Sales & Sales Gurus

Every day I receive at least a half dozen emails from firms promising to increase my sales if I pay them thousands, and sometimes tens of thousands, of dollars. I see website developers promising to increase my “traffic.” I get and see ads hyping sales consultants promising some innovative approach almost daily. What do all these people and firms have in common?

They all promise to increase sales in some form or fashion that does not require a producer to ask for a sale. Each also promises to increase sales but they universally fail to address whether those sales will be profitable.

For example, consider what happens if website traffic increases resulting in dozens of quotes daily but few sales. The agency will actually be worse for the increase in “traffic.”

I am in a unique position to evaluate sales and marketing programs because I get to see numerous agencies’ financials when I build strategic plans, productivity improvement plans, and complete due diligence for agency valuations and sales. In other words, I get to see what really works.

Not What They Need

One observation is that the sales gurus promising some world-changing new sales approach that does not require asking for the sale are the best sales people. They have discovered a crucial vulnerability of agency owners and producers. They understand this industry has developed a deep desire to avoid selling. This industry has developed a strong desire for customers to find a website and then just buy immediately. The gurus understand the desire for developing a soft message of health and “added-value” where the prospect is so convinced of the service they will receive that they buy without a producer ever having to ask for the sale.

Truly admirable, from my perspective, is these gurus do not sell per the formula they preach. They almost always sell the old-fashioned way and they are often quite good. A good opportunity exists to attend one of these programs to watch how they operate rather than listening to what they recommend. That is the more educational opportunity.

Their message, of course, depends on what they are pitching. If they are pitching marketing through websites, they advertise how “traffic” will increase and allude to how traffic automatically results in sales. If they are pitching social media, they allude to how recognition automatically results in sales. If they are pitching a “value-added” soft sales approach, they allude to how by adding value to your proposal, more sales will result. These are all legitimate methods if, and only if, based on the agency financials I’ve studied, a producer can close. These methods don’t close sales by themselves. If they did, the agency would not need producers, period. Someone has to ask for the sale, ask the prospect to divorce the incumbent agency, and ask the prospect for money. These programs sidestep or even ignore this essential key because the gurus know what their clients want to hear. Give them what they want, not what they need. Good sales advice.

I am not sure why or how so many people within the insurance agency industry have developed such an aversion to asking for a sale, but it is endemic. In some agencies, not a single person can ask for a sale. They can give a quote and hope the insured takes it. But they cannot bring themselves to ask for a sale. Many even feel that asking for a sale is beneath them. The sales gurus’ programs have identified these issues and take advantage of them. They make people feel good about their sales inadequacies.

Because these programs are so often designed to make people that don’t like sales and don’t want to be in sales feel good about being in sales without selling, these programs rarely provide a true cost analysis or return on investment analysis. If the programs worked so well, they would use these analyses to sell rather than selling the old-fashioned way.

Investment Analysis

My suggestion is to complete the investment analysis yourself. Ask, “If I spend $50,000 on a website, how much in commissions will it generate and have to generate to pay for itself?” Or, “If I have my producers attend this program, how much will their sales increase?” This is a touchy question to ask these organizations because they know that the agency would not be interested in their program, nine out of 10 times, if the producers could actually open doors and close deals.

The average real, not pro forma, profit margin of agencies is 9.6 percent per the National Alliance Research Academy’s 2014 GPS book. Using 10 percent then, if a program or website development cost $50,000, the program needs to generate at least $500,000 in new sales to break even. If you add the time-value of money, ancillary expenses, and so forth, then the minimum sales increase is likely $600,000-plus.

If it is a sales coaching program, the producers who will never likely succeed anyway are always given extra time to perform using the new “value-added” tools/skills they’ve learned. The extra time, usually one to five years, at say $75,000 annually, increases the cost quickly to $1 million of new commission sales.

That is a big nut to crack which is why you rarely see a good return on investment analysis with these programs. Insurance has to be sold unless one has a huge marketing budget and an effective marketing plan. A few companies are spending likely more than half a billion a year each and their premiums do seem to be increasing as a result. Niches are different and a producer can be more effective in this space with less money but it probably still does not matter if the producer cannot or will not sell.

The solution: the opportunity is to begin with producers that can actually sell and build a program around them rather than for them. One might conclude that is obvious but if it was obvious the industry would not have so many failed producers. Moreover, programs exist that greatly filter producers yet I continue to find the No. 1 requirement for hiring a producer is whether the owner thinks the person is a “good guy.”

Even more basic is the agency culture. I find that agencies with a sales culture rather than a service culture have far higher quality producers respond to their want ads, solicitations, and even head hunter calls. Furthermore, the best agencies not only get higher quality people applying, they have a full program for training and developing new producers. This is not about money as much as it is about attention. When agencies get the right people on the right seat in the right bus, the sales program with which they work becomes a side note.

For now, insurance is still a people business but it requires the right people, not the latest snake oil.

Topics Agencies