Understanding the unintended consequences of previous strategies
Problem
Allstate was facing a continuous decline in the number of people considering the brand but did not fully understand why. Research showed that the brand has been perceived as expensive and this wasn’t totally attributable to the growing popularity of competitors like Geico and Progressive. Allstate still had competitive prices so it concluded it was a perception problem.
However, this was surprising for Allstate. A couple of years prior, the company had introduced an innovative package of product features that included Accident Forgiveness and a Safe Driving Bonus. This had a lot of success in increasing the imagery measures and the number of quotes generated per month. The company was perceived as an innovative leader and the agents’ motivation increased considerably because they felt empowered and confident that they had a better product to sell. During the firsts couple of years after the launch of the new product, everything suggested that people believed that Allstate provided good value for the money. This suddenly started to change without an apparent reason. Something was missing.
Systems Thinking and Simulation Games
A theory of the problem was developed as well as a simple simulation game that allowed the user to play the role of an Allstate agent trying to maximize sales by controlling the amount of effort dedicated to selling the new product.
The exercise demonstrated that as people’s interest in the new product increased as a result of the advertising efforts, agents felt motivated to first quote (and sometimes exclusively) the new popular product that carried a premium price. This initially generated more dollar sales and thus motivated agents to sell the new product at the expense of the standard one that was more competitively priced.
What traditional consumer research failed to pick up was the fact that as people got interested and called Allstate, they received higher quotes than usual. Dissatisfied with the apparent higher prices from Allstate, shoppers generating negative word-of-mouth started to accumulate and it wasn’t until enough of them had accumulated that the perception that Allstate was expensive really spread.
Results
The exercise helped Allstate realize that its own differentiation strategy had unintended consequences and was one of the sources of the new problem. The simulation game allowed them to experience firsthand three years of history in just a few minutes. The interactive nature of the exercise was more powerful than the stream of data from research. Today, the standard product is quoted first and only after the sale is closed does the agent push the customer to upgrade to the premium features.