14 TIPS FOR SELLING IN A HARD MARKET

Historically, a hard market is part of the cyclical nature of the insurance industry. At one time, these cycles occurred fairly consistently at about seven year intervals. However, the last significant hard market came in the mid-80s.

A hard market is characterized by increasing rates and/or reduced industry capacity, which leads to affordability and/or availability problems. In addition, both underwriting and claims adjusting usually become more stringent. In the current marketplace, these conditions are exacerbated by increased uncertainty about such loss exposures as terrorism, mold, etc., and by a reinsurance market significantly strained by the events of September 11.

Looking specifically at the E&O marketplace, we can expect increasing rates/premiums and more stringent underwriting. This presents problems and opportunities. The bad news is that competition could lead to lost accounts. The good news is that competition could lead to lost accounts — because it’s probably not desirable to retain all your existing accounts.

There’s more potentially good news: since many carriers are in the same boat, the hard market could lead to new business — and increased premiums mean higher commissions (until or unless carriers start reducing them again). You can use this increased revenue to improve and expand services in a way that differentiates you from the competition.

Let’s take a look at 14 tips you can use to improve your sales performance during the hard market (or, for that matter, any market):

Sales Tip #1: Know your buyer

Whether you’re selling BOPs or Tupperware, you can only sell three things: (1) price, (2) product, and (3) relationship. When it comes to insurance, about 50% of customers are relationship buyers, 25% are price buyers, and 25% buy on the basis of product (10%) or value (15%). If you know where your prospect/insured falls along this spectrum, you can tailor your proposal to them.

Sales Tip #2: Really know your buyer

• Develop a client profile/rating sheet that includes everything you know about the buyer down to their favorite TV show.
• Identify the real decision makers. You can’t sell insurance if you’re going through a gatekeeper.
• Learn all you can about the buyer. Talk to employees, business associates and others to learn what makes this person "tick."
• Stay in frequent contact. Communicate with VIP, at-risk, and high-potential customers frequently. Very few of these contacts should be insurance related.
• Pay attention to the details. Joe Girard, listed by the Guinness Book of World Records as the best car salesman in the world, said his secret was sending birthday, holiday, and other greeting cards. Throughout the year, keep in contact and do little things for clients (such as sending a magazinearticle on a subject that interests them). Then, shortly before renewal time, do something really memorable that’s unrelated to their insurance.

Sales Tip #3: Don’t give up

According to Guerilla Prospecting, many contacts with fewer customers are far more effective than fewer contacts with many customers:

• 1 sales contact = 2% of sales closed
• 2 sales contacts = 3% of sales closed
• 3 sales contacts = 4% of sales closed
• 4 sales contacts = 10% of sales closed
• 5 sales contacts = 81% of sales closed

Sales Tip #4: Don’t ever give up

According to the Darnell Corporation, 20% of salespeople make 80% of sales. More than 50% of all of Avon’s sales come from 17% of their sales reps — who produce 10 times the revenue of the other 83%. The reason: most salespeople quit after one or two initial contacts:

• 48% quit after the first contact
• 25% quit after the second contact
• 12% quit after the third contact
• 5% quit after the fourth contact
• 10% quit after the fifth contact

As you can see from the Guerilla Prospecting statistics, 80% of sales require at least five contacts.

Sales Tip #5: Don’t recognize "no"

The following statements all mean "No." However, don’t take "No" for an answer. It might take four or five "Nos" until you get a "Yes."

• "I’ll think it over."
• "We’ll discuss it and let you know."
• "I’m just looking at all my options."
• "The price is just too high."
• "I’ll have to get back to you."
• "Let me see how this fits our budget."

(Source: "Six Rules of Salesmanship to Clinch the Deal," HOC, August 1995)

Sales Tip #6: Use solution-oriented selling

If I said I could come into your agency or company and show you how to close more than 90% of your sales leads, increase your retention rate to 99.9%, and more than double your book of business in less than a year, would you hire me as a sales consultant? You would? That’s odd, because I haven’t mentioned price! When you offer solutions — to create opportunities, solve problems, reduce risk, etc. — price is the last thing that will come up during the negotiations.

Let’s face it. In the minds of the prospects, most insurance is sold using similar approaches, similar coverages, similar proposals, claims, promises, etc. Because prospects perceive all of these elements as equal, price becomes the only variable — which means you need to define the "unique selling proposition" that differentiates you from the competition.

Consider offering a package of solutions unlike anything your competitors offer. For example, provide free or discounted in-house seminars, loss control services, or other perks. Remember, increased commissions might allow you to offer these benefits at little or no cost.

Sales Tip #7: Offer painless selling

In a hardening market, accounts experiencing problems with their current insurance program are your best prospects — because you can relieve their pain. If the person is a "product buyer," you can also create pain by showing coverage gaps compared with your product. Be sure to use vivid examples. Demonstrate how your proposal will boost their bottom line by reducing risk.

Sales Tip #8: Strengthen relationship selling

I’ve had my Personal Lines account with the same agency for 29 years. They don’t offer the best products and I can get far better prices elsewhere. It’s our relationship that keeps me doing business with them.

My mother worked for this agency for a number of years until she became terminally ill and passed away more than two decades ago. During her final year, she was only able to work for a few weeks. At best, one could expect a decent insurance package to provide 60% pay under a salary continuance or LTD program. However, the agency owner continued to issue her full paycheck every two weeks whether she was able to work or not.

When the call came from the hospital that she had only hours to live, I raced there at 2:00 a.m., just before she passed away. At 3:00 a.m., the agency owner and his wife showed up at the hospital to offer any help they could. I’ve never forgotten what they did for my family and, for that reason, I’ve never considered moving my account to save a few bucks.

Relationships build loyalty. Strong relationships based on genuine interest, empathy, and compassion create fierce, almost fanatical, loyalty. If you treat your customers like family and go beyond the call of duty when needed, no coverage perks or pricing discounts can approach the effectiveness of such relationships.

Sales Tip #9: Use testimonials

Include testimonials of long-term clients in your marketing materials. Every time you’re involved in a claim "victory" for an insured, ask for a testimonial. Every time you exceed the service expectations of a customer, seek a testimonial. If possible, target these statements so that recipients of your materials know the claimants. Flaunt the fact that so-and-so chose your agency or company rather than a competitor. If needed, ask a respected client to make a personal visit to a customer on the fence. Prospects will appreciate your personal interest and value the opinions of a peer.

Sales Tip #10: Utilize multiple closes

An effective sales training program can teach dozens of proven techniques that you can use to close the account. For example:

• Direct close. Simply ask for the check.
• Time-driven close. "Because rates are going up next week, buy now"
• Relationship close. If applicable, this is a foolproof method.
• Deal/concession close. If the prospect balks, up the ante by adding such benefits as discounted seminars or loss control services.

Sales Tip #11: Provide world class service

Offer consistent, personalized, responsive, reliable, accurate, and professional customer service. Do the unexpected to dazzle customers with your commitment to service excellence.

Sales Tip #12: Overcome objections

Entire books and seminars have been devoted to this subject. Some objections are real and must be addressed, while others mask hidden agendas. Objections aren’t bad, in and of themselves. According to Learning International, a salesperson is 20% more likely to close a sale that includes objections than if the prospect raised none at all.

To minimize objections, sell the benefits, not the product. Focus on emotional (e.g., security/risk) concerns. Stress why the prospect should buy, rather than their objections. Anticipate and be prepared for objections. Avoid bringing up those that the prospect wouldn’t have raised. Don’t talk price until you’ve demonstrated the superiority of your proposal — and never make excuses!

The Alcoholics Anonymous Prayer says, "Lord, give me the courage to change the things I can change, the serenity to accept those that I can’t change, and the wisdom to know the difference." This prayer applies to three major types of objections:

• Sincere objections. Negotiate around these.
• Hopeless objections. You have to know when to hold ‘em, and when to fold ‘em.
• "Smokescreen" objections that have nothing to do with the product, but mask a hidden agenda. Fix the problem, and you’ve made the sale.

Bear in mind that you’ll often be selling to a salesperson who might well know all the canned sales tactics.

Sales Tip #13: Counter price

If you’re selling relationship-based solutions and the product has been fairly priced, the premium should rarely be an issue. However, if your prospect asks for a lower quote and you have to address it, use these "last resort" responses:

• "It’s only that much cheaper?!" Imply that the competition’s product or service offers even lower value.
• Minimize the cost differential. Put the price difference in daily terms and, by compare it with something tangible: "That’s like giving up a (pack of cigarettes, couple of doughnuts, and so forth) a day."
• Make a "premium sandwich." "You get this for $, and this for $, and this for $, and this for $ ...." Constantly repeat the premium difference after you spell out each of the superior benefits your product provides.
• Use The Ben Franklin approach. "When confronted with two courses of action, I jot down on a piece of paper all the arguments in favor of each one — then on the opposite side, I write down the arguments against each one. Then, by weighing the arguments pro and con and canceling them out, one against the other, I take the course indicated by what remains." Make sure that the "pros" of your product outweigh those of the competition.

Sales Tip #14: Try the Saturn Approach

Don’t undermine product, service, and relationships by cutting price. Underwrite and price the account accurately using appropriate debits and credits, then stick with it. This will build credibility in the eyes of your client.

Too often, we don’t think of margins or profits when we discount premiums. Assuming that a product has been accurately priced to generate a profit, if the product costs $1,000 includes a 20% gross profit ($200), and the customer is given a 10% ($100) credit/discount, that represents a 50% decrease in margin!

As an alternative to discounting, add value by stressing your product’s superiority or unique benefits. You might also offer premiums by including free or discounted products or services. Create an entire package of value-added services as part of your overall marketing plan — you do have a hard market sales plan, don’t you?