GEICO Spends How Much on Commercials?
Car insurance advertising has become one of the largest marketing niches in America, suffusing the online, outdoor, TV and radio advertising marketplaces. Of the four largest insurance agencies, GEICO is the smallest (State Farm, Allstate, and Nationwide round out the class). In spite of its relatively small size, it still packs quite a punch. Bankrolled by Berkshire Hathaway, GEICO’s advertising budget is the largest in the auto insurance industry, cresting at nearly $2 billion-with-a-B this year. Their ads appear on your television, in your newspapers, during movie previews, and on your hockey rinks. They’re funny and clever and so varied that you can’t wait to see what they’re going to do next. And they make you think about car insurance, whether you want to or not.
How Much Does GEICO Spend?
In 2013, GEICO raised its advertising budget from $1.12 billion to $1.18 billion, making them the fifth-most-advertised brand in any industry. (In 2003, they were 87th.) This meteoric rise through the ad-spend rankings has been due entirely to the enthusiastic spending by Warren Buffet, who has been heard saying that if he had $2 billion to spend on advertising he would. This might be a useful way of getting rid of his money if other companies were catching up, but they aren’t. In 2013, State Farm – another one of the big-spending auto insurance companies – spend only $802.8 million-with-an-M on advertising. Peanuts, in the scheme of things.
If you’re anything like us, these numbers don’t actually mean anything – they’re just too big. To give you a better sense of what this money goes to, consider this: GEICO’s “Pinocchio was a bad motivational speaker” ad cost $24 million to make.
Where does the money come from? Premiums, of course. If you have a policy with GEICO, approximately 6.5% of your monthly check is going to advertising. I hope you’re enjoying the heck out of that lizard.
Do GEICO’s Commercials work?
Interestingly, a recent study may suggest that the larger advertising budget doesn’t actually improve market share, but simply maintains it. Car insurance is one of those products that we don’t want to have and hope we never have to use. Shopping for car insurance is a hassle and we hate the idea of paying for it, so we’re going to buy the policy that has the lowest rates, not the one that has the best advertising. We may visit GEICO’s site more often because their name is familiar, but if they can’t offer us the best price, we’re going to take our money elsewhere (while still enjoying their commercials). The increase in spending from all of the major insurance companies does not appear to be correlating to an increase in policyholders. Especially with so many players on the field, spending more on advertising does not seem to be the key to getting more customers.
What the numbers do show is a distinct gap between GEICO (and its peers) and everyone else, both in advertising spend and in market share. In other words, in order to stay competitive, companies have to spend competitively. It’s analogous to the Red Queen in Alice in Wonderland, who tells Alice she has to run as fast as she can just to stay in the same place…except here it’s not about running, it’s about spending.
What’s the Point of Geico’s Commercials?
Aside from relativity and the value of the dollar, what do geckos and camels and bluegrass duos have to do with auto insurance? Not a lot. It’s a growing trend among in-the-know marketing specialists that advertising doesn’t necessarily have to sell your product anymore; it just has to get people talking about it. Content and advertisements that focus too much on the product suffer from lack of creativity and, at bottom, are boring. GEICO, and more and more of their competitors, have realized this, and the result is a glut of car insurance commercials that have nothing to do with car insurance.
Although GEICO’s advertising strategy may seem a bit unorthodox to some purists, the numbers suggest that it’s working. Everybody has heard of GEICO, and when people are shopping for car insurance, they are more likely to look for a specific company than to search for “car insurance” generally. In an age when we are so inundated with advertising all the time, the most recognizable brand will win the day. The GEICO slogan has even garnered an attack-ad-style campaign from Esurance. If that’s not a successful ad campaign, I’m not sure what is.