Smaller Agencies Market Blueprint for Success

Making your mark
“The State Farms and GEICOs have a tremendous amount of advertising behind them, and they have a brand name that perhaps the independent agents do not have,” said Allen Lawrence, CEO and chairman of the board of Allen Lawrence & Assoc.

However, smaller agencies that do not have the immediate name recognition can still be profitable if they find the appropriate target audience to market themselves to, according to Lawrence.

Traditional marketing schemes, such as advertising and direct mail, have worked well for McDermott-Costa. Keeping your name out in front of your target audience is key, according to partner Mike McDermott.

“For example, we ran a 30-second local television spot last year,” McDermott said. “We weren’t really looking for the phone to ring off the hook…those aren’t the clients we necessarily want. The objective we were looking for was name recognition, and it definitely made a difference. The end result, we noticed increased recognition in the community, and it reinforced our financial size and strength to both our current clients and prospects.”

McDermott emphasized that a limited budget means you have to spend your advertising dollars wisely.

“We try to develop our strategy and choose the marketing strategy that will give us the best recognition and return on our investment,” McDermott noted. “We understand that reputation alone is not enough in this market, so we continually look at different ways to promote ourselves.”

Staying in the public eye
Being active and recognized in the community you serve is an important factor to Lawrence.

“The principals in the agency have to focus on doing that,” Lawrence said. “A part of their job is marketing their agency, keeping it in the public eye, keeping in front of the new prospects. If they’re doing personal lines, direct mail to certain zip codes is helpful. If they’re doing commercial, I think direct mail to certain zip codes and focused target industry groups. I don’t think small agencies can be all things to all clients. They have to look where their markets have the greatest strength and appetite.

“We’ve become very involved in the community. It gets the name out there, but it is good to give back to the community. Those seeds you plant take time to germinate but they often develop into large accounts down the road. Word of mouth is very important.”

According to Tom Hays, founder and chairman of United Agencies; and Gary Conkey, president of United Agencies; community involvement is especially important for newer agents.

“A lot of the younger agents are associated with the various insurance groups and service clubs, just so they get to be known in the community,” Conkey commented. Joining a group can be an effective way for new agents to make a name for themselves when first getting into the business or relocating.

As a result of building its name and relationships over the last four decades, United Agencies is able to negotiate contracts for all its agencies with markets such as Fireman’s Fund, State Fund, Zurich American, Chubb, The Hartford and SAFECO, among others.

Banding together to stay competitive
The story of United Agencies shows that small agencies banding together is sometimes the best road traveled.

“We started what is now called a ‘cluster’ back in 1962,” Hays said. “The feeling was we could not control the market, because individually, small agents do not have enough volume and premium to sign up more than one or two markets. We’re kind of a niche market in that we’re looking for insurance agencies with a volume of a million to five million. As a result, we have 18 agencies and four more in the pipeline joining us because we have a list of companies that will give us a competitive advantage or at least keep us equal.”

According to Hays, survivability is at the forefront for these agencies.

“If you don’t join someone else, it is tough for you to compete if you don’t have all those markets,” Hays said. “I think the companies that are successful are niche marketers themselves who stick with a particular class. They still, however, need more than one market to do that, and you have to have a broad range of markets.”

Using a one-on-one approach
According to Conkey, size can definitely work in a smaller agency’s favor.

“Probably our biggest sales pitch is that when someone calls, they actually talk to the person who sold them the policy,” Conkey said. “If they have a problem, that person can go out and see them—they don’t get turned over to a staff where they may get three or four different people.”

Both Hays and Conkey see challenges ahead for many small agencies, but they said that targeted marketing and first-rate client service can make the difference between being successful and being just another agency, especially in this era of mergers and consolidations.

“Every time a field person comes in from a company, they talk about how they’ve got to cut their agency force back,” Conkey stated. “I think [this downsizing] is going to be the biggest thing to impact the small agents.”

“It is a trend internationally, you’re constantly seeing mergers,” Hays agreed. “For example, where we once had 24 companies, we now have 12—they’ve all been bought or merged together. You have to stay apace with that growth, one way or another.”

Staying on top of technology
Another changing factor is the use of the Internet. Big companies and direct writers spend million of dollars for banner advertising and vast websites. For small agencies, the Internet is more of an information tool.

“The advertising value of the Internet is not as great as the customer service advantages of the Internet,” Lawrence pointed out. “In our business, I don’t perceive the Internet as really marketing our products, as much as clients calling up to find out more information about us, or people who are referred to us want to find out more.”

Rather than becoming a source of revenue, the Internet has enhanced the way they do business, Lawrence continued. “I think long-term, revenue generation will come as the Internet and the insurance industry evolve and become more compatible with each other.”

Keeping up with today’s technology can create a challenge in terms of the time, effort and money spent. Lawrence estimated that his company spends close to a quarter of a million dollars a year on technology. But in order to keep up with the competition, it is vital to stay current with the changes.

“We believe that technology (the Internet, e-mail, etc.) increases communication with our clients, and it also enables us to work more efficiently and provide services at the push of a button,” McDermott concluded.

“But buying insurance on the Internet will never replace the face-to-face sales process or the personal touch that a broker can bring to the table.”

Topics Agencies