ACG - Agency Consulting Group

The PIPELINE

A national monthly newsletter for agency principals dedicated to agency management topic

Negotiating The Sale

For many years we have criticized the common practice of price quoting as the insurance agents primary sales method. Price is certainly important. But it's rarely the only issue facing insurance customers and, while it is the easiest issue to address , there are often more important triggers to buying decisions than price.

A sale is made at the conclusion of a successful negotiation. Buying a car is also a negotiation. Deciding with your wife on vacation plans is also a negotiation. As a matter a fact, everything we do in life is done through negotiations. More importantly, everything that you want is in the control of others. In order to fulfill your wants or needs, you must somehow get other people to accept or modify your desires.

The critical elements in every sale negotiation is the time element, the knowledge (or information) element and the power element. Besides these three elements the key to a successful sale is the meshing of the personality types of the buyer and seller. You may have the best product in the world at the lowest price but if the buyer hates you or if you dislike the buyer, you probably won't make the sale.

In the sales process, the customer will normally try to exert his POWER, require you to work under his TIME constraints, and LIMIT the information to the minimum required in order to accomplish his goal your goal, on the other hand, is to gain as much information about the client as possible, assure yourself sufficient time to go the job done comfortably and professionally and to balance the power between you and the buyer so that you both treat each other as professionals in a "win/win" scenario.

In order to achieve a win/ win scenario you must never permit your negotiations to narrow to just one issue (i.e. price). Of course, cost is always a prime consideration of every insurance buying customer. However, the chances are that he has not gone to market solely because of the cost. Your job is to uncover the other issues that have caused the buyer to seek or accept alternative proposals. Some buyers are actually looking for you to hit their "hot buttons" without them bringing them up. However unless we have crystal balls or extremely good luck, we are better off delving to uncover all potential issues before proposing solutions.

The second requirement of a win/win scenario is your understanding that different customers want different things. Too many insurance sales people have a single sales methodology that they try to fit in every situation. You must change your sales scenarios to fit the personality of the customer. Finally, price is important, but not all-important if you accept the premise that the only thing a customer is looking for is price, than we don't need a salesman do we? All we need to do is offer a quote machine like many term life insurance agents have done recently.

The three stages of negotiating a sale are 1) understanding your prospects desires, 2) gathering sufficient information to respond to the customers need, 3)solving the customers problem in a way comfortable to him.

Learning your prospects desires involves asking open ended questions and keeping your mouth shut-listen to your customer. Believe it or not the customer will tell you all of his problems and their solutions if you ask properly and listen rather than speak. Your goal in this section of the negotiation is simply to find out what he wants until you are satisfied that you now understand all of his desires (not just the most important one).

Many of us gather insurance data mechanically. The use of survey forms is a good idea but should only be the jumping off place, not the "Bible" of information. In the search for information you should think like an underwriter. If you have not gathered sufficient data to make an underwriter comfortable with the risk and the pricing, gather more data. Open ended questions work well here to identify what the incumbent and any competition has suggested as solutions to the customers problems. Write a lot-speak a little. The final part of the negotiation is a the delivery of your offer of solutions to the customers problems. The information that you have gathered should give you sufficient data to formulate a proposal and quote. However, the information that you have written about your customers desires (not his needs) should give you all of the ammunition you need to formulate your proposal in a user-friendly way to respond to your customers personal desires in a way acceptable to him.

If you follow these rules of negotiating a sale, and do so diligently, you will find your hit rate rising and your retention rate based on a relationship the you build with your customers rather than on price alone.