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The Death Of The One-Size-Fits-All Selling Model For Life Wholesalers

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My father was a home office field wholesaler back in the mid-1960s through the mid-70s. He did pretty well. The other day I was thinking about how he would have reacted if, like Austin Powers, in 1968, he could have gone into a time machine, transported himself to 2003 and spent one day as wholesaler for a life insurer or annuity company.

I think he would be amazed at the laptop computers and Palm Pilots everyone uses in the field to manage their time. The home office AS400 and IBM 390s would blow him away with their number-crunching capabilities. The variable and equity indexed life and annuity products would really impress him. And, I think he would be a bit confused at all the variations, guarantees and options found in traditional universal life policies and annuities.

He would also be amazed at the proliferation of new channels: independent broker-dealers, wirehouses, producer groups, independent financial advisors, national brokerage agencies, banks and life brokers.

Most of these new things would leave his head spinning, and I am sure he would realize that he was in very unfamiliar territory. That is, until he walked into the sales department in both the field agency and in the home office.

If he walked into a typical sales strategy session, he would hear the managers saying things like “we want to make sure our sales force gives the customer the right information at the right time so he will buy our product and not someone elses.” Or, “we are trying to convince the client to buy from us and not from our competitors by showing how our product is better.” Or, “we go out and tell the customer how good our products and services are and get him to buy from us.”

He would know then that things havent really changed that much.

If he talked to wholesalers in 2003, he would hear how their territories have gotten larger, how their production quotas keep rising, how the level of field support has declined and how the rules of the game keep changing. Also, he would hear tales of good people losing their jobs during company mergers and distribution strategy shifts.

My father would feel right at home in the sales meetings because thats exactly how he sold back in the 60s and 70s. He told customers about product features and commissions, and he communicated the value of these products and his services with personal visits and mailings. He visited often, brought little gifts and made sure that all decision-makers liked him and had sufficient information about his products. He communicated details and information, and he was friendly and funny. He made a pretty good living at it and was able to buy me baseball mitts and sneakers when I was a kid.

But, I think he wouldnt be as successful as a home office marketer today, and he would be making a little less money each year while finding it harder and harder to establish a growing and sustainable business franchise. And, I wouldnt be getting my Sears Ted Williams baseball mitt each year.

If he looked around at other industries in 2003, like computer retailing, steel manufacturing and mobile telecommunications, he would see the same downward pressure on face-to-face wholesaling sales forces.

Sales forces are struggling to find and keep good customers, and home offices are discovering that they are not getting the returns they planned for. And, since they are not getting these returns, they are cutting back on expenses, training and support.

Whats changed?

For one, unprecedented product information is making customers more sophisticated to the trade-offs between price and advice. They have far more choices and, in many cases, they can easily substitute products. They are also busier and have less time to speak with wholesalers. Additionally, their businesses are under economic pressure as well as their customers are becoming more demanding and price-conscious.

For my father, his product created the value for his customers. His job was to communicate that value often and to the right people at the right time and to offer it with the right commission structure. Today, in order to be distinctive, he would have to create value for the customer during the selling process.

Its not enough to simply communicate the value, price and product features when people have access to this product information. Many of his customers wouldnt want to pay extra for information they could get themselves. Somehow, during the sales process, he would have to create enough value that his customers would be willing to pay extra for it.

But how could he create value through the sales process?

In consultantese, he would have to create multiple sales models tailored to the needs and the economics of his specific customer segments. That is, he would have to match his selling model to the buying needs of his specific customer segments. He would have to understand his customers so well that he would know how they wanted to buy, and he would have to create his selling process to match that need. He would have to understand the cost and profit of each customer so he could determine if he could meet their preferred buying style profitably. And, he would have to stay so close to his customers that when their buying needs changed he could quickly switch his selling model to continue to create value.

Although all customer segments have specific and changing needs, it might be helpful to look at the high-level way purchasing consultants segment buying needs. In some ways, there are just three basic types of customers:

Those who understand the product and want only low price and convenient purchase.
Those who need to understand how they can use the product and who want advice and insight.
Those who find the product so valuable and fundamental that they will change their business process and work in partnership with the seller to create new value.

We can call these three customer segments: convenience and price; advice and insight; alliance and partnership.

Each of these segments wants to purchase in a different way and each has far different economics to serve them. The “convenience and price” buyer wants to source products in a convenient cost-effective manner. This buyer wants choice and ease of purchase.

The “advice and insight” buyers want someone to help them understand how the product can help them reach their goals. These buyers want to know how the product can be used and are also looking for an “advocate” in the home office so they dont get lost in the shuffle.

And, the “alliance and partnership” buyer wants you to make a major investment in time and capital to create a significant and long-term partnership. This buyer is willing to spend the time, modify his business operations and make an investment in working side-by-side with product suppliers.

The reason my father would be in a downward cycle and unable to establish a strong franchise would have been the failure of his sales model to create real value: his “counseling” sales model did not create enough value for those customers who want advice and insight; his “product” sales model was not low cost and efficient enough; and, he lacked the organizational capability and planning process to truly modify business systems to result in dramatic breakthroughs and profitable partnering. No amount of personal visits, gifts, brochures and jokes would fix the inadequate selling model.

He would be stuck in the middle and struggling. He would be spending lots of money and time and actually destroying value for those customers who only wanted to source product conveniently at a good price. And, he couldnt spend enough pre-sales and sales time with his customers who valued insight and expert advice.

Furthermore, his small staff and thin home office support would never develop the capabilities to partner with a key customer who sought an alliance. He would have to dramatically lower his costs or dramatically add more value at the same costor he would slowly go out of business.

If, after a few years of struggling and fewer baseball mitts for me, my father went to a consultant to diagnose his problem and to figure out ways to fix it, the consultant might have given him a list like this:

1. Understand the type of buyer your customers are or will become.
2. Understand the profitability of each account today and make an estimate of future profitability.
3. Combine this knowledge to select the preferred customer segments.
4. Match the selling model to the customers preferred buying style by dramatically lowering cost and ease of purchase or creating real value or true partnership relationships.
5. Be able to switch models when customers buying preferences change.
6. Be able to steer customers to the most appropriate selling/buying model.

I think my Little League baseball career would have been severely compromised if, after getting this advice, my father was not able to develop these three sales models and match them to specific customer segments and customers.

Mike McKenna helps improve the distribution value chain for life insurance firms to increase sales and productivity. He is a former McKinsey consultant, life insurance salesperson and an executive at an aggregator firm. He can be reached at [email protected].

Reproduced from National Underwriter Edition, April 14, 2003. Copyright 2003 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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