Can O2 really make money from insurance

I posted last month on mobile network O2's plans to stretch into healthcare, based on my comments in a Marketing Week article. Well, it seems they have the brand stretch bug, as news in Marketing suggests they are also planning entering the insurance market. This follows the launch of O2 Money with two pre-pay cards you load money onto. The article suggests O2 is using "a 'Tesco-style' strategy to build its presence in additional markets."

Mmm. Not sure that O2 have Tesco's brand or, more importantly, the business model to do this successfully. Let's look at why.

1. Logo licensing vs. branded business

O2's insurance looks likely to be a "white label" product, where an insurance offer from partner Mondial Assistance has the O2 brand added. So, I wonder how serious and big a business this is really going to be.

Tesco's approach is very different. They create joint-venture businesses, most often staffed by ex-Tesco people who know the brand inside out. In banking, last year Tesco even paid £950 million to buy out its JV partner, RBS, and now owns Tesco Bank. This means real commitment to create a serious business, shown by Tesco Insurance having 2.4 million insurance policies.

Picture 1 2. Brand added value

O2 have done a decent job of delivering customer service. It has done an amazing job at creating and consistently applying a distinctive brand world with the blue and bubbles, as I posted on here. It feels more like a brand with a strong visual identity than a strong brand promise, as summarised by Justin Holloway in Marketing: "An eye-candy brand for the eye-candy age. All elegantly symbolised
by its bubble identity: bright, shiny and hypnotic, but penetrate the
surface and then – nothing".

In contrast, Tesco is a brand with a very strong promise, summed up with the idea "Every Little Helps". Customers trust Tesco to add value in financial services by simplifying all the jargon, offering value and delivering reliable service. Given what has happened with the major banks, a lot of people would trust Tesco to do a better job of looking after their money.

3. Business model

Tesco has a big advantage over O2 in its stretch into new financial services in the shape of its stores. 2300 of them that get 20 million customers a week. Yes, 20 million, 1/3 of the UK population! It has 3,000 Tesco cash machines, and plans to soon have 30 Tesco banks in stores soon.

In comparison, O2 have only 350 stores in the UK. These are obviously a bit smaller than a Tesco, and don't have the same retail space to flog financial services.

Picture 2
4. Forgetting what made you famous

This final issue with O2 Insurance is that it doesn't
reinforce what made O2 famous. Entertainment
and sports properties such as The O2 concert venue and priority ticketing have added energy and
fun to the brand. Insurance is, let's face it, not fun and energetic. Its hard to see how this will help enhance O2's image. In contrast, Tesco's financial services help reinforce the brand idea of Every Little Helps.

In conclusion, I don't expect O2 Insurance to be a big business, nor do much for the brand. As an O2 customer I have mobile, broadband and mobile broadband with them. But why would I want to switch insurance from leader brand Direct Line? I wouldn't.