This week, Motorola, the electronics giant, announced that they had “lost their way”. This innovative company who boasted that they were the largest (by far) manufacturer of cellular telephones lost that position to the young, upstart, Nokia. No one has ever questioned Motorola’s innovative and creative atmosphere. However, somewhere in the 90’s, Motorola lost its customer focus and became a process-driven company. The process that drove Motorola was the best process imaginable, the process of innovation. However, that innovation became lost in technology and the company moved away from what their customers wanted. As a result, Motorola cut 17,000 jobs last year and has gone through a period of corporate soul-searching led by their capable, third generation leader, Christopher Galvin.
Now, what on earth does Motorola have to do with the insurance agency business?
It is our contention that many “successful” insurance agencies have also “lost their way” and lost their customer focus over this never-ending competitive market. Price driven marketing and internal automation have been the concentration points to offset lower margins and to permit the agency to process better, faster and more efficiently. However, a concentration on automation has permitted many agency owners to distance themselves from the most troublesome question they face, “What does the customer want in this market?” And the constant price chopping has convinced them that price is all the customer wants.
Agency after agency that we visit boast about their “customer-orientation” and excellent customer service. However, in most cases, this means that they do exactly what the customer expects as a minimum requirement for managing his insurance products– processing transactions quickly and relatively error-free. While that is obviously needed, anyone (direct writers, banks, internet companies) can process as well as (or better than) an agency can process. These “Excellent Customer Service” agencies continue to lose revenue base to the soft market and customer base to competition. The result of these losses is a morale problem right at the top of the organization. When the agency owners no longer believe in themselves, their organizations, and their customers, the decline of the business is difficult to stop.
The “Self-Fulfilling Prophecy” really works. It is, in fact, a form of Visualization. If you believe that your customers are disloyal, that your companies are out to get you, that your employees don’t care about the work effort and about the agency, then these results will “actualize” and become true. If, on the other hand, you work under the presumption that the customer would like to do business with you and only seeks the reason to continue to do so, you will be inclined to work more patiently with the customers to find those reasons.
If you treat the companies as partners in a business relationship, you will realize that neither you nor they should expect to do business with each other if your products, services or goals are different. Agencies should not change partners at a whim, but, just as every other industry shifts relationships from time to time, so does the insurance industry. This does not mean that the carrier is “bad” or that the agency is “bad”. It does mean that agents have to be proactive and sensitive to the changes in their carriers and react accordingly.
If you treat your employees as if they care about the success of your business as much as you do, you will establish a shared relationship with your employees and use them to help you find the solutions to your problems instead of simply assuming that they are the cause of them. Working with, instead of for, agency owners give employees a sense of respect and being respected. Our interviews with employees are very insightful. Most employees feel a need for pride in their jobs and in their organizations. Those employees that have lost their pride have already been tainted by accusations (actual or perceived) by their employers that they are not working up to their potentials. Most employees want to do a good job. If they are not performing as well as needed, they need help in determining the solutions, not accusations. Most damaging is the affect that a low morale owner has on his employees. Once the employees feel that an owner has given up on his business, they can no longer maintain their morale level and begin treating their role as a “clock-punching” job instead of as a fulfilling way of helping others and earning a living.
DEATH BY ASSUMPTION
Focus on the customer instead of on personal goals. Of course you want to make more money and have more free time. Of course, you want your business asset to grow. But those agents who spend their time, money and effort on customer relationships find that they achieve their own goals, as well. The agents that we encounter who have graduated out of customer contact and spend their time in more personal pursuits soon lose what customer focus they had and suffer the same problems that plagued Motorola.
Don’t assume that the agency is a cash cow to be milked until it is no longer profitable, then sold. Once we penetrate the surface issues in a troubled agency, we get to this bedrock issue. The agent tells us that even if all of his problems are true, he can still make a good living operating as he has done and he expects the agency to maintain a strong value because of the “Urge to Merge” in our industry. There appear to be 100 buyers for every seller in the attempt to gain economies of scale. However, if the problems of the agency chase customers into the hands of the competition, what will be left to sell? Most sales are being predicated on retention of business and if that has been your problem it will deteriorate the value of your asset. And, after all, was it always your intention to sell out? If you were retaining your clients and growing, would you still have the same intention? Most agents would either continue in business or perpetuate internally to continue their business through the next generation.
Don’t assume that the game is over between the independent agency system and the direct writers. DON’T GIVE UP – THE DIRECT WRITERS DON’T DO INSURANCE THAT WELL!! But they are nothing if not persistent and are willing to market heavily. Marketing works. Without the unique value-added functions that you can provide, the heavy marketing will continue to deteriorate the customer base every year. Even mediocre products sell with heavy marketing. However, if you get back into the game and market your agency and its differences, you can regain your market share in your own territory.
Don’t assume that the banks and internet companies can provide the same services that can be provided by the independent agencies. An analysis of bank agencies prove that they provide neither more nor less products and services than the agencies that they purchased (or the core management who started the agency). Once financial institution management becomes involved, client services tend to decline (they are more process driven than most industries). This is a positive issue for the independent agencies who are their competition. And, NO, the bank and insurance relationships have not proven to be synergistic for the customer base yet. The internet companies arising sell one thing only, price. The are quote machines for auto and homeowners. They can provide no advice and the customers quickly become aware that they are alone. Stress this relationship issue when marketing against internet companies.
CUSTOMER FOCUS
Here are the three levels of customer focus. Pay attention to all three to regain the focus and to create the differentiation that all agents seek between themselves and the competition.
Level One — What the customer expects
Customer expectations are usually very basic. All customers want the lowest possible insurance costs, coverage for all normal exposures, and quick and efficient processing of their transactions. They all expect claims to be handled quickly and to their satisfaction. Can you meet these basic needs?
You may not be the lowest cost in the marketplace at all times, but most customers expect low cost as a part of their needs fulfillment, not as all of it. Give them the lowest cost and refuse claims or poorly process every request and you are likely to lose a customer. Communicate the fact that you can cross many carrier programs to provide competitive quotes and you have beaten the direct writers who can only quote their own company. Provide testimonials about your fast, friendly service and claims handling and both customers and prospects will likely stay with you.
Level Two — What the customer would like
Once the customers are convinced that their basic needs are met, they begin to move into the next level of expectation. At this level the customer wants to be considered as a VIP client with a feeling of importance relayed to the customer by respectful and friendly treatment by his agent. The customer wants to be “known” and recognized by the agency. Can your agency “know” every customer? The direct writers use random servicing. All representatives are equally able to assist customers and can access historical transactions on their systems. Many agencies using transactional filing also post notes to customer files on every contact. But if customers are assigned to one CSR (i.e. alpha splits) or to one team (i.e. program teams or large lines teams), the person or people to whom the customer speaks can actually know the client and treat him as a friend and respected customer. You can do this as an independent agent. The competition can not do this. If you communicate this difference to the clients, they will stay with you if respect and familiarity are important to them.
Level Three — What would “thrill” the customer
Level three expectations are ones that the clients don’t even know are available – until you tell them about them. For instance, some of our client agencies have begun giving large clients access to their own customer information on limited access dial-up facilities into the agency system. The customer can tell if payments were applied and how much is still outstanding on their accounts. Other agencies have arranged to have certificates printed in the clients’ office to heighten the ease of service. In a few cases, clients can request their own certificates on line and, unless a problem exists, the certificate is printed on their local printers in moments. “Thrilling” the customer involves providing services that are pleasantly unexpected. Stories abound about agents attending to clients needs on weekends and evenings. These situations used to be common. They are no longer the rule – now they are the exception. But it doesn’t matter if you don’t communicate these unusual and extra services to the clients who are seeking reasons why they should stay with you or within the agency system. When you do something extraordinary, tell the clients. Like Will Rogers said, “It ain’t boastin’ if its true!”
Getting back to Motorola – This company’s deviance off their success track will not spell disaster for the electronics giant. This is because their leader understands what caused the deviance and is concentrated on regaining the customer orientation that “thrilled” consumers and industry with innovative products that met and exceeded their expectations. It’s easy to be the leader when there are few contenders in the game. However, Motorola faces a variety of competitors from within the electronics industry and from outside. All of those contenders are innovative and are gunning for Motorola’s customer base. As the company again understands exactly what their customers expect (their base needs), what the customers want (their perceived desires), and what would create customer excitement (thrilling products and services that are attuned to the customers’ future needs), they will regain their leadership position and move to the next level of the company’s success.
Similarly, the few entrepreneurial insurance agents who are attuned to the needs of the customers, rather than their personal agendas can regain the positions of growth and profit that were common in the industry a few years ago. The key to tuning in to the needs of the customer is COMMUNICATIONS. Unfortunately, communications appears to be the first thing to shut down when things get bad.
COMMUNICATE WITH THE CUSTOMERS
Conduct individual meetings with your largest clients to ask them how they could use your agency to their best advantage. This is best done in an informal, social atmosphere. Most customers will begin with the obvious – shop their insurance for the lowest cost every year. Accept that need (it is everyone’s Level One need). Brainstorm with the client to evolve Level Two and Level Three issues that would add value to your role with the customer and would cement relationships to avoid any need or temptation to shop with any other agent or entity in the future.
Conduct group meetings with medium sized clients to derive the same information that you achieve through individual meetings with large clients. The agenda for these focus group meetings should be Controlling Insurance Costs and Protecting Your Assets. Provide refreshments and plan the meetings for no more than two hours. Issue formal, personal invitations. Don’t expect to get a large response, but be aware that the clients who choose to come are representative of the others who did not. Have a list of open ended questions prepared targeted to identifying this client base’s Level One, Two and Three issues and how you can help address them.
Communications doesn’t begin and end with the customer. Whether times are good or bad, be open and communicative with your employees. They can help you – if you ask them. If you shut down, they will sense that problems exist and will, eventually, respond negatively. Similarly, meet on a regular (quarterly) basis with your carriers. Don’t permit the “drop-in” visits by the marketing representatives. They are generally a waste of your time. Rather, you visit the branch office and meet with the group who works with your agency (underwriting, marketing, claims, managers). Your agenda with carriers is “How Are We Doing,” “How Are You Doing,” and “How Can We Make Our Relationship Better?”
Don’t assume that the alternative distribution systems to the independent agencies must continue to rob your agency of its customers, its good will and its morale. If that track continues, it is because you are unable or unwilling to change to meet the challenge. For 200 years, independent insurance agencies have represented the carriers for risk selection and the clients for coverage needs and placement. No other competitor is responsive to both the supplier and the end customer. The independent agent is more knowledgeable, more caring, and has more capabilities than the other markets available to the insurance customers in the U.S. We simply have to remember what we are, become proactive in representing ourselves to our client base and stop rolling over when faced with single-dimension competitors. The Self-Fulfilling Prophecy and Visualization works both ways.