David and Goliath is no longer news. These days, all a boy needs to kill a big man is a gun instead of a sling and a rock. Similarly, technology has created a new world of competition. A David who understands technology can successfully compete against any corporate Goliath.
In the insurance industry, technology allows small and mid-size agencies to compete, survive, and prosper in tomorrow's world. Considering how large our regional and national competitors are, this is good news for almost every agency.
Besides giving an agency the ability to compete, technology creates a customer need that can serve as the basis for continuing the agency's historically profitable relationships. As technology becomes an ever greater part of daily life, more clients long for the human touch-which agencies are best at providing.
Buying on the Internet, over the phone, or by direct mail may offer high-tech cost efficiencies, but these systems are devoid of the 'high touch': the hallmark of yesterday's agency world. Customers will always need (or at least want) someone to shake their hand, look them in the eye, answer questions, and explain coverages-in other words, to add value to the buying experience. These create a service need in a commodity world.
Commission levels in the future might not be sufficient to justify intense service on an individual policy, but the fact remains: If you want to compete with the giants of insurance marketing, personal service and technology are your best weapons. Yesterday's strategy of mass-marketing existing products to new customers will have to take a back seat to a new marketing initiative that sells new products and services inside existing relationships. Capturing a larger share of an individual's or business' premium budget will restore the profitability lost when commissions were reduced on single sales.
To capture this account opportunity, agents must know the client intimately. They must fully understand the client's wants, needs, motivations, and so on. They must know the individual or the business buyer, not their stereotype. This requires 'micro-marketing'-a system that segments the agency's customer/prospect base into very narrow niches and then gathers full information on the needs and wants of each member of the niche. In effect, micro-marketing is marketing to a 'niche' of one.
Micro-marketing allows agents to become the risk managers they currently claim to be. Risk is uncertainty, and uncertainty is simply the difference between good results and bad results. Management means control. Thus risk management is the control of uncertainty. The agent's 'product' will be the ability to ensure that clients maximize the good in their lives (achieving their dreams and goals) and minimize the bad (making sure that the pursuit of goals will not be interrupted and that assets will be protected).
The products and services necessary to complete this process represent the full range of insurance and financial services-and technology will allow you to tailor them to the niche of one.
Market segmentation is the first step in a very involved process that includes a narrow niching of customers. In Personal Lines, each niche must be understood in terms of age, economic standards, risk-taking temperament, lifestyle, life stages, and culture. In the Commercial market, segmentation will be based on such criteria as industry type, management commitment, payroll, number of employees, organizational culture, and so forth.
As an agent, you'll need to have your products and services redefined and re-engineered to match the niches being served-and then further tailored to satisfy the unique wants and needs of each individual customer. Pricing will be dictated by the marketplace-what the market is willing to pay (as opposed to the traditional approach of what the 'market will bear'). In many instances, the product will be provided net of commission. This will be the true test of the relationship: pricing the value you provide.
Delivery systems must then be reworked to be compatible with the customer's need, product design, and profit. Profitable delivery will be the result. Tomorrow's insurance or financial service transactions will be influenced by where as well as who: Consumers will still buy in the office, but also via telephone, fax, the Internet, through group relationships (employers, banks), supermarkets, and almost any other system that allows for economic transactions and database management.
Excellence, cost efficiency, and professionalism will be the minimum standard. The consumer (as an individual or through the collective buyer that represents the individual) will be more sophisticated and demanding. Innovators will be motivated by opportunity and the chance to compete; those seeking to maintain the status quo will be at the mercy of a cruel master.
As agents focus on the ever-softening market and observe the proliferation in the number and types of competitors, remember: Things could get worse. When Elvis Presley died in 1977, there were 48 certified Elvis impersonators. By 1995, this number had grown to 7,238. At this rate of increase, by the year 2012, one in every four people in the world will be an Elvis impersonator! You need to use technology to distinguish yourself from the pack now.