Dr. Zaid Ahmad Ansari*
Assistant Professor – Marketing, Head, Department of Marketing, College of Business (C.O.B.), King Abdulaziz University, Jeddah, Saudi Arabia
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Insurance, Product portfolio, Product development, Saudi Arabia
The marketing mix is the set of controllable, tactical marketing tools that the firms blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to influence the demand for its product. The many possibilities can be collected into four groups of variables known as the four Ps, Product, Price, Place and Promotion. In this study the researcher focuses on the product element of the marketing mix in insurance industry of Saudi Arabia. The variety of the product, quality, design, features, brand name, packaging, and services are important to deliver value to customers. In fact product is the solution the customers are actually looking for to solve their problem. Delivering right value through right product is very crucial in customer satisfaction, but the researches show that developing an appropriate product to generate sufficient demand is not an easy job. As much as 40% to 75% of the new products either fail or under perform in the market (Stevens and Berley, 2003). Researches further show that cross functional integration, especially between marketing and research and development has been widely recognized as a key success factor in new product development (NPD) both in the theoretical literature (Brown and Eisenhardt 1995; griffin and Hauser 1996) and in empirical studies (Henard and Szymanski 2001; Song and Parry 1997; troy Hirunyawipada, and Paswan 2008). By integrating marketing and R&D, companies can enhance the flow of market information, which critical to the success of new products, into the NPD process (Ottum and Moore 1997; Wren, Souder, and Berkowitz 2000). In recent survey, 750 global CEOs reported that only 14 percent of their innovation ideas came from traditional R&D. Instead, 41 percent came from employees and 36 percent from customers. (John Peppers and Martha Rogers 2007). New product development is the development of original products, product improvements, product modifications, and new brands through the firm’s own product development efforts (Armstrong and Kotler, 2011, 10e.). Thus in this study researcher investigates from the employees of the insurance companies in Saudi Arabia about their level of participation in the New Product development process of the company. Employees are the face of the company for the customers especially in insurance company where the major portion of the business is contributed by the marketing executives and salesman. Thus in study the respondents have been grouped into three categories namely Marketing executives, Salesman, and Others. In the following sections a brief about the current product range as per the article three of the Implementing Regulations (2005) is presented.
1.1. Classification of Insurance in Saudi Arabia
Insurance can be classified in different categories. It can be classified on the basis of subject matter or on the basis of the event insured or on the basis of the main classes of business. In Saudi Arabia insurance companies have to operate in accordance with the principles of Islamic Sharia’h (SAMA, Cooperative insurance companies control law 2005). Companies in Saudi Arabia deal in the insurance products which are formally approved by the Sharia’h Committee of the insurance companies. Sharia’h Committee is mandatory for every insurance company in Saudi Arabia. SAMA has classified insurance policies as follows (SAMA implementing rules, 2005).
1. General Insurance
a. Accident and Liability Insurance including the following
• Personal Accident insurance,
• Work related Insurance,
• Employers’ Liability Insurance,
• Third Party Liability Insurance,
• General Liability Insurance,
• Product Liability Insurance,
• Medical Liability Insurance,
• Professional Liability Insurance,
• Theft and Burglary Insurance,
• Fidelity Insurance,
• Safe Burglary Insurance inside the premises and in transit,
• Any other liability Insurance,
b. Motor Insurance provides coverage against losses and liability related to motor vehicles, excluding transport insurance.
c. Property Insurance provides coverage against fire, theft, explosions, natural phenomena, civil disturbances, any other insurance included under this class of insurance.
d. Marine Insurance provides coverage for goods in transit and the vehicles of transportation on waterways, and any other insurance included under this class of insurance.
e. Aviation Insurance provides coverage for airline hulls and liability against passengers and third parties, freight transport by air, and any other insurance included under this class of insurance.
f. Energy Insurance provides coverage for oil, petrochemical, other energy installations, and any other insurance included under this class of insurance.
g. Engineering Insurance provides coverage for builder’s risks, construction, mechanical, electronic, and machinery breakdown, and any other insurance included under this class of insurance.
h. Other classes include all recognized classes of general insurance not mentioned above.
2. Health Insurance health insurance provides individual or group coverage for medical costs, medicines, medical and medications requirements as well as management of medical programmes.
3. Protection and Savings Insurance
a. Protection Insurance provides individual or group coverage for death related consequences, and permanent and partial disability.
b. Protection and Savings Insurance provides individual or group coverage for death related consequences, and permanent and partial disability with a saving / retirement plan for an additional premium paid by the insured.
c. Other protection and savings Insurance includes other classes of insurance in the protection and savings insurance not mentioned above.
Insurance Law in Saudi Arabia
The Law On Supervision of Cooperative Insurance Companies, promulgated by Royal Decree (M/32) dated 02/06/1424H, has entrusted SAMA with the regulation and supervision of the insurance market in Saudi Arabia. To achieve this task, SAMA has setup a dedicated department, the Insurance Supervision Department. Article one of the Law says that Insurance in the kingdom shall be undertaken through registered insurance companies operating in a cooperative manner as it provided within the article establishment of the national Company for Cooperative Insurance promulgated by Royal decree M/5 dated 17/5/1405, and in accordance with the principles of Islamic Sharia’h1. Thus besides other the insurance companies in Saudi Arabia need to sell Sharia’h compliant insurance products (Traditional insurance is considered to be against the principles of Sharia’h). Article Sixteen of the Implementing Regulations (2005) further says that The Company and all Insurance and Reinsurance Services Providers shall provide complete and accurate information regarding their insurance products and services to the Agency. Written prior approval by the Agency is required for marketing all insurance products and services. After this introduction, the rest of the paper is organized in following major parts:
i. A literature review on prior studies on the role of marketing department (marketing executives) in NPD is presented.
ii. Objectives of the study.
iii. Statement of the problem.
iv. The methodology of the research.
v. Results and discussions.
vi. The concluding remarks.
Firms dedicate vast resources in their quest to develop new products that offer an advantage over competition. At the heart of this quest is the knowledge embedded in the cross-functional new product development (NPD) team. The team represents a group of people from different functions who are responsible for the management and coordination of the NPD project (Griffin and Hauser 1992). The rationale for using a cross-functional NPD team is to leverage each member’s distinct expertise and knowledge. Transferring knowledge across functional boundaries can generate a valuable strategic asset (Hansen 1999; Maltz and Kohli 1996) as teams create new solutions, products, and services (Atuahene-Gima and Evangelista 2000; Brown and Eisenhardt 1995; Griffin and Hauser 1992). Brown and Eisenhardt (1995) conceptualize the NPD process as a disciplined, problem-solving process that involves many decision-making activities geared toward finding solutions to critical customer problems.
Cross functional integration, especially between marketing and research and development, has been widely recognized as a key success factor in new product development both in the theoretical literature (Brown and Eisenhardt 1995; griffin and Hauser 1996) and in empirical studies (Henard and Szymanski 2001; Song and Parry 1997; Troy, Hirunyawipada, and Paswan 2008). By integrating marketing and R&D, companies can enhance the flow of market information, which is critical to the success of new products, into the NPD process (Ottum and Moore 1997; Wren, Souder, and Berkowitz 2000).
Addressing the role of the sales function in NPD should expand existing knowledge on antecedents of new product successes and failures (Hultink and Atuahene-Gima 2000).
Sales can potentially make complementary and valuable contributions that positively affect NPD performance. For example, organizations have experienced difficulties in generating high-quality ideas in the early stages of NPD (Khurana and Rosenthal 1998), and this difficulty has been frequently identified as a major cause of the notoriously high failure rates of new products (Nobelius and Trygg 2002). Because the sales function has the closest contact to customers (Kotler, Rackham, and Krishnaswamy 2006) and a strong customer orientation (Homburg and Jensen 2007), its involvement and information sharing with R&D and marketing should improve the process of finding, assessing, and selecting more and better ideas for NPD in these early phases. Therefore, the integration of sales with R&D and marketing could help lower new product failure rates (which are approximately 40%–75%; see Stevens and Burley 2003) and increase NPD performance.
A considerable amount of conceptual and empirical research has been devoted to the cooperation between marketing and research and development because both departments are highly relevant for successful NPD (Griffin and Hauser 1996; Gupta, Raj, and Wilemon 1986; Song, thieme, and Xie 1998; Souder 1988). The marketing function is responsible for a wide range of activities that provide relevant information for the entire NPD process. These activities include among others, market trend analysis, opportunity assessment, market research, market segmentation, product positioning, and communication (Griffin and Hauser 1996; Rouzies et. al. 2005). The R&D department is primarily concerned with the generation of new technological knowledge and applying this knowledge to design new products (Griffin and Hauser 1996; Souder 1988). Both sets of activities need to be aligned to share relevant information and to develop a new product that meets the market requirements and generates satisfactory financial returns to the firm. This is enhanced through a high level of cross-functional cooperation between R&D and marketing during the NPD process (Griffin and Hauser 1996).
Authors have used the terms new product development and new service development interchangeably (Johne & Storey, 1997). However, as noted by Kelly & Storey (1999), in comparison to New Product Development (NPD), New Service Development (NSD) has received significantly less attention. As noted by West & Altink (1996) innovations that are initiated and implemented by individuals have been largely bypassed as most of the studies have investigated NSD at firm level or project level. This lack of attention is in-spite of the recognition that employees (customer contact employees in case of service firms) can be major contributors of blockbuster new ideas (McGuire, 1973; Bowers, 1989).
Schneider & Bowen (1984) have argued that by including employees in the NSD process, customer needs can be better identified, likelihood to successful implementation can be enhanced, process efficiency can be enhanced and might result in employees treating customers better. Gordon et al., (1997) and Cadogan & Simintiras (1996) discuss the contributions sales personnel can make by the virtue of being closer to customers. For the present study, criteria specified by Barett (2004) are used to determine the front-line executive function. Barett has listed the following characteristic features of the customer contact executives; (a) it is people oriented (b) work is rarely routinised fully (hence non-uniform tasks) and (c) sensitive to changes in internal and external organizational environments. As suggested by West & Farr (1989), innovation at individual level is considered as “individual actions directed at generation, introduction and application of beneficial novelty”.
Organizations are increasingly integrating the diverse backgrounds, knowledge, and expertise of employees within work-team structures. As a result, using teams consisting of members with varying abilities and backgrounds is becoming a growing practice in modern organizations (Bayazit & Mannix, 2003; Cox & Blake, 1991; Evans & Carson, 2005; Horwitz, 2005; Lawrence, 1997). Diversity in teams, however, poses both opportunities and threats. If managed properly, team heterogeneity can create significant operational synergy, whereas mismanaged team diversity can become a major barrier to optimal functioning because of intragroup conflicts, miscommunication, and lack of trust (Jackson, May & Whitney, 1995; Jehn, Northcraft & Neale, 1999; Watson, Kumar & Michaelson, 1993). Many researchers agree that the effective implementation of cross-functional teams is critical to new product development success (Jassawalla & Sashittal, 2000; Keller, 2001; Sethi, Smith & Park,2001 2000). In industries as the automobile, biotechnology, consumer and industrial electronics, computer software, and pharmaceutical industry, companies often depend on products introduced within the last five years for more than 50 percent of their annual sales. However, new product failure rates are still high. Many R&D projects never result in a commercial product, and between 33 percent and 60 percent of all new products that reach the market place fail to generate an economic return (Schilling, 1998).
The present study is undertaken with the following objectives:
• To analyze the strength of product portfolio of insurance companies in Saudi Arabia.
• To find out the role of employees in New Product Development in insurance companies in Saudi Arabia.
The insurance industry in Saudi Arabia has been privatized for the indigenous investors and partially liberalized for foreign investors. As result since reforms in 2003, the industry has been growing at remarkably high rate in 2010 the growth rate has been as high as 12.2% (The Saudi Insurance market report 2010). The report further shows that the major part of the premium has been generated by the health insurance policies around 53.3% and by motor insurance policy around 20%. Thus the total contribution by these two policies accounted for 73% of the total premium. The demand generated by these lines of business will soon saturate. Thus in this study the researcher wants to investigate one of the important element of marketing mix ‘The product’ it’s available range and the process of developing new insurance product in the insurance companies of Saudi Arabia.
5.1. Data collection
The study is primarily based on primary data collected from insurance employees currently working in insurance industry of Saudi Arabia. The employees have been categorized into three groups - insurance salesman, marketing executives, and other employees. The study was proposed on a sample size of 100 respondents. 120 questionnaires were randomly administered to employees selecting five employees on an average from each company. Approximately 80 usable questionnaires were received.
5.2. Survey instrument
A comprehensive questionnaire was developed for data collection from the current employees of the insurance companies on the topic of study. The questionnaire consisted of four questions focusing on areas such as as per the topic of the study such as available product range, importance of new product development, innovations and improvements in products, and executive’s participation in product development.The questionnaire was originally developed in English and translated into Arabic for high response rate. The questionnaire contained question enquiring respondent about their education and experience.
5.3. Statistical tools
The data collected questionnaire from the respondents was analyzed by SPSS software. Statistical tools used were percentages, mean, chi-square test, and F-test.
H1 Insurance companies in Saudi Arabia have strong Product portfolio.
H2 Insurance companies in Saudi Arabia give importance to New Product Development.
H3 Innovation and improvement is required in products of insurance companies in Saudi Arabia.
H4 The employees in insurance companies actively participate in the product development process.
H1 Insurance companies in Saudi Arabia have strong product portfolio.
This statement can be tested from the classification of the product by SAMA Insurance implementing regulations article three. The range of products available varies from compulsory insurance i.e., motor insurance and health insurance to engineering, aviation etc. Besides, as substitute of the traditional life insurance policy which is considered against Sharia’h, insurance companies in Saudi Arabia deal in ‘Savings and Protection insurance policy’. The hypothesis can also be tested from the responses of the executives presented in Table1. Cumulative response of all the respondents irrespective of their category to which they belong, 53.8% said that the range of current available products is enough. From the remaining 46% respondents 32.5% suggested that the insurance industry needs more products and approximately 14% said they were not sure. Interestingly, the responses from the three categories of executives namely; Salesman, Marketing executives, and other executives were significantly different, only 34.3% of salesman agreed to the fact that the available product range is enough in comparison to 85.7% marketing executives who said that the current product range is enough. In response variable ‘Needs more products’ 42.9% salesman and 37.5 other executives supported that the industry is in need of more products. From the above analysis it can be safely said that the insurance companies in Saudi Arabia should strengthen their product range as per the need of the consumers.
H2 Insurance companies in Saudi Arabia give importance to New Product Development.
Table 2 presents the response of the executives on the importance of the new product development in insurance companies. The executives were asked to tell the level of importance on five point scale from 1 equal to extremely important to 5 least important. The response was measured through mean value and standard deviation, tested with F value. Among the three executives the mean value for the Salesman was least 2.26, Std. deviation 1.120. The mean value for salesman was followed by other executives, the mean value being 2.75, std. deviation 1.152. Surprisingly the mean value for the marketing executives was highest 3.14, std. deviation 0.727. Thus the responses of the three executives were significantly different where the salesman highly supported the importance of new product development in the insurance companies of the Saudi Arabia along with the other executive’s category. Thus the above hypothesis in accordance with the responses of the salesman and other executives is accepted.
H3 Innovation and improvement is needed in insurance products.
Table 3 presents the responses of the executives on the innovations and improvements in products. The response of the executives was measured as ‘1 equal to Yes and 2 equal to No’. The responses were analyzed with mean value and tested with F value. Under innovation and improvement the executives were asked to either support or not to support with the following statements; Change in product attributes, change in underwriting, change in premium structure, and change in risk assessment procedure. In cumulative response mean value for the fact ‘change in underwriting procedure’ is lowest at 1.73, std. deviation 0.449 followed by ‘change in premium structure’ mean value 1.80, std. deviation 0.403. Individually Marketing executives strongly supported change in premium structure with mean value 1.43 std. deviation 0.507 followed by change in underwriting procedure mean value 1.57, std. deviation 0.502 suggested by Salesman. Thus the from the responses of the executives the above hypothesis can safely be accepted that there is need of innovation and improvement in some areas in insurance products in Saudi Arabia.
H4 The employees in insurance companies actively participate in the product development process.
Table 4, presents the response of the executives on their participation in the product development procedure in Insurance companies in Saudi Arabia. The response was received on three areas namely; actively participate in product development, only give suggestions in product development and do not participate at all. In cumulative response 41.3% executives said that they actively participate in product development process and 42.5% said that they play only suggestive role in product development. Interestingly only 16.3% of the responding executives said that they do not participate in the product development of insurance products in insurance companies. In individual category approximately 43% salesman said that they actively participate in product development and 46% other executives said that they participate in product development and only33% executives said that they participate in product development. As a whole All the executives agreed that they either actively participate or give suggestions in product development. Thus the employees in insurance companies in Saudi Arabia actively participate in the product development and the hypothesis is accepted.
The results of the study shows that the insurance industry in Saudi Arabia is growing fast though the growth is mainly triggered by compulsory lines of insurance namely motor insurance and health insurance which makes more than 70% of the total written premium in 2010. This gave the researcher a gap to find out why there is concentration in compulsory lines of insurance. The investigation in this study was to the strength of the current range of products in insurance companies and the role of employees specially the salesman, marketing executives, and other executives in the insurance companies of Saudi Arabia.
The findings of the above investigations show that the available range of products with insurance companies in Saudi Arabia is enough supported by 52% of the employees. However, 32% said that the insurance industry as a whole needs more products. In comparison to others salesman who are in direct contact of the customers less agreed to the fact that the insurance products are enough, only 34.3% agreed that the current product range is enough whereas 85.7% of the marketing executives and 54.2% said that the current insurance product is enough. Since the salesmen are very important by virtue of their direct contact with the customers their feedback and response should be taken seriously. Majority of the salesman 42.9% said that the industry needs more products. In further investigation to the fact, importance of New Product Development, Salesman supported the fact that new product development is very important for the insurance companies. The mean value is lowest at 2.26 std. deviation 1.120, for the salesman and highest for the marketing executives at 3.14 std. deviation 0.727 showing that salesman support that New Product Development is important whereas the marketing executives do not. When asked about the innovations and improvements in products Change in underwriting procedure and change in premium structure was supported by the salesman as well as marketing executives from among other options given. The last question asked from the executives was about their participation in New Product Development. The executives either actively participate in the process of New Product Development or suggest in the development of new product.
The insurance industry in Saudi Arabia has done well in the initial stage of its liberalization registering a high rate of growth. The available range of product is enough however it needs to focus on continuous basis in developing new products. As supported by the findings if possible a change or adjustment can be done considered in underwriting procedure and premium structure of the product. The employees of the company are participating in the process of development of new product. A large number of the executives participate in suggestions only, they may be involved actively in the process for better results.
|Total||Salesman||Marketing Executive||Other Executives||Chi-square statistics|
|Enough||43||53.8||12||34.3||18||85.7||13||54.2||χ2 =15.068 df=4 Sig.= .005|
|Needs more product||26||32.5||15||42.9||2||9.5||9||37.5|
Table 1: Available product range
|Designation of Employee||Mean*||SD||F||Sig.|
*extremely imp-1,…, least imp-5
Table 2: Importance of New Product Development
|Specific improvements/innovation in products||Salesman||Marketing Executive||Other Executives||Total||F||Sig.|
|Change in Product Attributes||1.89||0.323||1.90||0.301||1.79||0.415||1.86||0.347||0.731||0.485|
|Change in Underwriting Process||1.57||0.502||1.81||0.402||1.88||0.338||1.73||0.449||4.042||0.021|
|Change in Premium Structure||2.00||0.000||1.43||0.507||1.83||0.381||1.80||0.403||19.639||0.000|
|Change in Risk Assessment||1.89||0.323||2.00||0.000||2.00||0.000||1.95||0.219||2.794||0.067|
Table 3: Innovations and improvements in products
|Total||Salesman||Marketing Executive||Other Executives||Chi-square statistics|
|Participation in New Product|
|Actively Participate||33||41.3||15||42.9||7||33.3||11||45.8||c2 =4.664 df=4 Sig.= 0.324|
|Do Not Participate||13||16.3||8||22.9||4||19.0||1||4.2|
Table 4: Executives participation in product development