Scarcity vs. ‘You Could Save 15% or More on Your Insurance’

8thMay. × ’09

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I picked up a new guide to writing web page sales copy about a month ago, and finally, due to a power outage the other day*, I had time to really think about it.  One common ‘hook’ in sales copy – the thing that grabs your attention sufficiently that you scan a little further – is the problem-solution formula.    That’s the most pervasive one, both on and off the web, in insurance sales copy:  ‘Your insurance costs too much and we can save you money.”  It is a hook that works, of course, or else GEICO wouldn’t continue to beat it to death.  I think that is also the easiest one for an insurance agent to latch on to, even though it leaves some of us with the queasy feeling that we are demagoging and commoditizing a service that shouldn’t be a commodity at all.

There is another variation on the problem-solutions recipe that shows up in insurance sales messages.  I’m going to call that the Allstate angle after their recent TV advertising campaign:  “If you don’t have the right insurance, you could find yourself leaving a courtroom bare-chested, the shirt having just been sued off your back.  We won’t let that happen.”  That’s a message that seems to work for Allstate, and many independent agents have adopted that same sales hook.

But as I read the copywriting guide, I was struck  by the effectiveness of using scarcity as the sales hook – you know, “this offer expires at midnight tonight”, or “we only have five widgets left” (a la QVC).  The scarcity message is problematic on a web page – “Look! I just refreshed the page after 2 hours, and there are still ‘only 5 widgets left!”  It also requires a little more thought in an insurance context; I mean, is there a limit to the number of insurance policies that can be printed?

But scarcity does fortuitously present itself from time-to-time.  A recent example here in Florida followed in the wake of State Farm’s announcement to pull out of the homeowner market.  A few of Confluency’s insurance agency customers seized that occasion to let customers and prospects know that their agencies had a number of financially solid markets that could accept State Farm homeowner customers at competitive rates.  They also warned (accurately and honestly), that due to market volatility, they might not have the capacity to place homeowner policies indefinitely.  The message:  procrastinate and increase your risk of not finding quality coverage at competitive rates.  And it worked.  All three agencies that I know of that used this approach more than doubled their new customers over about a two month period.  And then the tumult sibsided, scarcity moved off stage, and new business reverted to normal levels.  But what if your agency could manufacture scarcity and make a compelling case to a prospect for why they should act now?  I think it can be done, and I think it will improve agency bottom line results.  But first, some more background.

Doctors and dentists use a scarcity sales hook when they say they are not taking new patients or they are accepting only referrals (and some agencies work on a referral only basis).  These health care providers may not think about positioning their exclusivity as a sales hook.  A doctor may have a patient maximum imposed by their malpractice insurer.  Or a dentist may simply want to preserve free time and quality of life instead of piling in even more income.  But most always, professional service providers recognize the reality imposed  by time constraints and the necessary trade off:  if I take new patients, I’ll have less time to spend with my existing patients.  Insurance agents face the same trade off.

Suppose your agency were to set a monthly new business quota and then let potential customers know that if they wait too long into the month, they may not be able to become a customer.  OK, I get it.  Who among us is going to say no to a new customer.  But hear me out.  And by the way, this is something we wrestle with at Confluency Solutions; I firmly believe that within the next 6 – 12 months we will limit the number of new customers we take on for the very reasons I am about to explain.

The fact is, new customers cost money; we all know that.  For every quote that converts, somebody had to produce quotes for 3, 4, or 5 prospects that didn’t convert.  And  every quote opportunity was earned through multiple phone calls, emails, and other lead nurturing activities.  All that takes time.  How much?  Four hours per each new customer?  Five?  I don’t know, and it will vary from agency to agency.  The point is, every minute spent acquiring new customers could be spent nurturing incumbent clients.  There are things you do for your customers (or would like to do, if you had the time):  personal annual reviews, claims monitoring, educational safety or risk management seminars, etc.  And we all know that multiple, high-touch, value-added customer contacts result in better retention, more policies per account, and more referrals.**  In short, spending more time with your customers means more income.

All agencies need new customer growth and I’m not arguing against that.  But every agency eventually bumps up against a dilemma, wittingly or otherwise.  That dilemma is encapsulated in this question:  Is my insurance agency producing income from new customers at the expense of income (and better profit) we could produce by developing current customers?  To answer that question, you need to have specific customer development activities and results you can measure.  Maybe your agency does, maybe not.  But for the sake of illustration,  and my only hope of wrapping up this post, I’m going to assume a hypothetical agency does have a customer development program in place and can measure the results.

This hypothetical agency has determined the optimal number of new customers is 20 a month.  Further, the agency recognizes that half those new customers come from referrals.  So the agency decides to set a quota of 10 new customers a month, aside from referrals.  Then they craft a sales hook for their website sales pages and other sales collateral that goes like this:

We want to make sure you are never on your own when you have an insurance claim; our agency wants to be available to answer every question you have, in as much depth as you want; we want to recognize when a change in your lifestyle or business situation requires different insurance.  Because of that, we may not be able to accept you as a customer.  We have to protect the time we need to provide for all our customers’ needs, so we can only accept 10 new customers a month, exclusive of customer referrals.  We hope you understand.  And we hope you contact us as soon as possible, because we really would like to have you as a customer.

Think about the implications of a sales hook like that.  It creates a sense of urgency.  It articulates a value (actually value-added) proposition instead of just doling out the usual ‘we’re all about service’ platitudes.  It communicates to agency staff the commitment behind the kind of service you expect them to provide customers.  It also probably boosts office morale because the sales hook implies that you care about stress and overtime – you want to manage and protect staff time and sanity.

So there it is, scarcity vs. ‘you could save 15% or more’.  The anti-GEICO.  The question is, would you ever seriously consider implementing an approach like this in your agency.  I’d love to know.

As far as a quota on new customers my agency would accept...

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*In his book, The Age of Unreason, Charles Handy wrote about the benefits of unstructured time – protecting time for creative development and ideas; in particular he made not of several top performing companies that allow employees 15% of paid time for tinkering on their own projects.  I must confess, that except for sitting around in the dark without electricity for several hours, I can’t remember the last time I enjoyed any unstructured time.

**Of course, not all customer contacts need to consume a lot of time or cost money.  For a short video discussion about how to use a gift card program to improve agency results, check out Agency Resources website.

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