State Farm Mutual Automobile Insurance Company

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State Farm Mutual Automobile Insurance Company

One State Farm Plaza
Bloomington, Illinois 61710-0001
USA
Telephone: (309) 766-2311
Fax: (309) 766-3621
Web site: www.statefarm.com

TRUE STORIES CAMPAIGN

OVERVIEW

The leading automobile insurer since World War II, State Farm Mutual Automobile Insurance Company had relied for many years on advertising that took a serious tone and was anchored by its longtime slogan, "Like a good neighbor, State Farm is there." But in the 1990s the industry was turned upside down by direct marketer GEICO, which emerged from obscurity to blanket the television airways with a bevy of humorous commercials promoting the low price of its car insurance, which it was able to offer largely because it did not maintain the extensive agent network of a company such as State Farm. The Progressive Corporation also beefed up its marketing budget to make its own price pitch. State Farm and its closest competitor, Allstate, shied away from the insurance price war that developed, but by the first decade of the new millennium, price had become paramount in the mind of consumers, and State Farm, which had always promoted customer service over price, found itself losing market share. In 2004 State Farm released a new advertising campaign created by ad agency DDB Chicago. Called "True Stories," it made the case that an agent-client relationship was important.

The "True Stories" television spots were humorous depictions of unusual ways that actual State Farm agents helped their customers. The agents played themselves, while the customers and supporting cast were portrayed by actors. One spot, for example, concerned a Wisconsin State Farm agent who was also the local diver. When an out-of-town driver accidentally drove his car into a lake, the agent simultaneously settled the claim and salvaged the car. The budget for "True Stories" was not made public.

State Farm was pleased enough with the campaign to continue producing new television spots, including one that first aired during the pregame show for the 2006 Super Bowl. State Farm began to reverse the trend of losing market share, and in 2005 the company exceeded its sales quota by a large margin.

HISTORICAL CONTEXT

Since 1971 State Farm had centered its marketing around the slogan "Like a good neighbor, State Farm is there." The advertisements of State Farm and such rivals as Allstate and Nationwide touted their networks of agents and the customer service they provided, while avoiding any mention of price. In the 1990s GEICO, a direct marketer with no agents at all, began to upset the balance of the industry. The broad humor it employed in its commercials was a complete departure from the warm and serious tone adopted by State Farm and the old-guard insurers. More importantly, GEICO and the Progressive Corporation began bombarding the media with advertising that focused solely on price. They had everything to gain by such an approach, and both added market share during the 1990s and into the new century. State Farm, on the other hand, refused to contend for business on those terms, fearful that auto insurance would be reduced to commodity status: a low-profit item, only the cheapest of which customers bought. Instead the company continued to emphasize the level of customer service that its agents provided, maintaining that it warranted the higher costs of its premiums.

Although State Farm maintained it top position in the auto-insurance market, it began to experience erosion in the first years of the new millennium. It enjoyed a 19.3 percent share of the private-passenger auto-insurance market in 2002, but that number dipped to 19 percent in 2003 and continued to decline in 2004. Through their constant advertising GEICO and Progressive had changed the terms of the debate about shopping for auto insurance: price had become paramount, and the value of having a relationship with a agent was relegated to secondary status. In many ways the auto-insurance field was engaged in a battle of business models. Writing for Advertising Age, Mya Frazier reported that the fight was "pitting the call-center row of headset-wearing operators taking claims and signing on new customers against neighborhood agents who know a customer's kids and may even be a neighbor. It's pitting Internet price quotes vs. in-office consultations and the yearly search for a best price vs. a lifetime relationship with an agent." The direct model was enjoying faster growth than the agent-based approach. In an effort to return the focus to service and differentiate between price and value, State Farm in 2004 released its "True Stories" campaign, a lighthearted depiction of the lengths to which actual State Farm agents would go in service of their customers. While State Farm did not give in to GEICO and adopt a price message, it did drop its usual serious tone in favor of humor.

TARGET MARKET

Auto insurers had to contend with one of the broadest target audiences in all of marketing. The law required every driver to be insured, creating a massive pool of potential clients that encompassed all genders, races, and ages. The younger demographic, however, was more price-conscious and had not grown up with the assumption that one did business with an agent. In fact, many of them preferred not to have a relationship with an agent and were more than willing to switch insurance companies if the price was right. It was the older, less price-sensitive driver who was a more appropriate target for State Farm's "True Stories." Many of these people were already State Farm customers, and the company was eager to keep their business by reminding them of the value of an agent relationship. The campaign also sought to persuade other older drivers of the importance of what State Farm had to offer. At the same time the company was not writing off younger customers. One of the television commercials focused on a young woman who had two accidents within her first hour of having a driver's license. The spot appealed to both young people and parents.

COMPETITION

State Farm's closest rival was Allstate, which had about 10 percent of the auto-insurance market in 2004. Next came Progressive with 7.1 percent and GEICO with 5.5 percent, followed by Farmers Insurance Group, Nationwide Group, United Services Automobile Association Group, American International Group, Liberty Mutual Group, and American Family Insurance Group. Because of GEICO's attention-grabbing advertising and Progressive's willingness to spend exorbitant amounts of money on television advertising, every company in the industry was forced to follow suit. The bulk of the advertisements were price appeals, and even Allstate, which, like State Farm, had always avoided such a message, made a concession to the prevailing trend. Its "Our Stand" campaign, featuring actor Dennis Haysbert, who played the U.S. president in the hit television series 24, began in November 2003. It promoted Allstate's good-driver discount and touted statistics showing that people who switched to Allstate saved $200 a year on average.

A SPECIALIST IN TRUE STORIES

The first television spots in State Farm's "True Stories" campaign were directed by Academy Award-winning documentary filmmaker Errol Morris. He received his Oscar in 2004 for The Fog of War, concerning the life of Robert S. McNamara, U.S. secretary of defense during the Vietnam War. Morris's other documentaries included Gates of Heaven, The Thin Blue Line, A Brief History of Time, and Fast, Cheap, and Out of Control.

There was another compelling reason that insurers were padding their marketing budgets in an effort to poach customers from one another: the car-insurance business had become more profitable than ever. Cars were better built and safer. There were fewer accidents caused by mechanical problems, and as a result insurers paid out fewer claims. The U.S. population was also growing older. Older drivers tended to drive slower and more cautiously, again resulting in fewer accidents and claims and greater profits for insurers. Hence, State Farm's eroding market share was costing it a great deal of money. The company wanted not only to hold the line but also to build on its number one position and post even greater profits in the years to come.

MARKETING STRATEGY

The purpose of the "True Stories" campaign was to demonstrate the personal care that State Farm agents offered their customers. The company's advertising agency, DDB Chicago, said that to develop the campaign it had contacted State Farm's 13 regional zones, asking agents to submit actual customer experiences that revealed exceptional and highly unusual service. About 250 agents responded; 15 were determined to be of interest, and of them 6 were chosen to be dramatized. While actors would play most of the roles, the State Farm agents played themselves.

How the agents appeared on film, however, may have played a major part of the selection process. According to About Business, published by the city of Edina, Minnesota, one of the State Farm agents featured in "True Stories," local woman Joan Roisum, was nominated by a State Farm regional vice president. Next she was videotaped to determine if she was photogenic enough for the commercial. According to writer Cheryl Anderson, "She then needed to have a 'true story' to capture the interest of both State Farm and its advertising agency. They called her periodically for a year to ask if she had a story about a particular topic, but her stories had not interested them." Roisum finally caught the agency's attention when she was asked if she had any stories about people who switched from another insurer to State Farm. She told them about a newly married couple with whom she had worked: they had two of everything, including dogs, but the wife was a GEICO customer and the husband a State Farm customer. In the end they kept State Farm. A few weeks later Roisum was in Hollywood to shoot her commercial.

The 30-second television spots were first shown during baseball's World Series, which was telecast on the Fox network on October 23, 2004. Subsequently the commercials aired on major network shows and cable programming. In addition to the general-market spots, the campaign included the creation of single spots aimed at the African-American, Hispanic, and Chinese-American markets (for the latter separate spots were filmed in Cantonese and Mandarin). The spot called "Diver" featured Wisconsin State Farm agent Larry Bitterman, who served an out-of-town State Farm driver whose car had somehow fallen into a lake as a result of a faulty map. Not only did Bitterman settle the claim, but he also helped raise the car from the lake in his capacity as local diver. The "New Driver" spot showed a State Farm agent providing counsel for a San Jose, California, teenager who crashed her car twice in 10 seconds, within 45 minutes of receiving her driver's license. Her tale was interwoven with commentary from her parents and brothers. Other spots included Roisum's newlyweds as well as twin sisters who had accidents in the same intersection. The six agent stories were also fleshed out on the Internet as interactive ads. Radio versions of the television spots were created, and the campaign included a handful of print ads, but television was far and away the main messenger. Although one spot touted State Farm's financial services, the campaign focused on car insurance.

OUTCOME

State Farm considered the "True Stories" campaign a success and continued to air the television spots, along with new executions, into 2006. One of the new spots made its debut during the pregame ceremony of the 2006 Super Bowl. In 2004 State Farm's market share fell further, to 18.2 percent. In the company's annual report chairman and chief executive officer Edward B. Rust, Jr., made note of the poor showing of State Farm's auto division, writing, "Although we wrote 5.6 million auto applications and added more than 375,000 policies and accounts to our total book of business, we fell short of our growth goals in our core auto business. Our toughest competitors increased their share of the auto market—we did not." The situation improved in 2005, however, when State Farm made great strides in reversing the trend. The company set a goal of 400,000 new policies and exceeded that number by 225,000. Consumers surveys conducted after the start of the campaign also revealed significant improvement concerning positive brand image and likelihood for a non-State Farm customer to consider State Farm as an insurer.