In case you lost the hand out we (Robin, Larissa and I) gave during the morning class about the Independer.nl case in session 3. I put it on the blog again. Or if you have not been able to read it, you can do it on the blog.
Enjoy, Greets Robin, Larissa, Boudewijn
As you might have read in the article of Gerald Haubl and Valerie Trifts (Consumer decision making in online shopping environments; the effects of interactive decision aids), there are several product recommendation systems at work. Independer.nl makes use of such a recommendation agent (personalized list of recommended alternatives) and a comparison matrix (to help consumers make in-depth comparisons among selected alternatives). Independer.nl is a financial product comparison website: based on customer’s individual preferences, the company compares price, quality, services and consumer opinions of various suppliers and presents a list of the best options. The financial products are mortgages, investment funds, health insurances, retail savings accounts, consumer loans, disability insurances, car insurances and life insurances. It is launched in February 2000 and nowadays has 130 employees and 250.000 customers. Founders of Independer.nl, Edmond Hilhorst and Diederik de Groot van Embden, identified four key customer needs that traditional channels failed to meet, but Independer.nl could fulfill:
1. Price -> they include the best possible deals for the customer
2. Independence -> they give objective opinions
3. Convenience -> it takes the customer less time and effort
4. Quality -> customers are able to judge the intermediaries involved with the financial service.
The more transparency and flexible online channel access in the financial market would help customers make better choices more quickly.
Independer.nl had no serious competitors in the beginning: although banks and intermediaries also used the internet, their services were self-interested, restricted and biased.
Independer.nl gets his money from leads and sales commissions (two-prong revenue model). Leads mean that the insurance company has to pay Independer.nl when Independer.nl passes personal financial information about a customer to the insurance company which then can offer the customer the best deal. If the customer purchases the financial product online, the insurance company should pay Independer.nl a sales commission, which became very important later on. Customers were charged no fee except for paid advice. Since 2008 also advertising generates revenue for Independer.nl, but they have a clear note saying it is not a recommendation by Independer.nl.
Growth and current state
A few months after its launch, Independer.nl shifted from being a comparison website to being a financial intermediary. The company found out that two factors are important to sell financial products online: simplicity and ease-of-use would generate a higher conversion rate of site users to actual customers.
Meantime, suppliers were eager to use Independer.nl to promote their brands: they found it a broad and efficient distribution channel and even lowered some rates to outperform competitors in the comparison.
Independer.nl continued to enlarge its products offerings, see appendix 3.
For each product, Independer.nl would check whether it could offer advice and whether it could profit and then find the best way to sell it.
In 2005, Independer.nl added an extra product: healthcare service.
While expanding the product range, Independer.nl was highly innovative also inventing new services.
Over the years the brand name Independer.nl, associated with independence and transparence, became famous in the Netherlands.
Independer.nl grew to a real success: web traffic increased from 1000 per day to 17.000 per day.
Challenges and market developments
Difficulty arose because of market saturation and intensified competition. The company had to decide whether to enter a new segment to find more customers and, if so, how. They also had to decide whether to stick to their brand image of ‘transparency’. Since the market being more transparent (because of many comparison services, the Netherlands Authority for the Financial Market, inspection of intermediaries before collaborating with them, law to disclose the revenues a company makes on products etc), focus on transparency became less important. What new strategic focus should they have and how to redefine their brand image to attract new customers?
Most of Independer.nls customers are customers who like to control every detail of their financial products and do not mind filling in rather long sets of questions. They are loyal to Independer.nl, but also interested in good deals elsewhere (‘inspectors’). This makes Independer.nl dependent on customers with higher education between 30-49 which are familiar and have good experience with internet. Independer.nl haven’t reached the other group of customers: those who will not actively search for information because they think it is difficult and it saves just a little money.
Independer.nl got three kind of competitors:
1) Other comparison websites and intermediaries
2) Insurance suppliers who regarded Independer.nl as a new distribution channel that could steal their customers
3) Discount providers entering the market -> many companies see Independer.nl as a place to get cheap products, so the company had to take this price war seriously.
Also the declining Dutch economy did not help Independer.nl. A lot of people saw financial players as bad guys, so it became crucial to Independer.nl to make sure customers will get a feeling that Independer.nl was different from other financial institutions: the company is dedicated to customers.
New Strategy: Trustworthy Financial Manager
Independer.nl considered a new strategy: the ‘Just Right’ business model. Hilhorst doubted whether transparency was the most important thing, but thought it was more important to help customers make the right choice and to take away their worries. The new business model let Independer.nl manage the financial products of the customer which in turn guarantees to make the best choices for them. Independer.nl would ask the minimal number of questions needed to get the most important information. What about the revenue model? One idea was to let customers pay fixed fees but actually this contradicts the image as a transparent comparison site that did not charge its customers.
Independer.nl would want to make full control over the products it offered to guarantee they sell only good ones. To encourage participation by insurance companies, Independer.nl would place the most popular products at the best locations on their website.
Independer.nl was also in the process of acquiring licenses to issue insurance policies which will shorten the administrative process and time lag between making a product comparison and buying a policy. As for mortgages, Independer.nl referred customers to external advisors and controlled their quality. This lowered the company’s revenues, but it also lowered its costs.
Independer.nl was working on a customized website to reach potential customers. Visitors could enter Independer.nl not only through its homepage but also through various sub-sites via search engines like Google. Weblogs and forums were other devices to attract new customers: people often liked to share experiences; other consumer’s positive opinion of a product would attract new buyers.
One brand, two segments
However, these two business models served to different groups with different needs. Due to the fact that creating a new brand would be highly risky and would cost too much money, the company decided to use the same brand for the different models. The core values of ‘Just Right’ were trust and convenience. It believed the best way to win trust was through word of mouth advertisements.
So, Independer.nl hoped the ‘Just Right’ model would attract many new customers who found comparing financial products too complicated and time-consuming. With the aim of taking away worries and dissatisfactions from their customers, the company aimed to be a trustworthy financial manager. By taking full control of product offerings, Independer.nl would have greater operational efficiency and higher margins, which would give it a competitive edge over competitors. By making the website more personal and adding social functions like weblogs and forums, they wanted to channel more Google visitors to their site and entice them to use their services. It hoped for a high ratio of loyal customers who would promote its brand for free by word of mouth.
But, since Independer.nl was known for transparency and independence, would ‘Just Right’ make the established brand ambiguous? What should its core value be? How could Independer.nl guarantee it would make no mistakes in day to day operations? But perhaps most important, since Independer.nl worked closely with suppliers to design products and determine pricing, how could customers trust it to recommend the best product (how could they trust it to be ‘independent’ if it cooperates with insurance companies?).
Also, the ‘Just Right’ model was not immune to competition: the concept was easy to copy. Since most Independer.nl customers were inspectors, how could it be sure of creating steady sales if competition from discounters would increase?
The main question is: would the brand Independer.nl be powerful enough to reach out to a completely new customer base, with a completely new financial management service, now that Independer.nl was so well known for its independent online product comparisons?