STEP - Social, Technological, Economic and Political Assessment

This STEP analysis seeks to identify and assess the external drivers of change that will have an influence on the insurance marketplace and industry.

Each STEP aspect is considered on a separate page along with treats and opportunities. They are then followed by Conclusions, the Typical Responses of the Financial Services Industry and then Alternative Strategic Options are offered.

What are the relevant Social and Cultural Factors?

e.g. we are all living longer; most will need some form of nursing care in old age; more people are living alone or in small family units; women are more likely to have to support themselves; we have more active but riskier lives.

What sort of Technological Advances will impact the way we live and work?

e..g. medical advances are making us live longer and are minimising the impact of disabilities; the global wired society will soon be realised and could fundamentally impact all knowledge based work; information technology will permeate the home and the car etc..

What Economic Trends could these changes create?

e.g. booming economy but cautious consumers; increasing globalisation and opportunities overseas balanced by active foreign competition at home; increasing competition as retailers enter financial services, often using new technology; shortage of skills; the end of mass production and mass marketing.

How will the Government's respond? (Political, Legal and Regulatory Factors)

e.g. they will only provide the very basic level of pensions and benefits; many government interactions will be electronically based, thus making many citizens familiar with information technology; government will encourage citizens to make their own arrangements with the private financial sector; the financial sector will be increasingly regulated; a new all embracing Financial Services Authority (FS) will be in-place during 1999.

Conclusions

The future is likely to be fast changing, unpredictable, somewhat chaotic, but above all, demanding for consumers and suppliers alike.

Concurrent and fast changes in society are fueling fundamental paradigm shifts. Whilst at a macro level, some aspects of the future are clear, for example an aging population and globalisation; at a micro level customers and businesses face an unclear future. Life is becoming more complex and there are some difficult choices to make.

Citizens will no doubt have to take more responsibility for life's ups and downs. They will need to take both short term and long term financial decisions. To do this effectively they will need to become more knowledgeable about changing government policies, to gain an understanding about a wider range of financial products, adept at risk management and probably more skilled with technology.

The financial services industry will have a role to play, supported by the government but at the same time regulated to protect the consumer. More financial services suppliers are seeking to help consumers and to meet their needs, but at the same time, consumers are becoming cautious and "street-wise".

Financial Services Industry Responses

The typical responses of the Financial Services Industry include developing :

a wider range of products and services.
new distribution channels, particularly in direct marketing.
a heavy promotional program, particularly in discounted products and services.
ruthless cost cutting and development of low cost administration centres.
mergers and acquisitions to gain economies of scale.

All these initiatives are producing benefits but in many cases there are limits, and in other cases efforts are simply counter balanced by copy-cat action by competitors. For example:

hundreds of similar looking product variations confuses the customer.
channel conflict can lead to attrition before the new channels are fully developed.
cost cutting has finite limits unless products are sold below the risk cost.
mergers and acquisitions have limits when governments or the EU disallow them for monopoly reasons.
promotional incentives have diminishing returns. There is a tendency to give consumers yet another "free Legal Insurance" cover.

Financial Services Industry Strategic Options

These tactical solutions need to be complemented with Strategic Options incorporating new models, new approaches, new relationships and flexible actions.

Read the summary below or go straight to the details

New Models

From Supply-side to Demand-side thinking.
From Stand-alone offerings to Integrated Life Event offerings.
From Fixed Immediate Needs to Fluid Whole Life Dreams and Realities.
From Standard Offerings to Mass Personalisation and Customisation.
From Make and Sell to Sense and Respond.
From Unidirectional Information to Interactive Product Development & Manufacture.

New Approaches

Market driven.
Fast, flexible Product Development.
Product Differentiation through Mass Customisation.
Product Cost reductions though components.
Innovative, multi-channel Product Distribution.

New Relationships

Relationship-building built on dialogue and knowledge bases.
Customer Acquisition and Retention based on understanding and meeting individual needs, aspirations, values and beliefs, together with added value services.

Flexible Actions

Solution Selling using Mass Customisation to interactively tailor each product.
Customer Servicing in a variety of ways, time and place.
Knowledge based Product Servicing and Adaptation.
The Organisational issues holistically addressed; integration with other industry players.
Don't leave it too late to get on-board.
Addressing Customer concerns about data privacy.

External Resources

McGovern, Gerry, New Thinking, a free weekly email contributing to a philosophy for The Digital Age, NUA. Send an email to: New Thinking Request with the word subscribe in the body of the message.
- What I like about New Thinking is that it relates the use of the Internet and other interactive mediums to the existing use of the various mediums. Sure, the Internet etc. provides new possibilities and may even create new business models, but New Thinking reminds us not to neglect the basic marketing and communications principles as well as human behaviour.
  Each email covers just one topic and is typically half a page.
Taylor, Bernard, 1998, The Darwinian Shakeout in Financial Services - an Interim Report in International Journal of Strategic Management (Long Range Planning), Vol. 31, Issue 1, February 1997 , Elsevier Sciences, Exeter, England.
See the full list of resources for this web site for other related resources.

[Overview] [Social and Cultural Factors] [Technological Advances] [Economic Trends]
[Political, Legal and Regulatory Factors] [Financial Services Industry Response] [Strategic Options]

[SIM Overview] [One to One Marketing] [Mass Customisation] [Interactive Mediums] [STEP Analysis]
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