AA is a household name in New Zealand. And this is no surprise, as the company has been the leading provider of roadside assistance in the country for almost 100 years, and is used by 1.66 million AA members.
But, despite its success and popularity, storm clouds have been brewing for AA. Technological advancements are disrupting a number of sectors, and the automotive sector is no exception.
Vehicle technology is rapidly evolving and on the horizon is the arrival of self-driving vehicles, and emerging new vehicle ownership models (car-share, mobility as a service) which threaten to make the traditional motoring club model – and many of AA’s core services – redundant.
The effect of this had already become evident to AA. Demand for AA’s iconic roadside service was declining in the face of more reliable vehicles and ubiquitous smartphones that connected motorists with friends or family for help. The AA could no longer only rely on its roadside assistance to deliver value to its members and foster strength and trust in its brand.
AA Insurance (32 percent owned by AA, 68 percent owned by Suncorp) faced a similar challenge. With an insurance book heavily weighted towards car insurance, it was struggling to sell home insurance as it lacked the awareness and brand credentials that had made it so successful in selling car insurance. While its market share on car insurance was nearly 25 percent, its home and contents market share was in the low teens.
The AA and AA Insurance were both dangerously reliant on the motoring category. They risked becoming obsolete if shared self-driving vehicles replace private car ownership, and demand for products like roadside assistance, car insurance, vehicle servicing and repairs and driving lessons evaporates.
Like many business models facing technological disruption, AA and AA Insurance needed to think fast and figure out a way to stay relevant before the motor insurance category was decimated.
AA and AA Insurance decided on a strategy to create a joint venture, extending the AA brand into the home.
The plan was to offer AA’s trusted service to people who needed help at home, because homes break down too.
This would leverage the combined distribution and marketing power of AA and AA Insurance, and extend the AA brand beyond motoring, helping to future-proof both businesses.
For AA Insurance, it would create valuable differentiation and a competitive advantage through gifting the base level AA Home Response product to its home insurance customers, thereby boosting its home insurance sales and retention.
And, it would fill a big gap in the market too. A survey of more than 1,000 New Zealand homeowners identified that 52 percent had experienced a home
emergency in the past 12 months, and 63 percent of those who had used a tradesperson had experienced some frustration.
Many respondents also confirmed an emergency tradesperson callout would be of value to them and such a service had significantly more appeal when it was revealed it would be provided by AA.
Research participants saw the product as a natural brand extension and trusted AA to vet tradespeople, ensure they would arrive on time, charge a fair price and provide recourse if something went wrong.
There are 1.8 million homes in New Zealand, with 91 percent in population centres large enough to make AA’s Home Response service viable.
This was also a good chance for AA to broaden its relationship with its members and introduce new customers to the brand, talking to those who may not value AA’s existing motoring-focused membership proposition. AA Insurance could then enhance its brand credentials and create a competitive advantage for its home insurance, leveraging this to significantly boost sales.
But, while AA and AA Insurance were pleased with the idea of the joint venture, that doesn’t mean it was easy.
Pricing the AA Home Response Plus (six free call outs) product and tradespeople’s rates (for base AA Home Response product) at a rate that seemed reasonable was immensely difficult and consumers’ perceptions of the cost of calling a tradesperson varied widely.
AA Home Response offered a ‘come within the hour’ service, which had a significant cost, but in research, many consumers baulked at the cost, so it created more customer choice by offering cheaper rates for customers who were happy to wait for scheduled attendance on the next available business day.
As a new service in the market, it was also a difficult concept to communicate. Customers would want to know how it worked and what kind of home emergencies it could be used for.
So, AA and AA Insurance identified the 10 most common household emergencies and created a graphic device to communicate these clearly.
Another challenge was recruiting tradespeople. It needed skilled and qualified plumbers, builders, electricians and locksmiths. Recruiting experienced operators who could meet AA’s brand standards was critical if it was to meet its service promise. But, New Zealand has a major shortage of tradespeople, with MBIE reporting in February that New Zealand needs 51,000 more construction workers.
AA and AA Insurance engaged a master subcontractor to convince tradespeople to commit to accepting jobs from AA Home Response, on the expectation that the product would be a success and would be able to give them significant job volume. They had to commit to getting to jobs within the hour when required, and to deliver their service with the trustworthiness and friendliness people expected from AA.
Along with this, marketing needed to sit comfortably within both AA and AA Insurance communications styles, which meant working with two marketing teams to adapt tone, voice and branding that met both organisations’ requirements and was able to articulate the AA Home Response promise to prospective customers.
It launched on 5 March this year.
The move was huge for AA and AA Insurance, but worth it. By May this year, it had already surpassed its target number of subscriptions by 24 percent.
Though still being rolled out, AA Home Response is on track to achieve its goal of 100,000 subscriptions in its first 12 months.
AA Insurance’s home sales have also improved with the launch, with AA Home Response proving to be an effective differentiator.
The launch has successfully extended the AA brand beyond motoring and into the home. Even with a limited budget, the marketing launch garnered attention in the NZ Herald, Newstalk ZB, RNZ, Radio
Live, and many regional, daily and community newspapers.
Traffic to the AA website also increased by over 12,000 new visitors per month and anecdotal evidence and feedback from its network indicated high product awareness.
AA Home Response is also receiving strong interest from tradespeople, receiving over 10 enquiries per week for people wanting to work for the venture. This means it’s able to get better quality service providers and secure more competitive rates for its customers.
AA can now sit confidently that its future is secured, proving technological disruption doesn’t always mean doomsday, but can force a brand to think outside the box.