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Nike and Adidas have been competing to lead the charge in the training-shoe market for as long as I can remember. What on earth has this got to do with insurance, I hear you ask? I’ll come back to that in a minute.
Both brands of trainer offer principally the same user experience and a very similar suite of products. The price point is broadly similar as is the manufacturing quality. At the top end you can customise your product. And the two enter into collaborations with other brands to create a buzz and try to steal a march with unique and hard-to-obtain versions; ever fancied a pair of Adidas Kermits?
These sneaker giants also use people to endorse and promote their brand. Michael Jordan sees $100 million per year (therichest.com) from Nike thanks to the iconic Air Jordan shoe.
So, what we are talking about is a similar product from a similar company that does the same thing . What’s the differentiator? To answer that, think about which you would choose – Adidas or Nike?
Your decision would be based on brand preference, and would be formed by the deep and complex advertising, promotion and PR campaigns that both brands deliver so well around the world. Don’t worry, we will get to the insurance bit very soon.
Adidas reported total global revenues of $11.61 billion as of December 2021, and the company boosted its advertising and promotion spending to $2.5 billion US dollars in the same year from a heady $2.37 billion the year before, according to Statista.
For comparision, Nike’s total global revenues of 2021 were reported to be $44.54 billion as of December 2021 with advertising and promotion spend of about $3.11 billion (Statista).
So if we extrapolate those figures, we see that Adidas spends just over 21.5% of its revenue on promoting its brand and products while Nike spends just under 7% of its revenues on broadly the same activities. Now, we could analyse these numbers and the stark differences in brand investment vs revenues (well done Nike!), but I think that is for a whole other blog.
But here comes the parallel and possibly the paradox; the similarity of insurance brands in the specialty market to trainer (sneaker!) manufacturers. Just as Nike and Adidas offer broadly the same product, there are many similarities in what is offered by the companies in the latest Insurindex top 20 list of Power Brands.
These brands offer similar product suites – some commoditised, and some niche and with rinkydinks (think of that little green frog on the side of Adidas trainers). The products are similarly distributed to the same target audience and the supply chain is similar too. Each brand has some differentiators, some pursue claims excellence more than others, some develop smart ways of distributing products and personalising them through a user experience. Some use their underwriters to promote their products and capabilities. You get the gist.
So what is the single biggest thing that sets these insurance businesses apart? Brand. And I would include culture as part of that.
Having worked in the Specialty insurance space for some 25 years, I can’t imagine in my wildest dreams the idea of a company spending 7% (let alone 21%) of revenue on advertising and marketing. And, to be fair, that would be wholly inappropriate in this sector. But I do believe that investment in brand has never been more critical if you want your business to be front of mind and the go-to place, not only to place business, but also to work.
One closing thought. Where does Prada fit into all this? Boutique, premium service, premium tech, culture-committed and talent-led. Enter stage left, the Challenger Brand.
Watch this space for Insurindex’s upcoming analysis of those Challenger Brands in our marketplace that are coming up hot-on-the-heels of the established power players.
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