Hog Heaven
Burn up the road less traveled by revving up your organic growth.
Catch an enlightening ride with your client instead of steering straight down your lane to the sale.
Fast Focus
- Get off the I-90 highway and become a trusted advisor.
- Passion and positioning are among the keys to escaping the commodity trap.
- The Great Escape formula will lead to organic growth and agency profitability.
Been to a farmers’ market lately? Many people have, as evidenced by the amazing growth of these direct-sales channels. While you may be opposed to the idea of cutting out the middleman as farmers do when they sell directly to the consumer, two out of three parties to that transaction are happy as clams. The consumer gets fresher food and gets to meet the producer, and the farmer gets a higher price and very likely feels a lot more appreciated.
How can we duplicate the success of the farmers’ market in the insurance market?
Scott Addis has produced key tools to help producers and agencies not only improve their selling and organic growth numbers, but to transform their agencies. It’s an approach that identifies some problems in the system (like organic farmers did when they realized their high-quality product did not receive premium value over bulk commodities), and offers some solutions that steer producers to success by pursuing their passion (again, like the farmers’ love of feeding people with the freshest food possible).
I have seen how, through research and savvy perception of the forces at work in our industry, Scott and his firm, Addis Intellectual Capital, have helped build the “Trusted Advisor” model for our business. AIC works to elevate the perception of agents and brokers and to transform insurance sales from transactional and commodity-based to consultative, diagnostic, advisory work, like that of a CPA, attorney or physician. The goal is to stimulate organic growth, profitability and agency value.
Before showing Scott’s method for getting there, let’s first dig a bit deeper into the underlying problems that hold back most producers and agencies from becoming high performers.
SELLING, ONLY SELLING
The traditional insurance sales model has been to sell a policy—any policy. The focus has always been on the 90-day window prior to renewal. Let’s call this renewal blitz the “I-90 highway” because, like the big interstate freeway, it’s the route most people take. Little time or energy is spent on understanding the customer’s business and the industry. The service begins and ends with gathering underwriting data and takes an approach that assumes that every business fits into a handful of predetermined formulas.
Characteristics that are unique to a business—such as the quality of management, safety culture, risk management programs, compliance initiatives, human resource policies, employment practices, training or quality assurance standards—are often ignored or averaged out.
Here are some traits of an agency following that traditional model:
- Sells insurance, not risk management
- Lacks differentiation, creativity and purpose
- Lacks a strategy to learn the customer’s business and its issues
- Lacks a unique process
- Focuses on selling product
- Has difficulty building long-term relationships
- Cannot change the consumer’s perception of the agency’s role
The bottom line is that the traditional insurance agency or agent has not become a trusted advisor. You may say I’m being cynical and “that does not describe my agency,” but I have been around long enough to assure you that this is standard practice.
In fact, Scott and AIC conducted a survey that supports these statements. The simple, six-question survey was given out at the September 2008 CFO Executive Forum that focused on how consumers view the insurance process. The first three questions were answered on the scale of 0 to 5, with 0 being the lowest and 5 the highest. The results were astonishing.
- To what degree do you enjoy the process of procuring insurance? Response: 1.6 average
- To what degree do you have the time and technical expertise to identify exposures facing your business? Response: 1.8 average
- To what degree do you believe that insurance agents and brokers have a process in place to uncover and address these exposures? Response: 1.3 average
- Who “controls” the insurance game? Response: Carrier – 60%, Agent/Broker – 35%, Consumer – 5%
- With all the hats you wear, what percentage of time are you able to allocate to the function of risk management and insurance? Response: 5.8% of time
- Which word best describes insurance agents and brokers? Response: Transactional – 80%, Diagnostic – 10%, Consultative – 10%
These results give me two immediate thoughts: (1) Wow! No wonder insurance has the reputation it does and no wonder my kids don’t want to join my agency; and (2) This reminds me of the “C-” society, where below average is the norm or accepted and it is very easy to be successful if I just try! I hope most, if not all, readers share thought number two.
When you look at these responses—consumers don’t enjoy buying insurance, don’t have the time or expertise to do the job themselves, and feel that they don’t control the process—it’s no surprise most consumers describe the work as transactional. That’s like most farmers saying they just plow up the dirt. And it is why only a handful of agencies are successful regardless of the market: Only a minority of agencies control their own destiny through their strategies.
THE THREE DANGEROUS TRAPS
The commodity trap is due to the consumer’s perception that there is no distinguishable difference between insurance products, services and resources. When this happens, price becomes the primary point of differentiation. Agents fall into the commodity trap because they believe their primary job is to sell insurance.
The perception trap will follow. When you fall into the commodity trap, you are perceived as transaction-based (think low cost) versus diagnostic or consultative, like a CPA or an attorney.
And then comes the anxiety trap. When agents believe they sell a commodity and are transactional, anxiety results. The anxiety trap is characterized by agent fear around becoming consultative and diagnostic. In other words, because it would be hard to overcome the consumer perception of the agency just providing a commodity, let’s not even try.
We all know that, at times, price is key, but price is different than being a commodity. We can overcome price, but the perception and anxiety traps are the most dangerous and difficult to avoid.
THE GREAT ESCAPE
Scott and AIC have identified a formula to escape the three dangerous traps. The code name for the strategy is “The Great Escape,” and it can turn you into the Steve McQueen of the agency world and allow you to break out of the prison camp of commodity sales. The formula is defined as follows:
P5 x I3 + N = The Great Escape
P5 stands for process, packaging, positioning, purpose and passion. Think back to the farmers’ market analogy again and consider what that sort of market did to the commodity of vegetables and fruit. It created a new and unique process for consumers to buy it, and new packaging and positioning of the product. All those things created the consumer perception of a vital purpose and passion by the sellers of the product. You can apply this to your agency. Here’s how:
- Process—Create a unique experience for your consumers. As Dan Sullivan of the Strategic Coach organization says, “Companies who have a clearly defined value creation process stand out from all others who merely provide a product or service. While products and services are easily commoditized, unique experiences are not.”
- Packaging—The way you package your services creates a positive, appealing and permanent impression on your client or prospect. In insurance terms, your package is your process of identifying exposures, developing strategies, implementing programs and monitoring procedures. Your package is a key component to your brand identity, and we all know the value of a well respected brand!
- Positioning—Getting yourself off the I-90 highway is the key step to better positioning. The traditional renewal insurance blitz is not the time to introduce your differentiators. Positioning means starting the process well before the I-90 highway becomes too congested.
- Purpose—Addressing the first three Ps in this formula will help you define your purpose. It will redefine who you are. You will view your efforts as worthwhile and your purpose as more than the sale of a product. Your sense of confidence will show as you strategically position your package. Most importantly, the consumer will see a difference in you and your agency.
- Passion—Many “smart” people spend brainpower trying to figure out what makes people successful. They analyze people’s credentials, intelligence, education and other factors. But success is not just found in those factors. If it were, why are so many high-school-only graduates, or even those without a high school diploma, successful? It is because of their passion! John Maxwell, author of The 21 Indispensable Qualities of a Leader, has uncovered four truths about passion:
1. Passion is the first stop to achievement.
2. Passion increases your willpower.
3. Passion changes you.
4. Passion makes the impossible possible.
I3 stands for issues, implications and interventions. This is where seeing your client as a unique individual or firm and then using critical thinking to address his particular problems will help you rise above the competition.
Issues—The fundamental flaw with the I-90 highway is that it is focused on the sale of the product. It tends not to be a thoughtful, meticulous, diagnostic system aimed at uncovering “issues” facing your prospect. You cannot escape the commodity trap unless you have a unique process (P1) to uncover the issues (I1). Therefore, it is critical to understand the link between the process and the issues.
Implications—Once you have uncovered the issues, it is critical to explain how the issues affect the finances, human capital, operations, culture and reputation of your prospect or client. In other words, how solving the unrecognized problem will improve performance.
Interventions—After identifying the issues and explaining the implications, the prospect or client is ready to work with you to provide the solutions (the interventions, as AIC calls them) that will resolve the issues you have uncovered. At the end of this process you have transformed the I-90 highway into a diagnostic and consultative experience for your client, who now views you as a trusted advisor and not a transactional seller of products and services.
N stands for network. The last part of this equation is your secret weapon, your ultimate differentiator. Once you have successfully developed and implemented your P5 process and I3 analysis, the next step is to meld the results with your network. Your network consists of clients, carriers and centers of influence, who consistently and enthusiastically help you with prospect research, identification and qualification. They will be the underground drivers to promote you and your agency to others they believe can benefit from your services. As for clients, not only do they become a source of referral, but they are also willing to expand their relationship with you and your agency. This is the foundation of the ability to effectively cross-sell your capabilities.
We all know the importance of organic growth. Just like the farmers, we realize that’s where we can add the highest value to our businesses. But many agents and brokers are fighting an uphill battle, caught in the crowded traffic of the I-90 highway and trapped in the perception of commodity sales. But as you have seen, the dreaded commodity trap can be escaped.
Using the Great Escape formula will result in organic growth, increased revenue and profits and, ultimately, enhanced shareholder value.
Robert Lieblein is a contributing writer and managing partner of Hales & Co. |
|
