InformationWeek

July 20, 1998

Unified Front

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The Web has added another dimension to Prudential's customer-contact strategy. Collectively and individually, the various Prudential business units are using the World Wide Web extensively to market, sell, and provide information to customers. But because of security and other concerns, Prudential is using the Web sparingly for actual transactions--letting certain customers buy policies or investment products or trade securities.

"The focus is on customer service, and definitely on cost reduction," says Stephen Ilnitzki, VP of interactive marketing. "Our assumption is that the market is going toward service-oriented Web sites, and people are going to shift servicing resources there."

Individual Web Presences
Prudential's business units have their own Web presence apart from the corporate site. Prudential Securities offers Prudential Online, which lets customers view their account information in text and graphic form and E-mail their financial advisers. Prudential Investments runs a site called the Online Retirement Center, where customers or potential customers can go for information about retirement products, an interactive planner, and account balances.

Prudential HealthCare has a site with information about medical and dental benefits, a database of doctors, a search engine to help locate the nearest doctor, and online ordering of replacement health-insurance ID cards. Prudential Insurance's site offers an interactive service--a series of questions and answers--that concludes by offering a quote on term life insurance. To actually complete the transaction, however, customers must call an agent.

Prudential Online was the first Web site among the full-service brokerages to provide secured client access. It also was the first site from a full-service firm to offer online bill payment services. In June 1997, Prudential Securities introduced PruPay, which lets customers pay bills online, issuing up to 15 electronic checks for a fee of $6 a month and 35 cents for each additional check. But because Prudential Securities protects all its transactions with 128-bit encryption, only U.S. customers can use the service.

Competitor Merrill Lynch, which recently unveiled online trading capabilities for its clients, is the first full-service brokerage to follow the lead of online brokerages such as Charles Schwab. Prudential Securities is currently testing a service called PruTrade with a few hundred clients. PruTrade would permit limited securities trading by clients selected by Prudential's financial advisers.

Executives at the various business units say the Web sites have generated thousands of leads for their sales representatives. They say the technology helps to expand sales opportunities because it creates a savvier class of customer--those who have done their homework.

"If clients are using the Web, then they don't ask the financial advisers the simple questions," says Murali Balasubramanian, first VP and manager of strategic client initiatives at Prudential Securities. "You're becoming an educated customer, and as a result, there are ever-more increasing opportunities for you to do business with the financial advisers."

But some industry observers say Prudential executives are underplaying the threat the Web represents--the threat of disintermediation. "In the next 12 to 18 months, there are going to be a lot of changes in companies and in industries that have depended on agents and brokers as the middlemen to sell products and services," says Paul Daversa, president of Resource Systems Group, an executive placement firm. "It's already happening in the auto industry and with airline online sales. In the next 12 to 18 months, there will be someone in every industry that will take the lead" in replacing middlemen with direct online initiatives.

Web Threat?
Overall, technology is turning out to be an instrument that Prudential is using with some skill. But the company is trying to boost its profitability at a time when the Web could create a threat and when the company is still making payments related to its insurance sales debacle. How effective IT will be in helping Prudential thrive will only become apparent over the next few years.

Some say CEO Ryan's biggest challenge is yet to come: A sweeping deregulation bill being debated by the Senate would allow the amalgamation of financial services, so that the same holding company could own banks, securities brokerages, and insurance firms.

But most observers think the nation's oldest insurer will make it through. "Prudential certainly has considerable strengths, such as a strong brand name, a strong balance sheet, and improving profitability," says Morgan Stanley analyst Dave MacGown. "Prudential will be a survivor."