A Bright Future For Small Agencies

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Independent agencies, even small ones, definitely have a bright future. Offer better service related to a specific product or offer better service to a select group of customers, and you can sell those customers everything.

Some time ago, I read an article predicting that independent insurance agencies would be gone in 10 years. I doubt that, but I do believe many fewer independent agencies will exist a decade from now, especially smaller agencies, because bigger agencies and banks will offer more products, probably at better prices, than many small agencies will be able to offer.

In recent years, independent hardware stores have faced a similar challenge from large stores offering more merchandise, often at lower prices. Two such stores have successfully competed against their huge invaders, setting a great example for independent insurance agencies.

Independent hardware store A probably has 1/20th the floor space, stock, and selection of the competition. However, there's plenty of variety among the items they carry. For example, they carry parts for every sink manufacturer. So even though I can't buy a sink at Store A, I can find the parts to fix any sink. More importantly, someone is always available to tell me how to do the repair and help me get the right part the first time. Store A's price is sometimes a nickel or two higher than the competition's, but the free advice and help are worth it.

Store A never lost sales when the big hardware store opened. They have the same customers as the big store-and they keep them by offering better service related to a limited number of products, which people continue to buy from Store A. Store A does what it does best rather than try to sell anything and everything like the big store. I'm always amazed that such a small store always has the right part. I can never find what I'm looking for in the big store.

Small independent agencies can survive if they focus on selling specific products better than the competition. For example, if a small agency can prove that it writes small contractors' Property policies better than anyone else, it will write a lot of them-and leave the small contractors' Health insurance to someone else. Being all things to all people is impossible.

Local hardware store B didn't suffer any sales downturn when the big hardware store opened, either. Store B thrives by selling merchandise the big store doesn't. It specializes in the hardware ranchers and farmers need. By targeting a class of customers, Store B also successfully cross-sells its customers clothing, hunting and fishing equipment, toys, and animals. The key is that the clothes are Western-style or work clothes ranchers and farmers like. The toys are things like tractors, plastic animals, and trucks. Store B found that it can sell its customers almost anything related to farms and ranches.

Small independent agencies can thrive by identifying a type of business that large agencies inadequately service. Identify a group of clients, become experts in their business and their needs-and sell them all the coverages they require.

Independent agencies, even small ones, definitely have a bright future. They need to do something special like the two small hardware stores. Offer better service related to a specific product or offer better service to a select group of customers-and you can sell those customers everything.

Chris Burand can be reached at Burand & Associates, LLC, PMB 345, 1829 S. Pueblo Blvd., Pueblo, CO 81005, (719) 485-3868, fax (719) 485-3895, E-mail [email protected], or Web site www.burand-associates.com.
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