Strictly Sales: Take steps to assure success in a softening market

In preparing for the 12% to 15% decline in revenue that's been widely predicted in the coming year, as falling rates catch up with renewals, we reviewed our agency operations and made some changes. Our plan included several sales strategies that your agency would do well to adopt, too:

1) Review revenue per CSR. We discovered that several of our newer producers (hired within the last two years) were working with CSRs who simply could not process their accounts fast enough. The average new CSR was handling $300,000 to $350,000 in revenue, and we felt they could do no more. We then identified the larger accounts that pay 80% of the producers' revenue and initiated a plan for them to call on accounts of that size or larger. Our seasoned producers had CSRs handling around $500,000 in revenue. If you write smaller accounts, your staffing costs will eat into your profits, so write larger accounts!

2) Change telemarketers' focus. Instead of gathering expiration dates from prospects and then qualifying the accounts, we asked each producer to use two key criteria for qualifying prospects: (a) number of employees, and (b) annual sales. The telemarketer now asks for these two items to "update our information." Any prospect that falls below the agreed target size is deleted from the producer's list. This approach allows us to control the size of producers' accounts and increase the revenue per CSR. (See strategy No. 1.) Our goal is to have no new business with any accounts generating less than $2,500 in commission. We don't want just any activity; we want qualified activity. Work on the right accounts!

3) Consider lowering renewal commissions to 20% or so. As producers and CSRs try to "keep what they have," they often increase their renewal activity--at the expense of new-business activity. Other industries sometimes overstaff by 20% to 25% to reach their sales targets, and we may need to do likewise. Consider lowering renewal commissions to fund the hiring of new producers and to encourage the sales staff to focus on new sales.

4) Declare a benchmark for paying commission on new and renewal accounts. To foster greater producer and CSR productivity, we established a minimum threshold for earning commissions. A new account must generate at least $2,500 in commission, and a renewal account must generate at least $1,500 for the producer to receive compensation for it. Our sales team doesn't like to work for free and therefore no longer seeks out accounts below the established commission threshold. To generate more revenue, counteract the commission reduction brought on by the soft market and reduce the number of CSRs needed to service an agency's clients, write larger accounts!

5) Identify producers' bottom 10% and get rid of those accounts. They are the source of most of our service, billing, loss-ratio and payment problems. They're the accounts we have to reinstate and rewrite. Most of them should never have been written in the first place. With our CSRs' input--because producers tend to hold on to anything that puts money in their pockets, especially when the service team does most of the work on it--we established a value for each account based on the amount of service it requires, rather than the amount of revenue it generates. The ones with the lowest value we either nonrenewed or made house accounts. Eliminate your bottom 10%!

6) Grant "emeritus" status to producers generating $500,000 or more in annual revenue. They already know how to earn money for themselves and for the agency, so allow them to skip routine sales meetings. Producers with $300,000 to $500,000 in revenue probably need only a moderate amount of structure, provided their new-business activity and revenue growth justify a release of controls. Producers with less than $300,000 needs significant structure, monitoring and accountability, because they have not yet reached a production level that assures success. Give them continuing sales training to help them stay on track.

Any producer who cannot produce at least $35,000 in new-business commissions probably should not be employed. If you create a team of mediocre (or worse) sales professionals, you'll never hit your growth objectives!

7. Identify producers' top 20% and solicit referrals from them. These accounts generate 80% of producers' revenue, and their respective producers should visit them at least once per quarter. During each visit, the producer should develop a list of at least 10 prospects who meet our criteria for revenue and employee size, and who have something in common with the current client. It costs less to acquire clients via qualified referrals than from cold calling, and the gestation period (the time spent turning a suspect into a client) is historically much shorter. By taking this approach, a producer can count on scheduling a minimum of 12 face-to-face appointments each week--six from his or her top clients and another six from qualified referrals!

8) Use good questionnaires to qualify new-business prospects. Starting Sept. 1, we required the used of thorough questionnaires on all renewals too. A producer should complete the questionnaire 120 days before renewal to allow time to resolve any service issues the client may have.

Adopting these eight fundamental changes has made a significant difference in our culture, profitability, new-business growth and revenue per employee. Please try them in your agency, too. It's likely that you are busier now than you were last year, that more competitors are after the Top 20% of your accounts, and that your new business activity is more sluggish than it should be. So what do you have to lose?

Good selling!

Tom Barrett, CIC, AAI, is president of the Midwest and Southeast regions of SIAA Inc., a partnership of more than 1675 agencies writing $3.5 billion annually in property-casualty premium. Tom also serves on the national faculty for Dynamics of Selling, Marketing & Sales Ruble Seminar, and Mega Ruble Seminars for the National Alliance for Insurance Education & Research. To discuss your sales planning, e-mail Tom at tomb@siaa.net. For more information on Dynamics of Selling and Dynamics of Sales Management, call (800) 633-2165 or visit www.TheNationalAlliance.com.