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Managing Channel Conflict
Philip G Scott
Chief ExecutiveNorwich Union Life
ABN AMRO Pan European Bankingand Insurance Conference - 27th June 2001
2000 New Business
Company £m APE IFA Non-IFA Growth
Norwich Union 928.8 Y Y 19.1%
Prudential 541.3 Y YStandard Life 534.5 Y YSkandia Life 413.6 Y NScottish Equitable 409.0 Y NAXA Sun Life 404.7 Y YScottish Widows 366.8 Y YLegal & General 365.7 Y Y ________
Market = 0.5%
2000 New Business
Company £m APE IFA Non-IFA Growth
Norwich Union 928.8 Y Y 19.1%
Prudential 541.3 Y YStandard Life 534.5 Y YSkandia Life 413.6 Y NScottish Equitable 409.0 Y NAXA Sun Life 404.7 Y YScottish Widows 366.8 Y YLegal & General 365.7 Y Y ________
Market = 0.5%
Sources: ABI - Long Term Insurance 20002000 Money Management New Business Survey
Channel Choices of the Industry Leaders
Norwich Union Business by ChannelNorwich Union Business by Channel
IF A
D irect
C ore P artn ership s
Introdu cer P artn ers
A ffin ity
NU Distribution CapabilitiesNU Distribution CapabilitiesIFA
35 regions300+ consultantsIFA DirectStrategic PartnersNational Accounts
IFA
35 regions300+ consultantsIFA DirectStrategic PartnersNational Accounts
NU Distribution CapabilitiesNU Distribution CapabilitiesDirect
Direct Financial Services - 325consultantsDirect Corporate Sales - 40 consultantsTelesalesEstate Agency - 340 branches
Direct
Direct Financial Services - 325consultantsDirect Corporate Sales - 40 consultantsTelesalesEstate Agency - 340 branches
NU Distribution CapabilitiesNU Distribution Capabilities
Partnerships
520 consultants6 Appointed Representative BuildingSocieties15 Introducer Building Societies2 Estate Agencies
Partnerships
520 consultants6 Appointed Representative BuildingSocieties15 Introducer Building Societies2 Estate Agencies
NU Distribution CapabilitiesNU Distribution Capabilities
Affinities
Tesco Personal FinanceAge ConcernGoldfish
Joint VentureRoyal Bank of Scotland / NatWest Life
Affinities
Tesco Personal FinanceAge ConcernGoldfish
Joint VentureRoyal Bank of Scotland / NatWest Life
Customer Relationship ManagementCustomer Relationship ManagementDifferent distribution channelsDifferent distribution channels
Who owns thecustomer?
sIFA?
sNU?
sTesco?
The essence of managing channel conflictis understanding the
Value Chain
Management
Proposition Development
FundManagement
ProductAdmin
CustomerManagement Distribution
Support Services
Building a ProductBuilding a ProductDistribution &
MarketingCosts
Admin Costs
Profit Unit Costs
DevelopmentCosts
Flexibility is Key to Channel
Differentiation
Case Study: Term AssuranceTesco & IFA
Case Study: Term AssuranceTesco & IFA
IFA
Advice Driven
Comprehensive Options
Commission Sacrifice
IFA
Advice Driven
Comprehensive Options
Commission Sacrifice
Tesco
Execution Only
Basic Term Product
Option to sharemarketing costs
Tesco
Execution Only
Basic Term Product
Option to sharemarketing costs
Case Study: The PropositionCase Study: The Proposition
Fixed cost
IFA Tesco
Fixed costFixed costsare equal
Tesco price
Flexibledistributionallowance
IFA pricerange
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Case Study: ResultCase Study: Result
If IFAs wish to match execution onlyprices, they are able to do so byreducing their level of commission
Both parties benefit from NU marketleadership achieving economies ofscale and reduced unit costs
If IFAs wish to match execution onlyprices, they are able to do so byreducing their level of commission
Both parties benefit from NU marketleadership achieving economies ofscale and reduced unit costs
Case Study: Strategies Employed toManage Potential Conflict
Case Study: Strategies Employed toManage Potential Conflict
Extensive communication to IFAs through theirconsultants and in trade and national press
Tesco referral of clients to IFAs if advice isrequired
Ensuring that all distributors of our productsreceive the same basic product
Differential pricing allows THEIR decision insetting the final cost
Extensive communication to IFAs through theirconsultants and in trade and national press
Tesco referral of clients to IFAs if advice isrequired
Ensuring that all distributors of our productsreceive the same basic product
Differential pricing allows THEIR decision insetting the final cost
Channel Conflict is EssentialChannel Conflict is Essential
It results in the best advice andservice for the customer
It allows for flexible propositions
It results in the best advice andservice for the customer
It allows for flexible propositions
The key is giving all distributorsthe same scope for creating addedvalue within the transaction to thecustomer
Through flexible propositionsallowing differential pricing
The key is giving all distributorsthe same scope for creating addedvalue within the transaction to thecustomer
Through flexible propositionsallowing differential pricing
Keys to Success
•CAT standards, Treasury review
•Myners report
•Comparative tables
•FSA With Profit review
•Polarisation Phase 2
•Growing demand
•Choice, simplicity, convenience
•Financially aware, discriminating
•Flight to quality
•Growth in internet usage
•B2C at research stage
•Future - wealth management
•B2B key to 1% world
REGULATION
TECHNOLOGYCONSUMERS
Forces Driving Change for Providersand Distributors
Forces Driving Change for Providersand Distributors
Providers&
Distributors
A Progressive Approach to Managingthe Distribution Challenge
A Progressive Approach to Managingthe Distribution Challenge
Polarisation
Multi-tie
Integrated distribution
High productivity
Breaking down the Value Chain
Segmenting the market
Polarisation
Multi-tie
Integrated distribution
High productivity
Breaking down the Value Chain
Segmenting the market
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1999 Post Polarisation
Direct RemoteTied DSF
Banks
Multi-tied -Former IFA &tied advisers
Independent
Direct Remote
Tied DSF
Banks
IFA
Multi-tieBanks
IFA
Potential Market Share by Channel ifMulti-Tie Introduced
Progressive Product StrategiesProgressive Product StrategiesStakeholder market positioning
Flexible Products to meet consumer focus
Investment Choice and SRI’s
Impact of Mutual Funds
Non-traditional products
Corporate market and EBC strategy
Transparency and open architecture
Phase 1 SALTR accreditation
E-products
Stakeholder market positioning
Flexible Products to meet consumer focus
Investment Choice and SRI’s
Impact of Mutual Funds
Non-traditional products
Corporate market and EBC strategy
Transparency and open architecture
Phase 1 SALTR accreditation
E-products
Progressive Marketing StrategiesProgressive Marketing Strategies
Leading brand
Reduced unit costs
Economies of size and scale
Increased distribution capability
Increased segmentation
Tailored propositions
Leading brand
Reduced unit costs
Economies of size and scale
Increased distribution capability
Increased segmentation
Tailored propositions
M anaging Channel ConflictsM anaging Channel Conflicts
PartnershipsPartnerships
Different approach to strategic alliancesPrice differentiation - value chainEconomies of scaleWhite labellingProduct diversificationE-commerce
Strategies for Channel Diversification
Norwich Union Life is to be a market leading providerof Life, Pensions and Long Term financial servicesproducts in the UK and to generate superior return
on capital and substantial contribution to groupprofitability.
Our aspirational vision is to be the worlds mostcustomer driven, innovative and trusted provider of
wealth creation and protection products.
Norwich Union Life is to be a market leading providerof Life, Pensions and Long Term financial servicesproducts in the UK and to generate superior return
on capital and substantial contribution to groupprofitability.
Our aspirational vision is to be the worlds mostcustomer driven, innovative and trusted provider of
wealth creation and protection products.
Norwich Union VisionNorwich Union Vision