NEW YORK — U.S. auto insurers failed to boost sales even after spending billions of dollars on advertisements with Hollywood actors and professional athletes, McKinsey & Co. said.
The industry has been in a "marketing arms race" during the past decade, boosting spending 15 percent a year to almost $6 billion in 2011, the management-consulting firm said in a report released Wednesday. Sales have been stagnant for the group over 10 years and more than half of the advertising outlay has come from insurers that didn't gain market share, McKinsey said.
Progressive and Berkshire Hathaway's Geico unit added customers by advertising low prices. That pitch may not be the most effective for all insurers as they compete for part of a mature market, said Tanguy Catlin, a partner in McKinsey's insurance practice and a co-author of the report.
"When Nike advertises shoes, people can buy more shoes," he said. Spending more on auto insurance marketing doesn't necessarily translate into higher sales, because consumers "don't buy multiple insurance policies."
Geico led insurers in ad spending in 2011 with an outlay of almost $1 billion, according to data compiled by SNL Financial. The insurer's spots have featured a talking pig and comedian Gallagher to highlight savings customers can realize by switching to its policies.
State Farm, the largest U.S. auto insurer, has used sports stars such as Green Bay Packers quarterback Aaron Rodgers in ads. It was second with more than $800 million in spending in 2011. Allstate was third, followed by Progressive and Farmers Insurance. That spending has helped the top five advertisers pull away "in terms of brand awareness" from rivals including Travelers and Liberty Mutual, McKinsey said. Buying more ads may not be the best strategy for all insurers, since only about 30 percent of policyholders focus on the cost of coverage.
"The other 70 percent — the 'silent majority' of policyholders — appears to be difficult to reach," the authors wrote in the report. "This is likely because they are unresponsive to marketing messages based solely around price."
Allstate hired actor John Krasinski as a pitchman for TV spots and radio ads that began airing in 2011 to supplement campaigns it already runs using Dennis Haysbert and actor Dean Winters playing a character named Mayhem.
Progressive, known for its spunky saleswoman Flo, spent $536 million on ads in 2011, SNL Financial data show.
The surging cost of winning new customers has made retaining policyholders even more important, McKinsey said. Insurers can benefit if they tailor messages to specific customer groups as carriers have done in Britain by developing so-called micro-brands, the report said.
"Auto insurance shoppers are not as single-minded as the advertising aimed at attracting them would indicate," the authors said. "There are multiple segments, and the consumers in each of these segments are driven by different needs and preferences, and respond to distinct messages at distinct touch points in their shopping journey."