Agency Profiling

Agents come in a few distinct varieties when it comes to spending money on agency development. Some agents are penny-pinchers, preferring to save their money and make it available for their compensation and benefits. Others, who understand that spending money on agency development is like priming a pump, realize that money spent now may realize great gains in future income and revenue.

However, even these spenders fall into two categories, the Big Spender and the Investor. The ‘Big Spender’ tends to throw money at problems and takes advantage of every opportunity that he can afford. So when computers are too slow, he buys new computers. When backlogs become unmanageable, he buys more staff. And he is easily identified because he buys every gizmo and gadget as they become available. The ‘Big Spender’ is missing one key trait that separates him from the ‘Investor’ personality type.

The ‘Investor’ cost-justifies, then tracks spending to determine whether or not the expenditure was justified and pays off. The ‘Big Spender’ is almost paranoid about NOT tracking the results of the spending in case the purchase turns out to be unwise. “After all,” he says, “the money is already spent. What good is crying about it if the results don’t match the expectations of the cost of the purchase!”

In a way, the ‘Big Spender’ is right – you can’t take back an expenditure made to help the agency grow, prosper or become more efficient or effective. But where he misses the boat while the ‘Investor’ understands the process is in the score-keeping and evaluation aspect of spending.

Whether the expenditure is in people, systems, advertising or marketing, the only way to determine whether or not it was a wise move is by measuring the results of the spending. If the results follow the expenditure to the agent’s expectations, the agent can better determine whether to sponsor similar activities in the future. If not, he is unlikely to continue that activity. After all, the Chinese definition of insanity is to continue to perform the same activity that didn’t work in the past and to expect different results in the future.

People investment – or throwing people at a problem

Too often we have seen overstaffing situations occur when an agency staff appears to be working on overload and the owner, to relieve the pressure, adds more staff. It is easier to add staff than to analyze workflows to determine if the current staff is processing its work in an efficient manner. The current staff will always favor adding staff (after all, it’s not their money that’s being spent). It is up to the agency owner or manager to determine whether or not the problem is a workload problem or a workflow problem. Workload problems should be analyzed to determine if it is seasonal or temporary, and should be attacked through overtime before blindly adding staff. Workflow problems should be attacked through a systems re-design that relieves the current staff of the non-essential part of their workload, while addressing the critical areas of workload with the time saved in the re-design.

An investment in people arises when the agency finds a potential hire that can profit and benefit the agency over a long period. Whether or not a position is available, hiring a talented, skilled individual in these times is more of a long-term strategy than a luxury. However, a plan must be initiated including how best to use the individual and how to recoup the cost of the hire as quickly as possible. That plan of action is the difference between the ‘Investor’ agent and the ‘Big Spender’.

The Cutting Edge Agent with the Manual-Oriented Staff

Each of us knows agents who spend freely to keep their systems updated and as fast as possible. Many of these agents exhibit the habits of the ‘Big Spender’ instead of those of the ‘Investor’ because they do not adequately train or manage their staff in the system’s use. Nor do they determine if efficiencies can be created to offset the upgrade costs of the system. The agent is simply sold a bill of goods and, often, down the river, as well. The system vendors do not stress their training as much as they do the sales of products and upgrades. The staff is used to performing their jobs in the old, comfortable way. They must be carefully trained and closely managed if you expect them to learn and adhere to the systems upgrades that are presented to them. When they are not managed, they will seek excuses for why a process doesn’t work and will try to work around it (usually mimicking the way they are comfortable prior to the upgrade). Unless management carefully tracks the progress of system changes for which they have paid, many will likely not be used by the staff.

The Waste of Telephone Book Advertising

Agents spend thousands of dollars annually on telephone book display ads when their yield is limited to price-shoppers and distressed business. This has been proven time and again by the ‘Investor’ personality who asks every caller and new business client how they found the agency. Inevitably, those who answer, “the telephone book” are the clients who respond only to price or who have severe problems that took them away from their existing insurance agency relationship. The ‘Big Spender’ must keep up with the other display advertisers and either never asks the cost-justifying question or disregards the results of the analysis. The only exception is the non-standard agencies whose bread- and-butter clients respond well to large display ads.

To Billboard or Not to Billboard

We often recommend billboard advertising for specific types of agencies in small towns and spread out or rural areas. Familiarity breed’s customers and seeing a billboard day-in and day-out is one way of becoming a familiar name to your client population.

However, this advertising method must be cost-justified by increased traffic to the agency. While most people never pay attention to billboards, they act like mass marketing to build name and logo recognition. The way to measure whether or not this method works is to measure the number of prospect calls to the agency before, during, and after the billboards are in use. For instance, if the agency received 50 calls per week before billboard advertising, 100 calls per week during the period of billboard advertising, and back to 50 calls per week after the billboard advertising was completed, we can determine that the billboards worked to increase prospect contact.

Marketing Your Way into Debt

Four color brochures, promotional items, telemarketing, list development, marketing campaigns, all of these are valid marketing tools and all of these cost money. Unless you use the ‘Investor’s’ trait of monitoring results, you simply do not know if the programs worked or if they were a high profile drain on your funds.

Too many agents evolve multiple marketing programs simultaneously, making measurement of each almost impossible. Others accept new accounts and do not recognize whether they resulted from the marketing efforts or from penetration through referrals. Either way, we have seen as many successful marketing efforts stopped as unsuccessful ones.

It appears that when the agent’s tolerance for spending reaches a limit and he has not monitored the results of his marketing, he tends to terminate the program, regardless of the true results. As consultants, we sometimes find out about a marketing program and its results when we question a sharp change in new business production during and soon after a marketing program terminates. The agent just looks at the cost and has not evaluated the results when he simply stops spending the marketing money.

On the other hand, more often than not, the cessation of the program is perfectly justified, because virtually no results were achieved and the agent permitted the program (and his money) to be spent to their conclusion.

Spending money to ‘prime the pump’ is not wasted. However, spending the money without judging the results is a sure way to lose money. Adopt the ‘Investor’s’ habits of spending judiciously, measuring the results, and either continuing or terminating the spending based on whether it will make money in the short- or long- term. Avoid spending as a quick fix or in the hope of generating positive results without measurement.