Rather than focusing solely on how to handle business within the agency, managers must direct their focus to marketing precepts that produce profit and growth.
The International Direct Marketing Association defines direct marketing as 'an interactive system of marketing which uses one or more forms of communication to generate a measurable response or action from a targeted audience.'
Direct marketing and other growth strategies have become essential to the future of the Independent Agency System. Any medium can be used: TV, radio, mail, print ads, stuffers, phone, and leaflets are just a few. The focus is interactive communication; in other words, the medium must speak to prospects' needs and require an action.
Measurability is the hallmark of direct marketing. Lead-generating direct-marketing programs are measured by the number and quality of responses. Agencies that use direct marketing to convert leads into customers are measured by lead conversion, which is also known as 'new customers produced.'
THE AGENCY SALES PROCESS AND DIRECT MARKETING
An insurance agency's sales processes consist of three critical elements: lead generation, lead management, and account development.
LEAD GENERATION: Direct marketing identifies the best prospects, then reaches them with an offer designed to meet needs and create interest.
LEAD MANAGEMENT: Lead management takes the interest shown by a prospect and develops it into a purchase. The activity of converting the lead into a sale is referred to as lead management.
ACCOUNT DEVELOPMENT: The benefits of direct marketing to agencies and companies are closely intertwined. In agencies using direct marketing, companies ascend from a secondary market to a primary one. The agency embarking on a direct-marketing program learns the company's system, manual, rating, etc. As the program proceeds, agencies and companies work closely to achieve a common goal - profitable growth and customer satisfaction.
AGENCY BASICS OF DIRECT MARKETING
The essence of direct marketing is the communication of a sales proposal to a selected audience for the purpose of soliciting direct, positive responses in the form of sales or agreements to take the next step toward a sale.
One of the primary advantages of direct marketing is that it always provides immediate, measurable results. Targeting an audience and the measurable action resulting from the direct-marketing effort are key elements of this selling approach.
The prime communication devices of direct marketing are print media such as newspapers and magazines; electronic media such as radio and TV; the telephone, used for telemarketing; and the mail, used for direct and cooperative mailings.
PRINT: Since subscribers to daily and weekly newspapers generally are a very mixed population, this medium provides less selectivity of audience, and costs tend to be greater than for other approaches.
ELECTRONIC: Broadcast media are most effective when used to support direct mail or other forms of direct marketing. They can also be effective when used with a toll-free telephone number.
TELEPHONE: An audience can be selected from special directories. Telemarketing has been used by direct writers for many years. It is especially helpful as a follow-up to direct mail.
MAIL: The audience of a direct-mail campaign is selected by use of a particular mailing list - current customers, residents of a certain ZIP code, and customers or members of another organ- ization (such as credit unions, banks, auto clubs, etc.). The sales message can be as simple as a one-page letter or an elaborate package of sales material.
Cooperative mailing, a low-cost form of direct mail, includes a sales piece in a package of materials from several noncompeting companies.
There are four components of successful insurance direct marketing:
- a value-added product at a competitive price.
- a message presented to an appropriate audience.
- a personal risk-management approach to the sales process.
- follow-up. Without effective follow-up, the entire effort is usually wasted.
It's important to remember that direct marketing does not produce automatic sales; it creates sales opportunities. It doesn't replace producers; it supports them.
DIRECT MAIL
Direct mail works on a 40/40/20 formula: Success depends 40% on the right mailing list, 40% on the offer, and 20% on the format of the sales message - copy, graphics, color, and other aesthetic elements. This formula was first developed by direct-marketing expert Ed Mayer and expanded by Freeman Gosden Jr., also a leader in direct- marketing.
THE FIRST 40% (CURRENT CUSTOMERS)
The best mailing list of all reflects current customers. The classic formula for business success is to build a base of satisfied customers, then get repeat sales and referrals.
POTENTIAL CUSTOMERS
Mailing lists can be assembled on a do-it-yourself basis from telephone directories or other sources, or purchased from companies specializing in their preparation and use. Common mailing list categories include registered automobile owners, voters, property owners, people in specified occupations or types of business, people living in selective ZIP code areas or in specified income groups having special interests (boating, opera, etc.), or some combination of these.
SELECTING A LIST
In most cases, a ZIP code list that includes age and property ownership data will suffice for an insurance agency mail campaign. A good rule of thumb is to select prospects similar to present insureds. The usual arrangement is to purchase one-time use of a mailing list in the form of mailing labels or magnetic tape. (These lists have a built-in safeguard against unauthorized repeat-usage - dummy names and addresses that send your mailing to the company owning the list.)
Buying the rights to a second mailing can be a good investment in proper follow-up. If an agency is using a geographical list, make certain the list reflects updated census information. For an additional charge, a printout showing phone numbers can be obtained to simplify telephone follow-up.
Mailing lists are available from firms that sell only the lists or from direct-mail houses that can also provide supplemental services from professional advice to the printing and mailing. The usual cost for mailing lists is about $50 per 1,000 names, depending upon the demographics requested and the number of names on the list. Many special directories are available from which an agent can compile a mailing list. These include reverse telephone directories (listings by address), Yellow Pages, business directories, Dun & Bradstreet, Standard and Poor's (usually available at the public library), reports of real estate transactions, social registers, and others. These involve more work and usually don't provide as much qualifying data, but may be less expensive than rented mailing lists.
THE SECOND 40%
Mailings must state clearly who you are, what you're offering, what's in it for the prospect, and what action the prospect should take. It's important to give the prospect a reason to respond to the mailing. The prospect wants to know, 'What's in it for me? What will I gain by responding or lose by not responding?'
The sales message should emphasize benefits. Saving money is an important benefit but it must be tied to quality coverage and the service an agency provides to prospects. The consumer of today is looking for added value and convenience.
The object of a direct-mail campaign is usually not to receive completed applications with a check attached, but to produce a qualified response. What agencies are selling is not a policy, but a willingness to listen. It's important to communicate clearly that the prospect should return the reply card to learn more about the benefits of the service or product. Closing the sale comes in the follow-up (lead management).
Be sure to follow up by telephone with every prospect who returns the reply card and, if possible, with those who don't. The mailing will have paved the way for calls, and there are many sales to be made to prospects who don't respond. If the prospect doesn't know the agency or its products or services, include a well- designed brochure in the mailing. Explain clearly what prospects should do: Complete the reply card, including birthdate, policy expiration date, or whatever information is needed to quote or make an appointment. Make it as easy as possible for the prospect to respond; provide a postage-paid reply card or envelope. Response rates are better if a time limit is given. Each passing day reduces the likelihood of a prospect responding.
THE FINAL 20%
Mailings in envelopes with a letter tend to get a better response than self-mailers. The letter should be friendly, sincere, and simple. Be concise, but tell the complete story. There are several factors that can make a letter more successful.
- Margins should be generous. Leave plenty of white space around copy; frame the message neatly. The length of the message per page, excluding greetings and head, should not exceed seven inches.
- Datelines make the letter more personal.
- Paragraphs should be kept short. The longest paragraph should be eight lines or fewer. Indenting important paragraphs increases the response rate.
- Underlining key words can be effective if not overdone.
- Color can be used to highlight key words or phrases, but the impact is lost if used too many times.
- Format is important. Letters typed by computer or word processing equipment work better than printed sheets but cost more. A separate letter and brochure are more effective than incorporating the sales message into the brochure.
- Postscripts (P.S.) increase response.
- Type should be large and readable, double-spaced, and with extra space between paragraphs. Use only standard typefaces. Script typefaces reduce readability and do not, as sometimes assumed, make the letter seem more personal.
- The signature should be added by hand if possible. For large- quantity mailings it should be printed in dark blue to give a handwritten appearance.
- Paper should be good quality stock - for the letter and envelope. Cheap-looking paper gives the impression of a cheap, low-value product (and also projects a poor agency image). Don't use colored paper for letters, except off-white, ivory, cream, pale buff, or grey. Stronger colors greatly reduce readability and will lower the response rate.
- Postage can be third-class bulk rate for most mailings. Use first class if a prestige touch is appropriate or delivery time is important. postal regulations require that the address on any postage-paid business reply card or business reply envelope be imprinted by printing press. Adding the name and address by rubber stamp, handwriting, or gummed label is not acceptable.
Reply mail will come back to the post office from which it was sent, and the sender is assessed the postage due plus a handling fee for each piece received. Make arrangements with the post office for payment mode and pick-up or delivery of reply cards.
In order to meet requirements for bulk rate, senders must pay a fee, register for a bulk-rate permit, mail a minimum number of pieces established by the post office, and follow postal instructions for sorting. For further information, talk to the local post office representative or contact a commercial direct-mail firm. Reply cards should look important and recap the message of letters. A tear-out reply card should be positioned so the reader comes to it at the conclusion of the message. If the card is to be returned in an envelope, be sure the agency name and address appear on the card and envelope. If possible, the reply card should contain enough information to:
- quote
- pre-underwrite
- select a market
- set up a sales message with information
Timing is critical. Avoid income tax time and the early summer vacation months. If possible, send mailings just in advance of the season when the product is most useful. An examination of renewals will indicate the heavier months. Set timing accordingly, paying close attention to follow-up time after the mailing.
AGENCY LEAD MANAGEMENT
Most agencies using direct marketing successfully to generate sales have something in common - an effective system to handle and develop inquiries.
Direct marketing, especially telemarketing and direct mail, can be used to gain large numbers of leads in a relatively short time or a steady flow of leads during a longer period. The strategy used is dictated by the agency's objectives, staffing, market conditions, and other factors.
Generating quantities of leads is only the first step in today's direct marketing agency environment. Leads must also be properly qualified, developed, and tracked. If a lead is to be converted into a customer, a disciplined lead inquiry/management system with established objectives and assigned responsibilities is a must.
HANDLING RESPONSES
The agency may consider establishing a central handling department. This can be a select unit or an individual well-versed in product and underwriting knowledge who can pre-screen each lead.
With walk-ins or phone contacts, the lead information is usually captured on the reply card and processed as a mail response (although coded on the basis of how received). Mail responses are received and processed based on the information provided by the prospect. The chart below illustrates a basic response schematic.
TIMELINESS
A large percentage of inquiries have an immediate need for the product or service offered. These are prospects saying, 'Yes, tell me more.' Responding immediately to these people is essential to sales success.
RELEVANCE
What is communicated to the prospect should be relevant to what is requested. The information provided helps prospects make the buying decision. It must be understandable, precise, and speak directly to prospects' needs, as expressed in the inquiry. Isolate the specific need and sell to it.
QUALIFICATION
Leads passed on for sales action need to be properly qualified. This will determine lead quality in respect to underwriting acceptability and sales receptivity. A flow of well-qualified leads energizes the producer and staff. The responsibility for this function must be placed with someone well-versed in product and underwriting knowledge.
FOLLOW-UP
A qualified lead is a valuable commodity deserving the agency's best efforts in converting it into a customer. A prospect in a buying position because of an upcoming policy expiration is a prime sales candidate. But there are many who will not reply. They may, however, respond to a personal call or a later mailing. The agency must always be aware that any number of influences can alter purchasing habits. Proper follow-up may capture the prospect in a favorable buying mood.
Another aspect of follow-up is nurturing a lead with an expiration date that is several months away. This lead can be developed effectively through phone and mail contact.
MEASURABILITY AND ACCOUNTABILITY
How much does the agency's direct-marketing program cost? What are the results? Could the benefits have been achieved through some other marketing methods at a lower cost? How can the lead-to- conversion ratio be improved? All elements of the program need to be tracked so lead generation and management effectiveness can be measured accurately.
An objective evaluation performed by the agency on the quality of leads, sales results, and other elements of the direct-marketing effort is essential. Costs should be determined as to 'cost per sale' and related to the lifetime value of that customer/sale.
DISCIPLINE
A successful lead-management system exercises discipline daily. Replies are quickly acted on, producer activity closely monitored, and prospect files followed up on a timely basis. All elements, from the time a lead is received to the time the customer receives the insurance policy, are conducted in an orderly manner.
When considering direct marketing programs, managers must evaluate markets, products, sales force, internal strengths, and resources. Get a program off the ground by starting with present customers. Then add on or cross-sell these customers via a direct- marketing program - and expand. Concentrate.