristics Tied individual agent TR of corporate/ company agent TR of broker Bank (to agent) Bank (to broker) Channel Characteristics While choosing an appropriate channel of distribution the following factors should be considered:

Ø Market -related factors Ø Product factors Ø Company factors Ø Channel -related factors Ø Environmental factors Selection of Channels Market -related factors Ø Customers Ø Competition Ø Existing Channels of Distribution Product factors Ø Nature of Product Ø Technicality Ø Seasonality Ø Variety Offered Selection of Channels Channel -related factors Ø Channel’s ability Ø Channel’s Financial Strength Ø Ability to Provide After - sales Service Environmental factors Ø Economic Situation Ø Legal Factors Ø Fiscal Structure Company factors Ø Company’s Financial Strength Ø Extent of Control Desired Ø Company’s Reputation Ø Company’s Marketing Policies Ø Pas t Experience Selection of Channels Once the channel level is decided by the firm, the next task is to choose the number of intermediaries i.e. specifying distribution intensity. It is concerned with the market exposure to be given to the product to meet the target consum - ers’ needs and wants. 3 types of distri bution intensity (channel width): Ø Intensive distribution Ø Exclusive distribution Ø Selective distribution Distribution Intensity Distribution Intensity Consider individual channel:

Ø Rare in agency and bank environment? Ø How do you think for broker channel? How a CDO plans and decides the intensity strategy among all available distribution channels? Distribution Intensity Next level of strategic decisions concerning strategic relationships and partnerships. Two common strategies are:

Ø Vertical Marketing Systems (“VMS”) – suppliers and intermediaries working closely together instead of against each other. Ø Horizontal Marketing Systems (“HMS”) – where organizations operating on the same channel level (e.g., two suppliers or two retailers) cooperate. Distribution Intensity VMS Ø They plan production and delivery schedules quality levels, promotions and sometimes prices. Ø Resources, like information, equipment and expertise, are shared. Ø E.g. Doctor Martens boot manufacturers own their own retail store. HMS Ø They then share their distribution expertise and distribution channels. Ø This can speed up the time taken to penetrate the market. Distribution Intensity CASE STUDY UK giant in 2007 Local and expatriate IFA and broker channels Different culture, style, management approach Regional and even international exposure for various channel members Product suite regionalized and internationalized Image and reputation of the local insurer and also the entire group Strategic alignment – credit booking, cost allocation, management reporting etc. Case Study Key issues Channels’ distribution focus Operating principles Resolution of development Management actions Ongoing monitoring Discussion Day 2 Learning Personal selling system Electronic system Direct Response system Third -party system Channel characteristics Selection of other channels Distribution intensity Lecture Topics 2 (Jul 10) Insurance Distribution Systems Insurance Distribution Strategies INDIVIDUAL ASSIGNMENT Choose either one of two situations and write a report of 1500 to 2000 words (English). MUST submit on or before Aug 8 (Sun). Please submit your assignment to my email. For safety reason, please let me know after your submission via WhatsApp to my mobile. Assignment – Rules No receipt of your assignment and no mobile acknowledgement will be considered as missing to hand -in. Assignment handed in between Aug 9 and 14 will be deducted by 5% for each day delay (e.g. Aug 14: max -25%) ; additional 20% will be deducted for the submission from Aug 15 to 21. Assignment submitted after Aug 21 will be considered as record only and will not be graded. So, PLEASE BE PUNCTUAL!!! Assignment – Rules Situation 1 You are now the Chief Distribution Officer of an insurer in Hong Kong. In the last year, the business productions of two channels (agency and broker) could not meet the targets.

Currently three channels are under your management – namely agency, broker and bancassurance.

Now is the beginning of the year. Your CEO wants a distribution and marketing strategic plan for his board meeting two weeks later. Based on what you have/ would have learnt from this module, write a proposal to him with the following hints:

Assignment - Background Situation 2 You are now the Chief Marketing Officer of a brand -new insurer in Hong Kong. As approaching to its 1 -year birthday, a new product initiative and marketing program are agreed to launch in the next six months. Currently there is only one broker channel in your company. Write a distribution and marketing plan based on what you have/ would have learnt from this module with the following hints:

Assignment - Background Outline and describe the current corporate and marketing strategies of your company. Analyze the current product and market propositions of your company. Be aware of the current distribution model and strategies of your company. Identify the current issues. Any innovative channel strategies you would think of? Any challenges you might be facing? How do you manage the distribution function? Assignment – Hints