Even though some agents don’t want to admit it, insurance is quickly becoming a commodity, if it hasn’t already become one. Contrary to popular belief this does not have to be a bad thing, and agents can fight this by turning their marketing approach around and adopt new and emerging technology. Technology is transforming how our industry relates and works with the consumer of today.
How Most Agents Do Their Prospecting
Let’s dig deeper into this by taking a look at how most agents do their prospecting. Most agents begin with cold calls, followed by a bunch of meetings with prospects. And finally, they end with a quote. Sound about right?
Old School vs. New School Prospecting
The problem is for most this model is totally backwards. The only thing that really matters is qualifying a good lead, so the solution is to begin with qualifying your leads at the beginning. This will change your entire sales funnel and it increases your overall profitability. The difference between old school sales and marketing and new school is that the new school satisfies the same market share but qualifies the perfect prospect for you to spend your time on at the beginning. Let me give you an example to help explain.
Calculating the numbers with the Old School Model
Let’s say you are a commercial insurance agent and you are trying to write any type of business you can get your hands on. Understanding that everything has an opportunity cost and time is the most valuable asset we own, let’s say your time is worth $25 an hour ($50,000 a year) to make it easy. Then let’s say you do your prospecting based on the traditional sales model and you do 100 prospecting phone calls.
Of those calls let’s say we set 10 appointments, and of those appointments we get 3 that allow us to do quotes for them. Of those 3 we get 1 as a customer (even though this is just an example I feel these numbers are generous given the cold calling game today).
Now let’s say it took you 60 hours to do that (make calls, drive, have appointments, work up quote, present, etc.), so 60 hours times $25 an hour our total cost is $1,500 to acquire one customer that generates $2,000 a year in revenue for us ($10,000 – $15,000 premium account). That doesn’t seem too bad right?
Calculating the numbers with the New School Model
That is until you look at new school model. In this model let’s say instead of just going after everybody and anybody, you decide you are only going to write construction contractors. In this model you spend your time up front building your marketing and sales process so that only your best prospects are funneled down to you. You still have to spend time checking the system, making a few updates and changes, and you still have to take some calls and appointments to further qualify your prospects.
Even so, this process only takes us about 15 hours (compared to 60) and we verified that only 5 (compared to 10) were worth talking to, and 2 were worth quoting (compared to 3) and one became our customer. If we calculate the final numbers on this, we find that it only cost us $375 (15 hours x $25 an hour) in time to get this customer.
Let’s say we also spent $500 on marketing our total cost was only $875 in total costs to acquire a single $2,000 customer. In total we spent 75% less time and almost half the money for the same result.
The Snowball Effect of New School Prospecting
Now let’s go one step further. Considering that we have built a marketing system that continually finds our ideal prospects and qualifies them for us, and that it works on autopilot “24/7 – 365,” we now have way more time than we did before. We can accomplish in 15 hours what takes most other agents 60 hours.
So we can get four times the customers that the traditional model does, so we can now accumulate 4 new customers, which results in $8,000 in new revenue, and it still only costs us $1,500 ($375 x 4) in expenses to acquire them. It’s important to note that over time your marketing costs will go down because once you build the snowball and let it roll down hill it will get larger over time, thus resulting in a lower cost-per-customer acquisition cost.
This system allows for organic growth on the back end in referrals and higher retention, which every agent really wants, and it gets rid of cold calling, which every agent really does hate.
The Numbers – Why Online Marketing Rules Them All
With this understanding, your marketing costs will reduce because you will get higher ROI for every dollar spent. Investing some time on the front end in building the system will allow for huge returns and less time invested on the back end. So in total we made $6,500 ($8,000 – $1,500) in new revenue in the same amount of time it took the agent in the traditional model to acquire $500 ($2,000 – $1,500).
It is important to find your most profitable customer and tailor your marketing plans to them. By doing so you will be able to generate more value for your customers, more profitability for yourself, and battle the notion that insurance is a commodity.