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People don’t like insurance companies. They see them as greedy evil sales organizations that care only about their own profits. Some don’t even trust them to pay out claims[1]. This is ironic since paying out claims is the fundamental service these companies offer to customers. It’s sort of like not trusting coffee houses to pour coffee, or Taxi companies to get you home.

The insurance sector is ripe for disruption. Such a rudimentary service shouldn’t have to be a necessary evil. Lemonade is a young brand that agrees with this sentiment. It has a distinctive approach as it tries to bring a breath of fresh air to the industry and enable consumers to form meaningful relationships with their insurance providers.

In this article, I examine Lemonade and cover two major challenges they are facing, possible ways to overcome them and in the end some metrics that are informative and may be useful in similar situations.

Brief background on Lemonade

Lemonade was founded in 2015 by Daniel Schreiber and Shai Winninger. Both are seasoned professionals and have founded several companies between them.

They spotted and unaddressed consumer frustration that has to do with the slow processing, lack of trust and general dissatisfaction with insurance brands. Influenced by their previous tech-oriented roles, they came up with an innovative approach to insurance handling based on trust, transparency, frictionless consumer experience, machine learning and social impact.

Traditional insurance models encourage firms to withhold and increase premiums as this is their income source. Lemonade is different. It charges a flat service fee, uses technology to pay out near instantly and donates leftover premiums to social causes of each individual’s own choosing. This makes it impossible for the company to profit on its customers’ expense.

A snapshot of Lemonade’s home page: lemonade.com

Everything builds up to their mission: To change perceptions of insurance form necessary evil to a lovable social good[2].

Today, Lemonade offers basic services such as renters-, pet- and liability insurance in the United States and several European countries. It is steadily offering new products in consumer markets with a particular focus on the younger generations.

Challenge #1: Forming meaningful relationships

Lemonade positioning places it as a friendly, trustworthy and altruistic partner. It’s approach to brand management emphasizes a unique brand identity in which the youthful brand personality weighs heavily. It also appears quite relational in its conduct.

The company, however, is powered by technology and has largely cut out in-person and phone contact lines in favor of web and app communications that take place largely via bots. This, in turn, may make it hard for people to connect with the brand and form meaningful and trusting relationships due to the lack of ‘faces’.

People are critical in a service setting and offer a human dimension to the brand that significantly contributes to brand equity[3]. Moreover, empathy is also important. This may be especially true in insurance since often it deals with traumatic situations. Machines, despite their many qualities, are not good at being empathetic. Thankfully, I might add.

What can Lemonade do?

One option would be to engage in active communication to reinforce the brand identity and its underlying personality and values. Doing so increases the symbolic and emotional value consumers attach to the brand. This should also increase congruence which has has been shown to significantly impact various purchase behaviour[4].

Another thing Lemonade could do is to give its customer real faces to connect to. Ideally this would be the people working behind the brand. There are some elements of this there already, but they are hidden on the blog or various platform that are just too hard to find. It must be easy for people to connect to the brand and not require any but minimal effort on their behalf.

A conversation with Maya. One of Lemonade’s bots.

In a similar manner it could prove beneficial to create mascots for the bots. Now, they all have a human face but this comes off a little superficial in my opinion. It may be interesting to develop quirky non-human characters in their stead. That way, there is more transparency on some key customer touchpoints and it offers another platform to enhance that symbolic and emotional value.

Challenge #2: Growth and profitability

The second challenge is growth and profitability. Insurance companies have deep pockets and don’t take too lightly to a brand trying to disrupt their comfort.

Likewise, there is nothing about Lemonade that can’t be copied by resourceful followers. For example, while the Peer-2-peer approach, sharp pink colour, insurance tech are quite unique in the United States, the brand already has a much closer substitute in Luko, as it enters France.

Switching costs in insurance are high due to bundles that incentivize consumers to stay with the same provider. For example, it is typical to get a discount if you have a homeowners-, life- and car insurance all from the same company. This underpins the importance of a strong brand. Despite the apparent animosity towards insurance, Lemonade needs to entice and persuade consumers in scale to get any traction.

In all, this is underlined by that fact that to scale and develop, Lemonade needs to increase its subscriptions because of its flat fee approach. Similarly, if the brand is to be able to change
consumer perceptions of the insurance industry, one can only assume that they must become a significant player within it.

Given the ongoing market expansion in Europe and that Lemonade is still operating at a loss, this is a pressing brand challenge as without profitability all current and future brand equity will be void. Thus, growth and profitability is critical for Lemonade to achieve its mission.

How to grow?

For growth, it is important to gain new customers and retain existing ones. Byron Sharp[5] contests that the best way to increase retention is to increase market penetration, and thereby market share. I believe Sharpian-Principles are usually better applied to FMCG than services, yet it makes sense here as consumers know more and say more about brands they use, thus increasing the touchpoints in society through word-of-mouth.

This can also induce social pressure and social proof that in turn encourages loyalty. Granted, for these laws to hold (referred to as double jeopardy by Sharp) the service must be valued by consumers and brand promises fulfilled. Accordingly, the critical aspect is to gain new customers and establish brand salience through distinctive brand marketing[6].

Snapshot of Lemonade’s pay-per-click activity. Data: SEMRush

Upon observation, it seems that Lemonade focuses on marketing activation while long term brand building is somewhat neglected. Most expenditure appears directed to social media, display and pay-per-click ads. That is in itself not a problem, but it is important to maintain a balance and avoid shortsightedness.

Examples of Display Ads paid for by Lemonade
Example of display ads sponsored by Lemonade
Example of display ads sponsored by Lemonade

Optimal marketing effectiveness and efficiency is achieved at roughly 40% marketing activation and 60% long term brand building[6]. Seeing as existing marketing activities are concerned with activation, Lemonade should undertake a long-term emotion-based brand building campaign to win and retain users. As we know, emotions dictate decisions which is why the campaign content should be emotional.

Example of display ads sponsored by Lemonade

Conveniently, it is also synergistic with enhancing symbolic- and emotional value and increasing congruence, as discussed in relation to the first challenge. Not to mention that such campaigns have been shown by Les Binet and Peter Field’s monumental research[6] to have both stronger and longer lasting effects.

Monitoring success

To evaluate the effectiveness of marketing campaign and efficient expenditure of marketing budgets, it is important to have some measurements in place. The measurements should compose of relevant metrics. While a single metric is rarely useful, focusing on too many is probably just as impractical.

The key thing is measuring and tracking the right things. The easiest way to do this is to take a step back and look at the objectives of the marketing program in question.

Overview of the suggested metrics to track. Support from theory is cited in brackets.

Measuring the customer relationship

For the first challenge, it is relevant to track several metrics. As you may recall, the aim there was to form meaningful relationships. We also discussed some shortcomings such as empathy and trust, and we touched on how congruence is likely to play a role in that context. All are relevant to measure.

Congruence is a measure of compatibility between an individual and another subject, in this case Lemonade. The logic is that the more congruent you are with something, the more likely you are to develop positive feelings towards it and engage with the brand. This could be measured by a simple questionnaire with pre-established scale items, such as those available in the Sirgy reference below.

Empathy and trust and de facto personality traits. Yet, it would also be useful to monitor the various range of traits that users associate with Lemonade. This could be done with an open-ended survey, interviews or focus groups. Lemonade should not limit the personality to be only described in one way as different traits relate to different ways of consumer expression and construction each carrying implications for the nature of their relationship with the brand. Therefore, face to face conversations might be the best way to go here.

Empathy and trust should still be measured independently as they are key traits in obtaining the objective. These on the other hand are most fit to measure using a survey.

Lastly, customer reflection is an important metric because it somewhat includes all the other metrics in a holistic way and provides valuable information about how consumers see themselves as a result of using the brand[7].

Assessing growth

For the second initiative, the metrics are more big-picture oriented and should be evaluated on a longer time frame. At the minimum a year since brand building effects usually take time to come up to the surface as tangible results.

I have talked about how market penetration, market share and retention all relate to one another. Nevertheless each is valuable on its own and should be tracked as a metric. Penetration is a metric of a reach to people and thus an indicator of popularity[5]. Retention is an indicator of brand strength[7] and together with penetration gives a comprehensive look on market share, which is a function of the two expressed in monetary value or percentages. Market share should be measured relatively.

I said that that the service must be valued and promises kept for the Sharpian-principles to pan out. You could monitor this by measuring satisfaction, but it would be more appropriate to use the NPS score. It is more relevant it captures both passive loyalists and brand advocates based on their satisfaction with
the total brand experience and interrelates closely with the with the role word of mouth and referrals play in the customer journey.

Often people say one thing but then do another thing, this may particularly
be relevant when money is involved. Measuring price elasticity should be useful as it is both predictive of changes in loyalty given price increases and is highly relevant to long-term brand building. This is a powerful metric and is based on actions not words which makes it especially insightful.

Last, brand awareness should be measured both aided and unaided since it is a precondition for establishing salience and brand building to take place. If people don’t know who you are, how can they form a relationship and develop feelings towards you?

Final thoughts

This was the first part of two in this case study. I decided to split it into two since each cover different things though the case brand is Lemonade in both instances. Here we looked at strategic issues, possible ways to overcome them and I listed some metrics that could be useful in a scenario like this. Part two is about the customer journey and therefore on a more micro level.

I hope that you found this useful. Of course, be critical of what I say here. After all, I do not have access to any more data about this case than you yourself or anyone else out there with access to the internet. But it is my hope that it provides a framework of how you could approach similar problems or prevent them from even arising.

  1. Ind, N., Iglesias, O., & Schultz, M. (2013). Building Brands Together: Emergence and Outcomes of Co-Creation. California Management Review, 55(3), 5-26. doi: 10.1525/cmr.2013.55.3.5
  2. Ind, N., Iglesias, O., & Markovic, S. (2017). The co-creation continuum: From tactical market research tool to strategic collaborative innovation method. Journal of Brand Management, 24(4), 310–321. https://doi.org/10.1057/s41262-017-0051-7
  3. Markovic, S., & Bagherzadeh, M. (2018). How does breadth of external stakeholder co-creation influence innovation performance? Analyzing the mediating roles of knowledge sharing and product innovation. Journal of Business Research, 88, 173–186. https://doi.org/10.1016/j.jbusres.2018.03.028
  4. Kapferer, J. (2012). The new strategic brand management. London: Kogan Page.

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