Progressive Corporation

. What challenges does Progressive face in 2007? What would you recommend to CEO Glenn Renwick?

Challenges:

In 2006, insurance rates were softening but Progressive was determined to hold prices firm. Renwick argued that the recent high industry profitability was driven by unanticipated falling accident frequency and that this would not continue. He also pointed out that the difference in price might not be big enough to reflect market share, there might be many reasons for this, but the important issue was that Progressive didn't know the reason.

The second challenge was that the customer's perception of Progressive differed from the Company's self-perception as a champion of its customers. While Progressives goal was to be the consumer's #1 choice for auto insurance, JD Power and Associates gave the Company a below average score for the overall customer satisfaction and ranked it 14. Progressive also scored below average for collision repair satisfaction and also ranked 14.

The third challenge was consumer awareness of the Progressive brand. In 2006, Progressive had achieved 57% unaided brand awareness, up from 53%. This put the brand in the top four, but well behind GEICO(79%), Allstate (69%), and State Farm (74%) who had been advertising for many years. Moreover, the leaders were increasing their advertising support aggressively.

Recommendation:

The reality is that the standard of pricing sophistication among Progressive's most important competitors has improved, as has the technology used to present rates and make the sale. This means that it is imperative for Progressive to redouble its efforts to lead in the application of rating and segmentation skills, while maintaining low-cost position for non-claims expenses and excellent claims resolution quality.

Based on information about consumer's conception of Progressive, its effort should continue to focus on customer satisfaction and loyalty, and Progressive should also improve effective and consistent communication with customers, thus they can accurately reflect what they think and how Progressive's customers would best understand what Progressive said.

Strengthen customer's brand awareness through the explosive influence of brand building and advertising. Progressive can increase adverting investment and stimulate marketing team to design more attractive promotion strategy and advertising contents, or be more in sync with ad agency.

Increase the role of technology, and e-business. The Internet is well beyond the initial quote and sales, it can be used to facilitate more post-sale transactions. Beyond the sale, customers are increasingly using online service to make changes in their policy, check policy status and make payments.