Lincoln Financial Group (A) Case Solution
Lincoln Financial Group remained a well-known and top performing life insurer, which offered diversified financial services as a result of different mergers and acquisitions. The core competency of the company lied in the life insurance business. The key financial products offered by the company included: life insurances, annuities and investment management. The key business strategy of the company was dependent on the B2B (business-to-business) model, i.e. the customers were the sole distributors of different financial products offered by the company.
In 2000s, the customers, including: different institutions and consumers, used to purchase different products from a diverse range of the financial service companies. Few companies were considered as the manufacturers of the financial products whereas few were the distributors and many firms performed the role of both the manufacturers as well as the distributors. The four key distribution channels included: banks, wire house dealers, independent insurance brokers and the managing general agents or MGAs.
The Lincoln’s distribution strategy involved the marketing of products and services through different distribution channels. The company’s life insurance was mainly distributed through LFA and the LFG’s captive network. Apart from this, the company had a whole sale section, which focused on independent distribution channels, such as: Lincoln Life Distributors. Moreover, during 1990s the company expanded by offering its financial products and services through brokerage agencies, MGAs, banks and other financial institutions.
The LFG was operating in the industry which was highly competitive and saturated. The adoption of distribution channels through customers was not a viable strategy. It is because the members of the distribution channel had a wide variety of financial products and services made available by the industry players and they had different options from which the distributors selected the best product to include in their offerings for their customers. These diverse variety of financial products and services led to the low shelf space occupied by the LFG’s products in the distributors’ offerings. Moreover, the wholesalers were not satisfied with the remuneration awarded for making the company’s sales they despite of them playing a very significant role in the sales of the company’s products. These considerations led the management to come up with a new Lincoln Financial Distribution model, as the current model was not up to the mark and it didn’t generate viable returns for the company.
Summary of Issues with Current Distribution Strategy
- Extreme reliance on the client based distribution.
- Less control over the distribution.
- Low shelf space
- Reduced market share
- Reduced Profitability
- Dissatisfied MGAs and whole sellers.
The current distribution model of LFG is based on the sales of the company’s financial products and services through the B2B model, whereby the customers, including: the banks, independent brokers, MGAs and other distributions are solely responsible for the company’s sales. The strategy provides a benefit to the company that the cost of marketing the products is relatively lower as compared to the costs of the distribution if it is managed by the company itself. Moreover, different customers have a large access to different customers, which helps the company to grow but with the passage of time; the financial products and services in the markets have increased………………..
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