What's the Hard Part? Outgrowing Your Niche

How Progressive maintains balance between its origial focus and its potential growth.

How do you grow beyond your original market niche without losing the focus that made you great? That's one of the core strategic challenges facing Progressive as it tries to maintain its breakneck growth rate. CEO Peter Lewis built the company around writing policies for high-risk drivers whom his rivals were reluctant to insure. Today Progressive is second only to Allstate in this "nonstandard" market.

But that market accounts for less than 20% of total U.S. private-passenger insurance, according to Daniel R. Lewis, 52, its agent-marketing process leader (and Peter's brother). The market for "standard" and "preferred" policies is a $90 billion opportunity that the company simply cannot ignore.

Indeed, Progressive has been trying to crack that market for 10 years without much success. The major obstacle: Persuading the 30,000 independent agents who sell the bulk of Progressive's policies to see the company in a new light — as a mainstream auto insurer rather than as an intriguing niche player. "They're pigeonholing us," says Leslie Kolleda, Progressive's PR manager. "We're trying to get these agents to shift their mind-set."

In some ways, the company is a victim of its own success. Progressive often uses "mystery shoppers," who pose as would-be customers, to find out how agents perceive the company. All too often, says Dan Lewis, if these shoppers don't fit the profile of a nonstandard driver, an agent won't even mention Progressive. If the shopper asks about Progressive, the agent usually assumes that he or she is a high-risk driver and hasn't been completely honest about his or her record.

How does Progressive change this mind-set? "You beg," says Dan Lewis with a laugh. "We have to convince the agents that it's in their best interest to use us." Progressive asks independent agents to do three simple things when they see a potential customer: Mention something positive about Progressive, such as Immediate Response; give a price quote for standard insurance if someone asks for it; and make sure that the quote is accurate.

Slowly but surely, the company is making progress. Last year, more than half of its affiliated independent agencies sold standard or preferred policies. Five years ago, the number of its agencies that did so was negligible. "We're trying to change a deep-seated perception," says Kolleda. "It's an ongoing challenge."

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