| A LOOK AT VALUE ADDED SELLING AS AN ANSWER TO PRICE SELLING
by Allen Karlin, Ph.D. Use these proven ways to stand out from the competition. One reality of today’s business climate is that price is of critical importance when clients make a decision about where to buy their insurance. Rates and prices constantly are being examined by agents, risk managers, and prospects. Due to significant competitive and economic pressures, clients are looking to save money wherever they can.
Agents must be aware of the concept of value-added selling: the need to set yourself apart from competitors so that prospects and existing clients view you as a business partner of the highest quality and integrity. Value-added selling can be defined as the entire package of goods and services that you, as an agent, bring to a prospect or client.
The package extends beyond you, however. It also includes the agency and its reputation; the support it provides; the carriers you use, their products, and specific advantages those products offer; and the level of claims service provided.
In short, there is a price associated with any insurance policy. And sometimes the cost of doing business may take a less expensive policy at the outset and make it the more expensive purchase in the long run. For example, a heavy-equipment manufacturer normally would require a high level of loss-control services. If he or she chooses the lowest-priced insurer and the services provided are inadequate, he or she will suffer down the road.
If you can’t offer the lowest price, differentiating yourself, your agency, and your product provides the key to making value-added selling work. Finally, if you find yourself in a situation in which price is all that matters, be positioned to get the “last look” as a result of having done an excellent job of setting yourself apart.
STANDING OUT FROM THE CROWD
To differentiate yourself from your competitors, ask yourself these basic questions: “Who am I?” and “What do I have to offer?” The first answer most agents give is “service.” This is a very comprehensive and subjective term. Service may mean fast turnaround on policy issuance, returning phone calls on the same day, looking for coverage changes and potential pitfalls, keeping abreast of information that may affect clients’ businesses, fast claims service, or friendly and courteous phone service, etc.
In practice, the meaning of service may vary for every client and prospect. How does the motivated agent differentiate what service means for his or her prospect? Ask! Ask is the most important three-letter word in the English language. If you don’t ask, you won’t be sure you know all there is to know. In order to provide what the client or prospect wants, and whether you want (and can afford) to provide it, you need to ask what the buyer means by service. For example:
“Which aspects of service are especially important to you?”
“We find that many people switch agents because they’re dissatisfied with the service they receive. Are there any areas in which you have been less than satisfied?”
(If the response is positive, follow with, “Can you tell me what happened?” And if it’s not obvious from the story, ask, “What impact did that have on you?” or “How did that make you feel?”)
This puts you in a position to empathize with the customer or prospect (e.g., “No wonder you feel that way; if it had happened to me I’d feel exactly the same way. If you were my client, here’s what we would have done for you . . .”). If the person you are speaking with is your client and is complaining about your service, you still must listen and empathize. Then ask what it would take to fix the problem and negotiate from there.
However, not all clients will be dissatisfied with the level of service they receive. How often do you hear, “I’m really satisfied with the service I receive,” or “My coverages are fine, thank you.” In these situations help the prospect understand that his or her current agent never really defined service because that agent didn’t ask what was important to the client. If prospects say they are satisfied with their current service, define what level of service they currently receive and then raise their level of expectation regarding the service they should be receiving. In other words, ask the right questions so that the insured wants to receive the next higher level of service.
For example, a smaller prospect with a premium of $2,500 says he or she is satisfied with the level of service received. You might ask when the last time his agent visited his business. He tells you it was three years ago, when the policy was first sold. By his voice you can tell that the insured is asking if there’s something unusual about that. You then can ask when and how often the insured sees the agent. Quite often the response you will get indicates that the insured does not expect to see or have visits from the agent.
This insured has fallen into “programmed thinking” regarding his agent. Because he has a business to run, and probably a few hundred other items keeping him busy, he doesn’t spend time thinking about how he can obtain better service from his insurance agent. Part of differentiation is asking questions designed to help someone break that pattern of thinking.
Through your questions, a prospect may suddenly ask why he or she has accepted less from their current agent than they do from other vendors. Since you raised the issue in a tactful manner, suggesting that you do business in a different way, you are well-positioned to be the beneficiary of that new thought process. You earn the opportunity to prove what you can do on the insured’s behalf!
Other questions you can ask to help redefine acceptable service levels include:
How much mail or phone contact does the insured receive from his or her agent? (This helps define the agent-insured relationship.)
Does the insured speak to the agent or to a CSR?
Does it make a difference to the insured, and does he or she prefer dealing with the CSR?
The goal in differentiating yourself through service is to illustrate to both current clients and prospects how your attention to what they consider important will save them time and, in the long run, money. They will realize that each time they don’t receive the service they want, the follow-up time alone may be expensive, raising their frustration level. Your success at differentiating yourself will depend on your ability to: • Discover specific client needs
• Influence decision-makers
• Formulate strategies to fill client and prospect needs
• Form market relationships
• Emphasize strengths and improve weaknesses
• Relate to client and market needs
• Exploit the expertise you bring to the relationship
• Network
• Troubleshoot problems
• Identify opportunities and analyze signals
• Analyze selling situations
• Train support staff to satisfy customer needs
• Innovate potential solutions
• Overcome objections and obstacles
• Negotiate with clients, prospects, and markets PRODUCT DIFFERENTIATION
Product differentiation is a second area in which agents can showcase the products they sell and the companies they represent. The No. 1 rule here is Know how to read and interpret coverages. This example helps to illustrate the point:
A producer had developed such good rapport with a prospect through active questioning and listening that she was shown her competition’s quote. The competition was $2,000 less on what seemed, on the surface, to be a similar policy.
Upon closer examination, the producer, who had the last look, realized the policies differed on prior-acts coverages. She was offering full prior-acts coverage, which was not provided by the competitor’s policy. The competitor’s policy easily could have cost the insured an amount far greater than the $2,000 difference in price. It pays to be able to read and interpret policy terms and conditions.
In this example, the producer was able to point out the difference in coverage and ask if the potential loss, which would probably exceed the $2,000 premium difference, was an acceptable risk to the client. The answer was no. She had differentiated her product by illustrating the differences in coverages she uncovered, and she received the order.
Knowing how to read coverages and how to take apart a policy and recognize real differences in what is covered by different forms and contracts is critical to your ability to neutralize price as the sole buying criteria. Some policies have exclusions written into the body of the contract while others appear as separate endorsements. Still others are written in such ambiguous language it would require the assistance of a roomful of attorneys to provide a halfway-workable interpretation.
If you need to strengthen your skills in this area, consider these solutions: • Find someone in the agency to teach you.
• Spend more time with your company underwriters and ask more questions.
• Ask the market underwriter to interpret policy terms and conditions (this has the added benefit of building your market relationships so you can better present risks to that market).
• Participate in insurance classes or self-study programs (CPCU, ARM, IIA, etc.).
• Take insurance classes at a local college or junior college.
• Attend classes conducted by market personnel (when promoting a new product, often there will be a comprehensive comparison to the competitor’s products), thereby making your job in the field even easier. Auditing coverages for clients or prospects as a method of gaining business has proven successful. Consider the credibility and relationship you can establish, not to mention the powerful motivation for buying you can provide, if you were to audit a prospect’s coverages and discover: • four different policies, many with overlapping coverages, which could be replaced with two policies of lesser cost.
• different “other insurance” clauses leaving the insured with potentially inadequate coverage and a lawsuit to interpret the policies, should a loss occur.
• glaring gaps in coverages.
• inadequate limits.
• use of a claims-made form when an occurrence form is available.
• exorbitant deductibles or self-insured retentions (SIRs).
• unrated carriers. Unfortunately, it is not always this easy. The competition may be doing a good job of handling the account. Additional questions to uncover areas important to the prospect are essential here. Sometimes you need to change the pace and take a new direction.
One strategy used to overcome current economic conditions and pricing barriers is called “unbundling.” Unbundling, which should be used for larger and more sophisticated accounts, refers to removing specific services or items from the policy so that the prospect does not have to pay for them.
Here’s how it works:
When determining rates for exposures, insurance companies take into consideration not only the losses they will have to pay, but many other incidental services that add to their overall costs. These services include exposure analysis surveys, claims administration, and actuarial analysis of loss experience.
Many of your large and sophisticated prospects either have the capacity to perform some of these incidental services themselves or have turned to specialists to provide them. So, they do not need to purchase these services as part of their policy.
As a result, some carriers are providing quotes on an unbundled basis by pricing a risk based only on those services the insured sees as necessary.
While such situations usually apply to larger accounts, unbundling does offer an opportunity to compete strictly on price. However, be careful not to eliminate a service that a client needs. Taking unbundling to an extreme to get your price down can open your client to an uncovered loss and open you to an E&O claim. When careful analysis indicates unbundling to be justified, you can save significant money by having the insured purchase comparable services from outside sources (e.g., contract claims administrators, risk control specialists) or by providing these services internally utilizing their own employees.
Other ways to offset pricing include developing an understanding of supplemental services, which may not be provided by prospects, or other price-sensitive strategies that you can use in highly competitive situations. Examples include loss-control services, flexible payment plans, utilization of deductibles, manuscripted endorsements, and policies and customized coverages.
Since rates and prices probably will continue to be examined carefully by agents, risk managers, and prospects, it’s important to consider ways in which you can either meet or offset concerns about price. Use the concept of value-added selling to set yourself apart from competitors. Be creative in providing services clients want and need. Explain the benefits and drawbacks of various solutions to their insurance needs. Use your relationship-building abilities to gain an understanding of those client and prospect needs as well as to get the “last look” in competitive situations. Allen Karlin is president of Karlin Management Resources, a sales and management consulting firm. He can be reached at (310) 394-1770 or [email protected] |