EASIEST MONEY YOUR AGENCY CAN MAKE, THE

Rough Notes, Jan 2005 by Jans, Michael

Numbers prove that adding a few points in retention can be worth millions

Let's talk about getting the easy money for your agency. Let's start by looking at how much money this topic really means to you.

Most people think of marketing as the "sexy" part of business. Bold headlines, creative ideas, clever strategies, and so forth. And while those elements have their place, boring old arithmetic is at least as important in the marketing cycle.

So let's "do the math" on retention. (Now if you're thinking, "This really IS going to be boring," let me urge you to hang with me. These numbers should get your juices going.)

Example:

* You're a $500,000 commission agency with 85% retention.

* That means your income from those customers will deteriorate to $425,000 next year (Year One).

* It also means that, at that pace, your income from those customers will wither to $98,437 in Year 10. Ugly!

* Also, at this pace, you'll realize a 10-year cumulative income of $2,775,523, vs. $5 million at 100% retention.

* Let's say your retention is four points higher-89%. From that effort alone, you'll get $508,490 more in commission over the next 10 years than you would have at 85%.

* Or let's bump your retention to 93%. Now you'll get $1,152,309 more in the next 10 years than you would have with a 85% retention rate. Worth working for? You bet it is! Isn't it time to map out your agency's own Retention Strategy?

Now, let's look at how many successful agents are grabbing that easy extra million or two.

It usually starts with a wake-up call

Generally, it's either an unexpected price shock or that the agency principal (finally) takes the time to measure retention-and gets his or her own shock. Sometimes I run a retention spreadsheet for them and that gets them motivated before they have a problem. That's rare, but it's good.

Here's a common scenario in my business with new clients:

Client: "Michael, all of a sudden I'm losing a lot of clients in _____ class of business."

Me: "Really? What's your Retention Strategy?"

Client: "Huh?! Retention Strategy? Well, we really take good care of our people, and I think it shows."

And that's the problem. More often than not, an agency's Retention Strategy is nonexistent or passive and, at best, little more than hopeful platitudes. If you're wondering if your agency has a Retention Strategy, ask yourself:

* Is it written down?

* Does everyone know his or her role?

* Does someone with authority monitor its implementation?

* Does someone with authority measure its effectiveness?

* Is it periodically evaluated and adjusted?

At a minimum, you know it's not a strategy if it's not planned ahead of time.

Your Retention Strategy needs three prongs

Research overwhelmingly indicates that people continue to do business with a company when three things happen. A powerful retention strategy needs to employ all three of these principles.

* Sell them more insurance. That's right; people do more business with companies they buy more from. Direct marketers like Lands' End know that the second purchase is more important than the first one because it's the one that moves the buyer into a relationship with the company. The customer who buys two policies from you is much more likely to buy more than the customer who buys one. And the higher your policy-per-customer count, the higher your retention is going to be.

* Wow them with amazing customer service. When was the last time you "mystery shopped" your own agency? Do you know whether or not your CSRs exceed customer expectations? Your customers are comparing your service to every other agency they do business with. They're also comparing your service with every other business they do business with. Unless you constantly test and measure your own service, you are statistically likely to be over-rating the service you give your customers. More than likely it's average-even if you think it's better than that. And for half of you reading these words, it's below average. (That should be a sobering thought.)

* Nurture your customers. Most agency principals would agree that their staff "cares" about their clients. But how do you show it? How many times a year do you communicate your relationship with your clients ... and how many times is it not about their premium? Let's explore that more below.

Exploit the value of the "relationship"

In many ways, this is the luckiest industry in the world. Most people need insurance-and recognize that fact. And many are required to have it by law. Combine that with the fact that buying it flies "under the radar" of many clients and that shopping for it is not much fun ... and you've got a natural client retention that would be the envy of almost any other industry. (Therefore, I'm afraid, it's easy to be lazy about it.)

Here are three important principles behind this concept:

* People hate to break relationships. Most people will agree that the most difficult situations in their life often have to do with a broken relationship. The problem is that most agencies don't create a relationship with their clients. They take them for granted.