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Achieving a Sustainable Competitive Advantage in the Current Insurance Marketplace

By Bruce Wedderburn

Try this exercise: Get together a group comprised of clients, producers, and carrier representatives and ask them to describe the current state of the insurance industry and insurance products in general. Regardless of what words they use, all of their answers will fall into one basket — commodity. For many companies, this means an economic environment where sales performance is influenced by the following factors:

• Increased price shopping by clients
• Increased spreadsheeting by producers
• Increased margin pressure all around due to pricing concessions that are all too frequently given in order to win or retain business

Unfortunately, research indicates that:

• It is not going to get better any time soon, so you had better rethink how you sell if you do not want to continually play the “Give me your lowest price” game
• Trying to differentiate using a “unique” product or product feature is the equivalent of saying, “Please price-shop me against my competitors, who are also touting their ’unique’product features.”

The reality is that insurance customers will forever view insurance as a commodity.

The ability to achieve this differentiation and to get paid for that differentiation lies in your ability to leverage the experience and competencies of your company’s sales force.

To put it simply, Is your sales force a value-creating sales force or a value-communicating sales force? It used to be that the best salesperson was the one who was the best talking brochure. To be the best meant simply translating product uniqueness into something a customer cared about and the sale was made. These days, that translation has to be far more elegant. It is not enough to let the product create the value, the seller has to.

Creating Value

So what does “create value” really mean? Our company’s research of tens of thousands of buyers who bought solutions that were more expensive than the lowest price, reveals that there are three things — and only three things — that create value for clients during the sales process. In short, customers will pay for the sales experience/salesperson who helps them to:

(1) Recognize the unrecognized problem — Help customers understand their problems, issues and opportunities in new and/or different ways.

(2) Develop the unanticipated solution — Help customers arrive at better solutions than they would have arrived at on their own.

(3) Act as advocates for their customers within their own organizations and bring the full range of the seller’s company competencies to bear.

The skill and sophistication with which you can execute the above three competencies will dictate whether you can win all of the business that you should be winning or continue to fight the price war for every deal.

Strategy #1 — Recognize the unrecognized problem

Work with the client to uncover the problems that they don’t see, or help them to realize the magnitude of the problems that they do see. The key word here is with — you want to craft the conversation to get the client talking about their issues, not you. As an example, one vendor, through skillful questioning, was able to get a client to articulate how their current arrangement with another insurance company was negatively affecting their efficiency, costs, and staff utilization. Once the client was able to fully understand the implications of these problems and the costs associated with them, the present situation was seen as unworkable.

How skilled are you or your sales team at being able to conduct a diagnostic meeting with your client or broker? How effective are you at being able to understand and communicate your insurance products in terms of client problems and outcomes? Do you know what value you bring when you sit down to talk insurance with a client? Having these skills can make the difference between winning and losing a piece of business.

Strategy #2 — Develop the unanticipated solution

When deciding whether to place their business with you or your competitor, what factors are clients and customers looking at? While price is obviously a factor, in many cases there are other factors that are potentially more important than price, providing the client/customer sees value in them. How effective are you at being able to increase the value of those other criteria and reduce the emphasis on price?

To illustrate, one insurance agent was being pressured on price at renewal. After examining the client’s claims experience, the agent helped the client to see that if the client got the price they were seeking, it would end up costing them more the next year and would probably force the client to go out to market, which will end up costing the client even more in terms of time, resources, and hassles. “I helped them to redefine what ’price’meant as a criterion for this renewal,” he told us. “They are now an even more loyal client as a result.”

Another way of developing the unanticipated solution is to match the full array of your company’s capabilities to meet your client’s needs and criteria. Does your company offer capabilities that the client is unaware of that can offer them a superior solution? How can you create value in these capabilities?

Strategy #3 — Act as advocates for their customers within their own organizations

To achieve maximum sales performance, you must be able to be the voice of your client within your own company. Make sure you have a clear understanding of the client’s definition of value, and that everyone in your organization shares that understanding. Then, ensure that your company has the internal relationships necessary for you to access the information that your customers and clients need quickly and accurately.

A Final Thought

Successfully using the above value-creating strategies doesn’t mean that you will never have to compete solely on price again. There are those clients that want your price and they want it fast and that’s all they want. But we have seen time and time again that there are clients out there that are being driven to price shop by the behavior of their sales person. Is the way that you sell reinforcing that you are a commodity?

Huthwaite’s research shows that there is good news to selling in a marketplace where the client perceives little difference between solutions. Thousands of buyers have told us that there is a way to break away from the commodity pack, that there is a way that you can become differentiated, more strategically important, and difficult to substitute. Becoming a value creator is a good place to start. 

ABOUT THE AUTHOR

Bruce Wedderburn is a Senior Consultant with Huthwaite, Inc., and works with a wide variety of clients in the insurance and financial services industries to help them to increase sales performance. He can be reached by e-mail at bwedderburn@huthwaite.com.

riskVue | The webzine for risk management professionals
August 2003