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Insurance agency owner needs to get back to marketing

Tony Freeman's Corona firm is drawing customers but losing far too many each year. He should become its primary salesman again and work on building relationships, says consultant Phil Beakes.

August 04, 2009|Cyndia Zwahlen

Tony Freeman opened his State Farm insurance office at about the worst possible time.

It was late 2002, just as the national company lost its appetite for much of the California home and auto insurance business. And the new agency owner had counted on that business to pay the bills and recoup his $50,000 start-up cost.

"I wanted to quit so bad, so many times, in the early days. It was brutal," says Freeman, 43. To make up for the missed sales, he wrote hundreds of workers' compensation insurance policies at a time when State Farm's price was well below market rates.

Revenue at his Corona agency soared to $402,000 in 2006. But he soon found himself whipsawed again when a new state law helped push competitors' prices below what he could offer. Sales plummeted by $106,000 the next year.

Freeman has since sworn off seeking new commercial insurance clients and has been rebuilding the business with the home and auto policies State Farm eventually began accepting again in the state.

He's making progress -- sales are expected to hit $335,000 this year. But Freeman says he is losing too many of his customers. His loss rate is about 20% a year, double the industry average of 10%.

"We seem to be good at selling and acquiring new clients but not very good at keeping those clients," Freeman says.

He was a successful sales agent at AAA in Orange County for nine years before he became a State Farm agent. As an independent State Farm agent, Freeman owns his own business but doesn't set prices and can't sell other insurance companies' products.

Successful selling is in Freeman's DNA, says consultant Phil Beakes, but to keep more of his 1,200 active clients, the business owner has to change his focus. Freeman needs to become his agency's primary salesman again, build long-term business relationships with customers and actively market the business.

"He's in the relationship business, the trusted advisor business," says Beakes, former co-owner of a large insurance brokerage in Monrovia. "He's not in the insurance business."

Beakes, who specializes in sales and marketing training and leadership development, made the following recommendations:


Take back sales. Freeman spends about 90% of his time on administration and paperwork and has hired people to do telemarketing and to write new policies, Beakes says.

"Well, guess what's happened? He's not attracting the type of customer base that he used to attract because he's not the guy doing it, and somebody else is being paid to put numbers on the book, but not for putting the right kind of customers on the book."

Like many small-business owners, Freeman wants the business to be able to run without him. But he's hired people to do things for him, not necessarily to leverage his own sales and marketing strengths, says Beakes, chief executive and co-owner of Peregrine InSight Group in Oxnard.

"I said, 'Let me tell you a scary number: As owner, 65% of your time needs to be spent on marketing and sales and 35% on just about everything else,' " the consultant says.


Define the target market. Attracting the right kind of clients will boost the agency's retention rate. Freeman's target market should consist of clients who will be the most profitable for the firm but also the best fit with the owner's goal to build long-term relationships. If customers don't fill both bills, don't bring them in, Beakes says.

He suggests that Freeman interview his best customers, asking them four questions that will help him define and better serve his target market: Out of all the agents, why did you choose us? What's the best way to stay in contact so we can maintain our relationship? If you were in our position, trying to grow the firm with people like you, what would you do? And what is one thing we could do that would make us lose your business?

"If he's diligent in doing those calls, he's going to learn how not to lose that 20% of his business" each year, Beakes says.


Develop a marketing plan. Freeman needs a consistent, effective marketing campaign. That will make the job of selling policies easier, Beakes says.

Freeman should use information gathered through customer interviews to develop a message that appeals to them. Deliver it through the medium they prefer -- phone calls, direct mail, e-mail campaigns and the like. Then develop a system of measurements that tracks how many people are contacted, in what geographic area, through what medium and what kind of response was received, Beakes says.

"A lot of people just dump money into marketing but never track how effective it is," he says.


Establish a relationship-building system. Building business relationships through regular calls and e-mails is key to attracting the type of clients who will value State Farm products even if they are not always the cheapest.

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