Carriers, Agents From Mars Should Prospect On Venus

How many times have you heard producers repeat the old maxim: "Sell on price, lose on price"and then go on to do just that? Do you know of any other markets where the view of such a small minority of buyers has dictated marketing behavior for so long?

Why has it? Well, likely because price is the simplest, easiest component of the overall insurance transaction to discuss–and often the most misleading.

At the other extreme are so-called "Satisfied Loyalists"–that is, clients who have significant loyalty to their agent/carrier even in the face of appreciably lower, competing coverage quotes. Everyone agrees that these folks are great customers–if you already have them. By definition, however, theyre tough to attract once an initial insurance relationship has been established.

Obviously, they can be even tougher to find since no simple demographic characteristic identifies them. Relying on the luck of the draw wont work well either, as "MarketStance" data reveal that only about 17 percent of small business insurance buyers fall into the "Satisfied Loyalist" category.

However, as shown by the accompanying bar graph, narrowing the marketing focus to women-owned businesses changes the distribution of buying behavior segments appreciably, reducing the odds of encountering "Price Switchers" and "Satisfied Loyalists"–the two most problematic attitudinal groups among small businesses in general.

At the same time, "MarketStance" data indicate that women-owned businesses have a significantly higher share of "Service Focused" insurance buyers.

Insurance purchasers in the "Service Focused" attitudinal category are much more concerned with the types and quality of service provided by the agent and carrier, and as a result are a much more attractive prospect group.

The service focus of these buyers can be a real blessing for agents, enabling them to move away from the price-based sales pitches that have proven so destructive to healthy retention rates and profitability.

Moreover, the interest of service-focused buyers in the array of services provided by the agent/carrier forms a natural foundation for an effective, enduring relationship. Indeed, one can argue that service-focused buyers are just as attractive as the elusive "Satisfied Loyalists."

There is one important distinction, however. Should the agent or carrier fail to maintain the expected level of services–or allow the price differential to get too wide–these demanding buyers will walk. Where has the phrase: "Sell on service, keep on service" been all these years?

The large service-focused segment of women-owned businesses sounds pretty good–perhaps even close to the ideal small commercial sales prospect since they account for such a sizable fraction of these businesses.

If they are, indeed, so attractive, then why havent women-owned businesses been more aggressively pursued? Well, perhaps this oversight arises out of a number of common misperceptions about the size and composition of this vibrant segment of the small-business market, or perhaps from a myopia thats all too common on Mars.

Myth #1: Women-owned businesses are a negligible fraction of the entire business sector.

Reality Check: According to recently-released Census Bureau data and "MarketStance" calculations, there were more than 5.5 million women-owned small commercial businesses in the United States last year, accounting for about 18 percent of all small commercial accounts. In addition, women were half-owners of more than 3.5 million additional small commercial businesses.

All told, women-owned and controlled businesses accounted for almost one-third of all small commercial risks and for more than 20 percent of all small commercial premium.

Myth #2: Most women-owned businesses are small, home-based enterprises with no employees and minimal insurable exposures.

Reality Check: As with all small companies, many women-owned businesses have no employees, and may be part-time occupations and/or home-based. In point of fact, however, "MarketStance" estimates for last year show that there were almost 750,000 women-owned businesses with at least one employee.

When classified by employment size ranges, moreover, larger women-owned businesses are seen to have as much, if not greater premium potential than their smaller counterparts.

In total, MarketStance estimates that women-owned businesses represent more than $4 billion in written premiums, while businesses with women as half-owners account for another $6 billion in premiums–an estimated total premium volume of $10 billion.

Myth #3: Women-owned businesses are almost exclusively in the retail trade and services industries.

Reality Check: The highest incidence rates for women-owned businesses, indeed, are in retail trade and services. However, MarketStance analysis reveals that women-owned businesses also account for high shares of written premium in the agricultural services, forestry and fisheries sector, and in the construction trade–industries not commonly thought to have a significant women-owned presence.

Myth #4: Women-owned accounts have very modest average premium writings.

Reality Check: The typical premium-per-account in the services industry does tend to be fairly small for women-owned businesses, averaging only about $1,000 for property, liability, commercial auto and workers' compensation combined.

However, in contrast, the average premium per women-owned account in the manufacturing and construction industries is estimated to be more than $8,000, with average writings in the mining, wholesale trade and transportation and communications industries all above $5,000.

Myth #5: Women-owned businesses are evenly distributed across the map.

Reality Check: Given their large numbers, its obviously possible to find a significant number of women-owned businesses in most any sales territory or state. However, the concentration and prominence of these businesses varies significantly from one state to the next.

Perhaps not surprisingly, some of the older, more heavily industrialized states tend to have the lowest concentration rates. In Massachusetts, Connecticut and Delaware, women-owned or controlled businesses account for less than 5 percent of total business revenues. In contrast, corresponding shares in Montana, Nevada and Alaska are above 10 percent.

Late night talk show hosts have gotten lots of mileage out of the communications gap between the genders. All joking aside, the gap in insurance buying behaviors is just as real.

In prospecting the growing women-owned business market, savvy agents and carriers can use this gap as a competitive advantage by carefully focusing on the different buying attitudes and service expectations of women business owners.

The competitive advantage represented by the Mars-Venus gap is especially attractive since the stated preferences and attitudes of women business owners reveal that the "lowest-price is all that counts" approach clearly will not work well on Venus. But remember, whether youre prospecting on Mars or Venus, it pays to keep track of your market stance.

(For an online version of this article, visit www.MarketStance.com. MarketStance provides up-to-date demographics as well as by-line premium estimates, exposures and growth rates for the commercial market.)

Frederick Yohn is the president of IntelliStance LLC in Middletown, Conn., and the developer of "MarketStance," a precision market analysis tool for the U.S. commercial property-casualty insurance market and a registered trademark of IntelliStance.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 8, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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