Geico’s Giant Ad Budget Drives Them Past Allstate

Geico has recently proved to us that you get what you pay for when it comes to advertising. The company is backed by Warren Buffett – billionaire investor – and they are ready to take advantage of the massive advertising budget that they used to pass Allstate, which brought them into second place in the car insurance market, which will as we all know is seriously competitive.

During the first quarter of 2013 alone, they have already passed Allstate in direct premiums. They wrote $4.72 billion worth of direct premium auto insurance which you can compare to all states $4.53 billion. We learn this from SNL Financial business data. This is the first time that Geico has moved ahead of its major competitor in a single period of reporting.

Throughout the whole year though, Allstate is actually still ahead of Geico, but just barely. The major insurer, which has an advertising campaign named “mayhem”, has held onto the number two spot for auto insurers over the year ended March 31 but only by a narrow margin. They had $17.65 billion in premiums versus Geico who has $17.16 billion in premiums according to the financial firm. The leader in the automotive insurance industry is still State Farm, who had a total of $8.43 billion in direct premiums during the first quarter.

Geico eagerly awaits the full-year numbers to be released before celebrating. But if the current trend tells us anything, the company will expect to stay at number two, we learned from Ted Ward – Chief Marketing Officer. There are many analysts that also agree. Meyer Shields said that “it’s almost inevitable.” He’s the managing director of equity research in insurance at Keefe, Bruyette & Woods.

This shows us exactly how Geico has used its advertising budget to turn from a smalltime player into a major competitor. The key to turning things around came in 1996, once Warren Buffett decided to turn Geico into a Berkshire Hathaway subsidiary. He told them point blank that money was no object as far as growing the business was concerned. During this time, Geico only had about 3% of the market, maybe even less than that. But in 2013, Geico now owns 9% of the market share, we learned from the Insurance Information Institute.

Geico’s rise to power has been fueled by its never-ending media budget. As far as advertising goes, in 2012 the company was the fifth most advertised megabrand – and this is across all industries. They spent $921 million in measured media spending, we learned from the Ad Age DataCenter. Back in 2003, the company was only ranked 87th, so it’s obviously a major rise in advertising and the rankings.

Not only does Geico spend more than all of its other competitors in this category, it also spends its advertising budget wisely and relentlessly pursues the same message of car insurance savings across almost all of its ad campaigns. Geico is known for its friendly characters such as the gecko, pigs and cavemen. “We are trying to stay ever present into the consumer’s mind but not bore them and have them just tune out yet another Geico ad,” said Mr. Ward.

In Geico’s latest commercials, the company actually makes fun of itself and it’s often used “15 minutes could save you 15% or more” company tagline. The ads in their latest campaign called “Did You Know?” end with the line: “15 minutes could save you… Well, you know.” Horizon Media handles Geico’s media advertising and Martin Agency handles the creative work.

Geico’s messages were revolutionary when they first hit the airwaves. “It is a simple, clean pitch,” said senior director of global insurance at JD Power, Jeremy Bowler. “They clearly staked out their position and have maintained that position.”

One Comment

  1. Geico is not doing anything from a rate perspective that cannot be found elsewhere. Rates on policies sold through the agency channel vs. the call center channel are not cheaper or more costly simply because of one channel vs the other. What Geico is / must be doing better than others, is providing constant brand awareness along with rate stability. Even if the client is buying state minimum, the public is getting a product they want. When consumers are low information and / or confused about a product such as insurance, the easiest denominator for this type of consumer to understand is the price. Not saying this is what is best for the client.

Leave a Reply

Your email address will not be published. Required fields are marked *