Focusing on Target Markets
Target Marketing involves a number of steps, without which all the "buzz words" in the dictionary won't develop a steady flow of new business for your agency. Execute each step, fully and in order and you will find yourself penetrating one target market after another with specialties in each.
Market Selection - The keys to market selection involves three things, the strengths of your carriers, the experience and strengths of your producer force and your marketplace.
1. Carrier Strength - Every carrier has specialties. Unfortunately, most don't know what they are. A specialty is not necessarily programs that the company solicits (although many programs are certainly target markets ala CNA CAM Programs). Too often, a company will solicit a program for which they do not have sufficient rating or underwriting skill to manage profitably. The end result is the embarrassment of soliciting a target group only to find that the rates or guidelines are too severe to compete in the marketplace. The strength of each carrier resides in their underwriting appetite and in the skills and experience of their underwriters. An underwriter with a strong background in construction is much more capable of accepting construction accounts than one with no construction background (as long as the company has an appetite for construction accounts).
Search for the match of company desired lines and local underwriters' skills and experience to identify the target markets for each of your carriers.
2. Producer Force Strengths and Experience - Let's say you find that your primary carrier "Fly-By-Night Casualty Co" wants farm business and has and underwriting force who were born and bred on farms. If none of your producers have ever been on a farm, don't bother pursuing that target market. Each of your producers has unique histories, talents and backgrounds. Your best target market will come from the match between producers who know the market well and a carrier who desires that market combined with an underwriter who understands it fully.
3. The Marketplace - Even if your producers grew up on farms - even if the underwriters have written farms for years - even if the carrier has a special program and a giant appetite for farms - it just doesn't matter if you are located in downtown Chicago.
The final arbiter of target markets is the marketplace in which you reside. A demographic study (a fancy name for knowing the businesses that are based in your marketing area) would serve you well. And you needn't pay an advertising agency large sums of money to create one. Using a variety of off-the-shelf programs on CD (i.e. PhoneDisc) or insurance based programs like Q-Mod and Imarket (formerly D&B Marketplace), you can easily search your geographic territory by SIC codes. This will identify the types of businesses in your marketing area and the number of prospects in each. These are the potential target markets for you as an agency.
Market Planning - Saying you have a Target Market is a far cry from properly penetrating it through a direct and prolonged effort. Writing a letter and enclosing a brochure identifying your agency is not much of a marketing program. Yet this is the exact effort that many agents expend, expecting the producer to make the sale now that the agency has "laid the groundwork".
The best way to illustrate the problem is to turn the tables. Let's say a new office supply house wants your business. They identify you as a steady buyer of office supplies due to your SIC category. Their office supplies are generally the same as every other office supplier (some prices a little higher, others a little lower). They tout great service (just like everyone else). So they send you a letter, slick brochure and a catalogue with the promise that a salesperson will call. What do you do when the salesman calls? That's exactly what your target market prospects do to your producers - they tell them that they already have insurance and that (unless you can promise price savings) they don't need your services. Does this attitude make them less of a target market? NO, of course not! What it means is that a RELATIONSHIP, the key to any sales opportunity, has not had time to develop between the prospect, the producer and the agency.
4. A Market Plan is a multi-step process whose goal is to write a significant number of target market accounts through a disciplined program of familiarization and relationship building with the prospects within the target market.
Write it before you execute the marketing plan. "READY - FIRE - AIM" is no way to run a business. Yet many agents, with all good intentions, begin a marketing plan before they actually "plan" it. If you write your marketing plan you exercise your most innovative talent, your creativity. You must actually determine how many steps you will take to properly educate and motivate your customers to do business with your agency. Remember that familiarity does not breed contempt - it breeds business. Your goal should be to make your producer and your agency more familiar to the prospect than his own agent. This typically isn't very hard since most agents don't see their clients more than once or twice each year. The marketing plans that we have helped to create that have proven most successful involves contacting prospects (by mail, by phone and in person) no less than five times each year. And we do this for three years in a row. We have found that a three year cycle in a target market gives an agency maximum penetration. If you haven't gotten it in three years, you probably won't get it at all. Every step of the Plan is pre-written so we can proceed through the marketing track for each prospect in the data base for that target market.
Would you sell only Workers Compensation in your agency? Of course not! Why do so many agents rely on a single target market? What if the company was wrong and was not as competitive as it thought? What if the company reneges on the entire program after a year? What if the target market to which you devote so much time decides to create an association sponsored program - with someone else? Every agency should have at least three target markets in progress at any given time. Some of the agents for whom we provide marketing services are pursuing six to nine targets at any time.
Commit yourself to target marketing but don't forget that your agency (if it is like most) owes its success to being a generalist, writing insurance for many types of business and individuals. Target marketing permits you to focus on specific prospect groups. The most successful insurance agencies use each target market success as the center of influence for a variety of other commercial, personal and financial service accounts. They are not satisfied with the commercial target account alone. They have a PLAN to penetrate every officer's personal lines, the health and life insurance and then jump to the friends and suppliers and customers of the new client to continue their presence in the marketplace as a generalist with specific targets each year. We highly recommend that you pursue every target market success for all corollary lines and referrals within the first year of its presence in your agency.
Follow these steps in a disciplined and diligent manner and you will become both a target market specialist and an general insurance giant in your marketplace.