Where’s the big money in insurance? For agents & brokers, it may be easier to find than you think it is.
Let’s take a $5 Million agency or brokerage. Suppose they have 10,000 clients. Now, let’s assume they have an 86% retention rate.
We have to make up the loss by adding 14% in new clients. In our model, we won’t raise revenue per client, so total revenue is flat — a year from now it’s still a $5 Million agency, two years from now it’s a $5 Million agency, five years etc.
Now let’s make two changes. Let’s make relationships deeper. So, more clients stay a little longer. More clients buy a little more.
Same agency, same number of new clients, but we increase retention by 3% and we increase revenue per client by 5%. No other changes. In other words, no growth from new client acquisition, we’re simply going to grow by protecting our clients better, and deepening relationships. What happens five years later?
That $5 Million agency added $2.4 Million without adding any new clients.
What if we take the same shop and bump retention another three points — and progressively increase revenue per customer by another five points.
At the end of five years, we’ve got a $10.8 Million agency. We’ve added $5.8 Million to that agency in only five years.
Focus on the customers you already have
That seems impossible, but it’s just math. And all we did was focus on the customers we already have.
I had a conversation with one of our sales-reps the other day and he said, “Michael I just got off the phone with a prospect, and we’ve been hearing more and more from them how the economy is getting better, and they’re a little stressed out because they’re busy writing a lot of new business.”
“Well, what’s their retention?” I asked.
“Well it sucks. It’s like 89%.”
“And what are they doing to cross-sell their existing book?”
“They don’t have time. In fact, he said, ‘Look, I really love what you guys are all about but we don’t have time to do anything else because we’re writing new business.’”
I just shook my head.
That is the worst business model I can imagine, but that’s the business model of this industry. We have a fascination with new business.
We have a new-lead fetish
I have a couple of theories on why:
For one, leads and new business are a ‘shiny new thing.’ The producer rings the bell, or the CSR says, “I just wrote a ______,” and you’ve got a new customer, and you just let the guy renew quietly through the carrier.
New business gets energy and attention. Renewing business happens quietly. Often, downloaded at night.
Nobody rings a bell when a customer renews.
Another theory: a lot of agency principals were (or are) producers, so they’re skin tingles and blood pumps at the thrill of the hunt.
They’re killers, so there’s an emphasis on selling. But that’s not creating or running a business.
Having reliable systems that generates high quality leads is important.
But an imbalanced resource investment on lead gen and conversion when you don’t have systems in place to optimize and retain those relationships is expensive, wasteful and poorly conceived.
Imagine having to fill a bucket that’s constantly leaking – running back and forth to the spigot.
Brokers focus too much on lead generation when they can easily generate more income from deeper relationships. What a waste! Fix the bucket!
The four stages of insurance marketing (and why you cannot ignore any one of them)
What is marketing?
Unfortunately, a lot of the industry think it’s ‘advertising.’
They think it’s lead generation.
They think it’s getting customers.
With that paradigm, agents put a lot of emphasis on communicating with people who aren’t customers….in the hopes that they will become customers.
In other words, they dump a lot of resource into the beginning of relationships (and a lot of resources into attracting and quoting people who never become relationships).
But what happens after they become a customer? What happens after the hard work is done?
Those are the people who are best positioned, by far, to give you more business, to refer more customers and to renew with you, year after year.
To help agents develop a more comprehensive approach to marketing — and to help them gain the rich benefits of ongoing, full spectrum ‘life-cycle’ marketing, we developed the ACOR+ Marketing Model™.
ACOR breaks the marketing sequence into four stages
It reveals the need to see that prospects and customers take a journey through their relationship with the agency. And that at different stages, people are receptive and responsive to different messages.
By being sensitive to the stage at which each individual person is in their journey, the agency can effectively deliver the right message to the right person at the right time, guiding and leading people to the next stage in their relationship.
Typically, that means guiding them to a deeper level of trust and confidence — and, correspondingly, to a deeper business relationship.
Ideally, these communications aren’t merely spontaneous or haphazard. They are carefully crafted and sequenced.
The savvy agency or brokerages has a communication or marketing system that:
- ATTRACTS people into the brokerage’s marketing funnel. Ideally, they are attracting people who are high probability prospects, and, who are effectively influenced by the marketing messages that they become pre-disposed to do business with the brokerage. They go from being ‘cold leads’ to ‘warm prospects.’
- CONVERTS these prospects into buyers. In most agencies or brokerages, marketing practically stops here. The savvy insurance marketer understands that this is just the beginning. The marketing community has a common axiom that says ‘the most important sale you can make to a customer is the second sale.’ This is intended to underscore the importance of converting transactional sales to trusted relationships.
- OPTIMIZES customer relationships, making them as rich and deep as possible. Savvy insurance marketers understand the reciprocal relationship between cross-selling and loyalty: additional policies tend to make customers more loyal; loyal customers tend to buy more policies.
- RETAINS customers for the longest time possible. The savvy insurance marketer understands that customers reward meaningful relationships — and a highly profitable way for them to do that is to renew, over and over. Hence, good marketers create deeper relationships by consistently adding value, sharing expertise and delivering meaningful advice and advocacy.