Try this exercise. Get together a group comprised of clients, producers and carrier representatives and ask them to describe the current state of the industry and insurance products in general. Regardless of what words they use, all of their answers will fall into one basket—commodity. Here are a few examples of what we hear working with companies in the insurance industry:
“I had three insurance agents come to my house and two of them said that their company was the best. The other agent said that their company was ‘really excellent.’ I ended up buying from the Web.”
Employer “We have had four different group insurance providers in the past four years. The difference? I don’t know. My claims are my claims are my claims.”
Individual Agent “The media attempts to downplay the advice that agents like me can provide customers. They tell people to not talk to insurance agents and instead do their research and purchasing online. More and more people are following their advice.”
Consultant “In the commercial P/C business, there are two criteria we all tend to look at—financial stability and price. That’s it. The only difference is in which order the client wants to put them in.”
Can you relate to any of these situations?
How are you being affected by the increase in commoditization? For the majority of financial services companies it means: Increased price shopping by clients; Increased spread-sheeting by producers; and Increased margin pressure all around due to pricing concessions that are all too frequently given in order to win or retain business.
What is the answer? Some people say, “As soon as the market softens/hardens/turns around, things will improve” or “We have some real unique features that our competitors can’t match. We just need to get better at telling our story.”
Unfortunately, research indicates that:
1) It is not going to get better any time soon, so you had better rethink how you sell if you do not want to continually play the “Give me your lowest price” game.
2) Trying to differentiate using a “unique” product or product feature is the equivalent of saying, “Please price shop me against my competitors who are also touting their ‘unique’ product features.”
The reality is that insurance customers will forever view insurance as a commodity.
What impact does this have on selling strategy? If what we sell is no longer effective at creating and sustaining a competitive advantage, then what should we do? If the products we produce or distribute no longer create differentiation, is there any good news?
Absolutely, and the organizations that have figured this out are thriving in this market! The good news is that the ability to drive differentiation and get paid for that differentiation lies in the ability to leverage the experience and competencies of your sales force.
To put it simply; is your sales force a value creating sales force or a value communicating sales force?
It used to be that the best salesperson was the one who was the best talking brochure. To be the best meant simply translating product uniqueness into something a customer cared about and the sale was made. These days, that translation has to be far more elegant. It is not enough to let the product create the value—the seller has to.
To quote Neil Rackham, author of SPIN® Selling and Rethinking the Sales Force, “Sales forces that simply communicate value to customers are doomed to fail—sales must begin to create customer value to survive”.
What does the phrase “The selling process must create value for customers” really mean? How do you do it?
Try this test
What is it that you do on a sales call that is so valuable that a customer or broker would pay for your time, whether or not they actually purchased from you? When we ask this question at meetings with insurance executives we get blank stares. It is a tough question. Huthwaite’s research with thousands of customers who paid above the minimum for services or products reveals that there are three, and only three, things that clients say creates value for them. There are three things that will help you to be more strategically important to your clients and difficult to substitute, and a true value creating sales force needs to be able to do all three.
The skill and sophistication with which you can execute these three competencies will increasingly dictate whether you can break out of playing the commodity game and win all of the business that you should be winning, or continue to fight the price war for every deal.
Let us examine each of these strategies in a little more detail:
Value Creating Strategy #1 – Recognize the unrecognized problem
This involves working with the client to uncover the problems that they don’t see, or realize the magnitude of the problems that they do see. The key word is with—not at. You want to craft the conversation to get the client talking about their issues, not you.
“One employer I was working with had their medical coverage with us, and their Behavioral Health, Dental, Pharmacy and Stop Loss coverage all with different vendors,” said Andrea Groomes, vice president of Sales for CIGNA. “Although each of these vendors was performing satisfactorily, the client didn’t realize the hidden costs and hassles of having what they thought was a smart “best in breed” approach. Through questioning, I was able to get the client to articulate how their current arrangement was negatively affecting their department’s efficiency, costs, and staff utilization. Once they were aware of these problems and had costs associated with them, their present situation didn’t seem all that smart after all.”
One independent agent told me during the writing of this article, “In twenty-three years of being an insurance agent, I have yet to have a sales manager ask me ‘How many client problems did you understand this week?’ The skills needed to understand client problems are typically not a part of an insurance agent’s toolkit, and they need to be.”
How skilled are you or your sales team at being able to conduct a diagnostic meeting with your client or broker? How effective are you at being able to understand and communicate your insurance products in terms of client problems and outcomes? Do you know what value you bring when you sit down to talk insurance with a client? It can make the difference between winning and losing a piece of business.
Value Creating Strategy #2 – Develop the unanticipated solution
When your clients are making a decision about whether or not they are going to place their business with you or your competitor, what factors are they looking at? Yes, price, of course—but what else? In many cases, there are criteria that are potentially more important than price, if only the client could see value in them. How effective are you at being able to increase the value of those other criteria to reduce the emphasis on price?
“Becoming a trusted advisor to your clients is about understanding that what the client is asking for is not always in their best interest, and having the guts to help them see why,” said John DePalma, managing director of First Union Insurance in New Jersey. “I recently had a client who was going through a renewal and they were pressuring me on price. Before committing, I examined the client’s claims record against their aging population. I helped them see that if they got the price they were asking, it would end up costing them more next year and may force them to go out to market, which will cost them even more in terms of time, resources and hassles. I helped them to redefine what ‘price’ meant as a criterion for this renewal. They are now an even more loyal client as a result.”
Tony Nugent, vice president of Sales for MetLife, commented, “Recently, a consultant sent out an RFP to all of the carriers for buying out a large company’s disability liability. All of the other carriers immediately started responding to the questions asked in the RFP. We took a look at it and realized that what the client was asking for was not the best legal solution for them. Instead of responding to the RFP, we started asking the client some targeted questions. By doing so, we were able to help the client realize that they were asking for something that was detrimental to the financial well being of their plan. That dialogue positioned us to craft the solution that ultimately won us the business.”
Another way of developing the unanticipated solution is to match the full array of your company’s capabilities to meet your client’s needs and criteria. Does your company offer capabilities that the client is unaware of that can offer them a superior solution? How can you create value in these capabilities?
Value Creating Strategy #3 – Broker of capabilities
David Hinkel of Mercer Consulting noted, “The carrier salespeople that I enjoy working with are exceedingly responsive and know how to make things happen in their organization. They can get me the information and approvals that I need quickly to help me be responsive to my clients.”
There are a couple of tips for creating value here. First, make sure you and your broker/consultant/client have a common understanding of the client’s definition of value. Make sure everyone in your organization shares that understanding. Second, ensure that you have developed the internal relationships necessary for you to access the information that your brokers and clients need quickly and accurately. Third, ensure that you are in a position to be the voice of your client within your own organization.
A final thought…
Does successfully using these three strategies to become a value-creating sales person guarantee that you will never have to compete solely on price again? Absolutely not! There are those clients and brokers that want your price and they want it fast and that’s all they want. But we have seen time and time again that there are clients and brokers out there that are being driven to price shop by the behavior of their sales person. Is the way you sell reinforcing that you are a commodity?
Huthwaite’s research shows that there is good news to selling in a marketplace where the client perceives little difference between solutions. Thousands of clients have told us that there is a way to break away from the commodity pack, that there is a way that you can become differentiated, more strategically important and difficult to substitute. Becoming a value creator is a good place to start.
Bruce Wedderburn, firstname.lastname@example.org, is with Huthwaite Inc., an organization that works with a wide variety of clients in the insurance and financial services industries to help them to increase sales performance in the current economic climate.
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