Agents come in 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 might generate major gains in future income and revenue.
The Spenders fall into two categories, 'Big Spenders' and 'Investors.' Big Spenders tend to throw money at problems and take advantage of every opportunity they can afford. So when computers are too slow, they buy new computers. When backlogs become unmanageable, they buy more staff. Big Spenders are easy to identify because they shell out for every gizmo and gadget as it becomes available. Big Spenders are missing one key trait that separates them from the Investor personality type.
Investors cost-justify every expenditure by tracking results. Big Spenders are almost paranoid about not tracking the results of the spending in case a purchase turns out to be unwise. 'After all,' they reason, 'the money’s 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 Spenders are 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 score keeping and evaluation.
Whether the expenditure is for people, systems, advertising or marketing, the only way to determine whether it was a wise move is by measuring the results of the spending. If the results meet the agent’s expectation, they can determine whether to sponsor similar activities in the future. If not, they’re unlikely to continue that activity. After all, one definition of insanity is to continue an activity that hasn’t worked in the past and to expect different results in the future.
PEOPLE INVESTMENT — OR THROWING PEOPLE AT A PROBLEM
Too often we’ve seen overstaffing situations in which an agency staff appears to be working on overload and the owner adds more staff to relieve the pressure. It’s easier to add staff than to analyze workflows to determine if the current staff is processing its work efficiently. The current staff will always favor adding people (after all, it’s not their money that’s being spent). It’s up to the agency owner or manager to determine whether the problem results from workload or workflow. Analyze workload problems to determine if they’re seasonal or temporary and can be solved through overtime before adding staff blindly. Attack workflow problems through redesigning systems to relieve the current staff of non-essential tasks, while addressing the critical areas of workload with the time saved in the redesign.
An investment in people arises when an agency finds a potential hire that can create profit and benefit the business over a long period. Whether or not a position is available, hiring a talented and skilled individual in such a situation is more of a long-term strategy than a luxury. However, you must plan on how to use the individual most effectively and recoup the cost of the hire as quickly as possible. This action plan marks the difference between the Investor agent and the Big Spender.
THE CUTTING-EDGE AGENT WITH THE MANUAL-ORIENTED STAFF
We all know 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 don’t train or manage their staff to use new systems effectively. Nor do they analyze whether the greater efficiencies of the new system will offset the cost of the upgrade. The agent is simply sold a bill of goods and, often, down the river as well. System vendors don’t stress their training as much as the sales of products and upgrades. The staff is used to doing 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 presented to them. When they aren’t managed, they’ll seek excuses for why a process doesn’t work and try to work around it (usually mimicking the method they were comfortable with before the upgrade). Unless management carefully tracks the progress of system changes for which they’ve paid, chances are the staff won’t use them.
THE WASTE OF TELEPHONE BOOK ADVERTISING
Agents spend thousands of dollars annually on telephone book display ads even though their yield is limited to price-shoppers and distressed businesses. 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 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 breeds customers and seeing a billboard day in and day out can familiarize your client population with your name.
However, this advertising method must be cost-justified by increased traffic to the agency. While most people never pay attention to billboards, they do help build name and logo recognition. To determine if billboards work, 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, it’s clear that the billboards helped improve prospect contact.
MARKETING YOUR WAY INTO DEBT
Four-color brochures, promotional items, telemarketing, list development, marketing campaigns — all are valid marketing tools, and all cost money. Unless you’re an Investor who monitors results, you won’t have a clue if these tools worked, or were simply 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 without knowing whether they resulted from the marketing efforts or referrals. Either way, we’ve seen as many successful marketing efforts stopped as unsuccessful ones.
It appears that when an agent’s tolerance for spending reaches a limit and they haven’t monitored the results of their marketing, they tend to end the program. 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 looks only at the cost without evaluating the results. On the other hand, the cessation of a program might be perfectly justified because it achieved virtually no results.
Spending money to 'prime the pump' is not wasted. However, expenditures made without judging the results is a sure way to lose money. Adopt the Investor’s habits of spending judiciously, measuring results, and either continuing or terminating an expenditure based on whether it’ll make money in the short- or long-term. Avoid spending as a quick fix or in the hope of generating results without measurement.