True Value

Price is king” in the hard insurance market. Actually, price is the most common question customers ask of any insurance product in any market. It is just that the stakes are higher today as talk of dramatic rate increases and coverage restrictions circulates among consumers.

So, here is the stark choice for the modern broker: you can play the price and product game down to the lowest common denominator or you can focus on truly differentiating your brokerage from competitors in ways that matter most to customers.

Just how did consumers become so price-conscious in the first place? That is easy, “we taught them”. Excessive (but often meaningless) quotations for business, little understanding of client needs and a constant “churn and burn” mentality in the insurance selling business have created a monster. This also leads to a logical conclusion – if you sold them on price, you can also lose them on price. And what kind of a relationship is that?

CLIENT DEPTH

The iceberg represents perhaps the clearest image for brokers who truly want to achieve vertical growth and create lasting client relationships. As most know, you can only see the top 10% of an iceberg from the surface. Let us say this visible part represents product and price. If you, as a brokerage, stay above the waterline you are dealing with a lot of competitors in this crowded realm. You are also merely skimming the surface when it comes to the depth of client relationships.

Below the waterline, it is a different story. That is where the real value added services (VAS) of your brokerage become apparent. There are far fewer competitors who can dislodge your trusted and stable relationships. Price and product matter much less down here. VAS is the only real way to set your brokerage apart in the minds of customers. It is hard to open up a newspaper or watch a television show without seeing an advertisement touting a product’s value (“new and improved”) or a company’s commitment to value added service. It has all been done before. These “value added items” seem pretty vague and immeasurable. But they do not have to be.

What does VAS really mean? What sets you apart as a brokerage? How will you find out? Who determines what the value added really is? Does it really matter in today’s marketplace? These are all good questions to hold up in your brokerage’s mirror.

DEFINING QUALITY

Many firms have no idea what sets them apart from competitors. Ask them and you will get some fairly stock responses. “We have been in business for over 50 years.” Great, who cares? “We are a part of our local community.” Okay, but is not Joe Broker down the street, too? “We provide great service to our customers.” Yeah? Prove it.

This may seem dismissive of some legitimate broker claims, but it is customers who will ask the harshest, most basic question of your VAS: “what’s in it for me?” Brokers have to realize that it is clients who determine both quality and what services are important. And what do they expect? That’s easy – they want insurance free, perfect and right now.

Can you realistically deliver all these things? Obviously not. But, you can look at how customers define quality. First of all, most consumers base buying decisions more on perception and emotion rather than logic or reality. That perception is driven by trust. If you can demonstrate trust through transparency and full disclosure to the client, you have made enormous headway.

Then you can show specific behavioral evidence that you are addressing their needs. For example, you cannot give them insurance for free, but you can save them money by reducing their total cost of risk. Your brokerage is not perfect, but it can exceed their expectations by reducing errors and providing consistently responsive service. You may not be able to give clients instant coverage, but you can save them time by making the insurance transaction as easy and simple as possible.

IDENTIFYING STEPS

To achieve an authentic VAS, there are some systematic steps to follow. First, you have to compile a list of the specific services that can transform clients from simply satisfied to loyal to advocates. What do you, and your staff, think are the most important services you provide? Note that there may be more than one list, depending on the specialty markets of your brokerage. For example, there may be a basic list of overarching VAS across the brokerage and a specific subset for niche groups of clients.

Remember that not all customers are created equal. You have to define your ideal clients. What characteristics do they have in common, what kind of impact do they make on the profitability of the brokerage, what are the cut-off points separating these ideal clients from the rest? Then you can actually identify the ideal clients on your book of business. One key benefit of this process is that it provides a natural focus group. If you use a shotgun approach to client surveys, you will get shotgun results.

The next step is to talk to these ideal clients. Determining VAS is not an ivory tower exercise through which internal brainstorming will suddenly yield miraculous results. You have to develop a client interview form. Get your ideal clients’ direct, written feedback. Give them an incentive, if necessary, to provide their thoughts. Once you get the results, do not rationalize what they say. Do not assume because something is important to your brokerage and you do it well, it is automatically important to your clients. Tell yourself the truth about what your ideal clients are saying about your firm’s services – both good and bad. This will require revising the original VAS list, perhaps in ways that are counter-intuitive to your beliefs about the industry.

When the list is revised, confirm it with your ideal clients. Make sure you heard them correctly the first time and you understand exactly what they are saying. Armed with this powerful information, your brokerage is ready to seek out new customers and offer them your list of VAS. This is the most effective way of replicating your ideal clients and avoiding those customers who are profit-draining and labor-intensive.

INTO PRACTICE

It is one thing for principals and account executives to know a brokerage’s VAS, it is another matter altogether to ensure everyone knows the definition. The list has to be highly visible throughout the brokerage and actively used in all client materials, correspondence and communication. This is not an abstract set of goals, but a tangible set of services that must be integrated at every level of the brokerage.

Does all this VAS stuff really matter? It does if your brokerage wants to survive. A sharply defined list of VAS for your brokerage can provide the differentiation you need in today’s competitive market. Perhaps price is “king” only for those brokers who allow it to rule their customer relationships.