Jamjars on the highway

Direct Line built on its reputation for selling insurance via telephone to launch its online service, and now the company is...

Direct Line built on its reputation for selling insurance via telephone to launch its online service, and now the company is finding success with a new Web car sales venture. David Bicknell finds out that flexibility is key

One year on from launching its online operation, Directline. com, insurance company Direct Line has now moved into the jam jar business.

Jamjar.com (jam jar is Cockney-rhyming slang for car) is Direct Line's new car sales service. The move is clear evidence that, having achieved over 100,000 sales online for its core insurance business, the Croydon-based company that pioneered the direct selling of insurance over the phone was ready to start breaking the mould again.

By making the most of brand awareness and understanding its customers, Direct Line is now in a position to make as big a success of its online operation as it did its telephone-based operation.

Since its launch in July, Jamjar.com has already had orders for over 500 cars, and delivered over 100. The site's success is probably not unconnected to public discontent with high car prices in the UK, which Jamjar has tried to appeal to by offering price discounts of up to 30% off list prices. First week car sales topped £1m.

According to Direct Line's e-commerce managing director Oliver Prill, the take-up of both Jamjar.com and Directline.com has been way beyond the company's expectations. "If I had said that we'd be doing 100,000 sales - not quotes, sales - people would have laughed at me. The expectations we had were a fraction of what we've delivered," he says.

At the heart of this success, Prill believes, is something that many dotcoms are currently trying to achieve, and what many traditional companies already have - brand awareness.

"The Direct Line brand really transitioned well. We monitor awareness, and our brand-awareness research showed that Directline.com had a higher level than Yahoo or Lastminute.com. That's amazing.

"I think its because we have very dedicated, well-targeted dotcom marketing campaigns, and also that in the consumer's mind, it is a Direct Line brand, with 97% awareness among the population. So, the transition from the phone to the Web has been a relatively small one.

"We also offer real functionality. We put people on cover on the Web, rather than having a convoluted quote system which, at best, gives you indicative prices which have to be confirmed by post. Our thinking is that if you get a quote, you can actually buy it, and you're on cover."

Prill adds, "Most of the products we are talking about are relatively simple and well understood, and let's get real - the insurance company is usually something that you want to spend as little time as possible dealing with. You want to get out of the way. You want to get a good price, good service, something you can trust and get it over with."

So far, the strength of Direct Line's brand has prevented significant competition arriving from any Internet start-up.

According to Prill, the difficulty for would-be dotcoms is that, in financial services, you are dealing with intangible goods ie, a service where you see none of the benefits until something happens to you.

"You need to have a lot of trust. That is why, to some extent, even the online brokers who have tried to establish themselves have been relatively unsuccessful. With insurance, you really need to provide the comfort so that when you press that button and it says you are covered, you actually are. The nice thing is that when you have built a brand that provides that trust, it is a very significant advantage over any competitor," he says.

Prill believes one factor in Directline.com's success has been doing extra work on the Web site, refining processes, listening to consumers, and getting feedback. The company has also invested time in transferring offline marketing expertise onto the Web.

Integrating both Web and offline business models has become a critical issue for many traditional bricks and mortar companies. Direct Line though is different. It is already a direct seller over the telephone and it makes little distinction between the its two online operations, which Prill describes as "broadening our footprint."

Direct Line is reluctant to detail the exact sums it is spending in developing Directline.com and Jamjar.com, save to say the costs are estimated to be "double-digit millions of pounds" over the next four years.

"This is a very significant investment. There is a bar, and we are under no illusions, we want to be the leading Web player in the insurance space, and the leading player in the motoring space in the UK," says Prill.

The time from concept to launch for Jamjar was under eight months, which Prill admits was "quite a stressful period". He explains, "You need to have business plans to justify your expenditure, but also it involves working with a lot of partners, building a site and a support infrastructure, and making sure we have a truly distinct proposition."

In order to be able to offer all the functions it wanted on Jamjar.com, the company had to understand all the mechanics of the car-buying market, especially as it wanted to be the first site to offer online trade-ins.

Fortunately for the company, says Prill, it already had significant expertise in-hand.

"When you look at Direct Line, you say, 'What is Direct Line?' and you immediately say, 'insurance company'. But that's a traditional classification. If you look at it from a slightly different angle, you can see that Direct Line is a leading motor company. We are the largest motor insurer, and we are the third largest rescue organisation.

"Motor insurance - or a large part of it in terms of profitability - is about managing claims, which include total losses, car replacement, repairs, servicing. So we have a lot of expertise in the car lifecycle. While it would be nice to have learnt everything about cars in eight months, that is not quite true. We already had a lot of expertise."

There are other reasons that Direct Line set up Jamjar. The first was to get closer to its customers.

"We have been looking for ways to touch our customers more frequently. But insurance is not being something people enjoy. With motoring, we feel there are a lot of services we can offer that allow us to touch the customer, have more frequent contact," Prill says.

The second idea was the concept of "horizontal expansion" - in other words, anyone that is currently involved in motoring tends then to go into financial insurance. So, a considerable part of Direct Line's motor insurance could be sold through competing horizontal players.

"Clearly, on the one hand, you could look at it and say that's a threat. But you could also turn it on its head and say we could turn it into an opportunity. The first thing, however, is that we need to be absolutely leading in Web insurance."

While the debate over car prices has helped gain publicity for Jamjar.com, another considerable plus for the online operation has been the interest among female users.

"The research we came across in developing the site, said that a lot of women hate the 'dealership experience'. Actually, even if they could negotiate a discount, they dread doing it. So, in addition to offering discounts, it is hassle free for both men and women. You just go in, and you get the discount. Traditionally, with a dealer, if you are a poor negotiator you get nothing, while if you are a very aggressive negotiator, and the dealer is desperate, you can actually get quite a good discount. That has turned out to be a more significant factor than we thought," says Prill.

At some companies, notably bookseller Barnes & Noble, there have been problems integrating online and offline channels.

But Direct Line believes it has got around that problem by ensuring that both Jamjar.com and Directline.com are fully call centre-supported and users can switch between the two.

"There's no problem there - we don't care which company you use. That is part of our philosophy," says Prill. "They are two different routes to what is essentially the same product offering."

Perhaps there is a lesson there that other companies can learn. Prill explains, "We think that unless you have extreme channel conflict, which we don't have, there is no point in separating the two.

"Customers don't think 'offline' or 'online' - they think 'what is convenient for me?' That is why we say, if you want to get a quote online and buy or complete the deal over the phone, you can do that, or you can buy online. To us, it is not an issue. And the marginal costs of our telephone infrastructure support that completely."

For Direct Line, embracing the Web appears to have been as focused as its embrace of the direct telephone method for insurance. Critical to its success however is a simple concept that many other companies should follow - understand your customers.

Direct Line's tips on being successful online

  • Find out your marketing acquisition costs. These are driven by what you pay for adverts, your marketing activity and what your response rates are. The Web lends itself to being able to understand the response rate of different sites to make sure that you can become expert in managing your marketing acquisition costs.

  • Find out what your key profit drivers are. Ask yourself what levers you have to pull to get the business into profit. Dotcoms can turn themselves around by understanding their profit drivers and starting to manage them through the key indicators that support them.

  • Find out your customer mindset. Always think of the customer proposition. What does the customer really want, and how can you execute it? What mix of price, channel, and product design is needed to make an attractive product for the customer? Too much customer choice causes customer confusion.

  • Customer service - don't think "e-mail". If what the customer wants is real-time response, then give them as much online help as possible and also have integration with a call centre to answer queries. Remember, different media are useful for different things. E-mail is not a good way to make a sale. Feedback, on the other hand, is where the customer can get something off their chest, and you can get useful suggestions for improving your site.

  • Read more on IT for small and medium-sized enterprises (SME)