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The Dynamics Of Market Demand

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The notion that people do not buy things, but rather buy what things will do, is best illustrated by the old bromide, “each year millions of 1/4 -inch drills are sold, but nobody wants a drill–what they really want is a 1/4 -inch hole.” I learned this lesson early on in my sales career selling automotive and industrial equipment prior to my entry into the insurance business.

For example, I used to sell wheel balancers, and I always stressed the quality of the machine and its features that distinguished it from the competition. While this may have been of interest to the customer, what clinched the sale was the fact that he could make more money with my equipment and pay for the initial investment more quickly. It was what the machine could do that was the primary motivation to buy.

Likewise, when I sold an expensive automatic lubrication system to a large copper mine–the features and durability of the system were important, but it was the savings in labor that prompted the mill superintendent to authorize an expenditure of tens of thousands of company dollars.

Perhaps there is no other product that I know of where this axiom is truer that in the sale of life insurance. People do not take comfort in knowing they have a number of insurance policies in a desk drawer or safe deposit box. Their comfort lies in the knowledge that these policies can do something that in most cases nothing else can do. There is no great demand for the policies themselves. The demand is derived from their ability to satisfy a want or a need.

More often than not that want or need is not thought about on a day-to-day basis, if at all. For example, two people form a partnership to operate a business. In most cases, they draw up a partnership agreement spelling out how they will operate the business and how they will divide the profit. Little or no thought is given to what will happen to the business should one of the partners die or become disabled until a life insurance agent enters the picture. The agent, by whatever name he or she is called, does not talk about insurance at the outset. The savvy agent focuses on the problems created by the demise of one of the partners and recommends they have a buy-sell agreement drawn up by their attorney.

Selling the idea of a buy-sell agreement is the first step and an essential part of the sale. Once the partners become aware that this is needed to solve a problem they didn’t realize existed, then the question of how to fund the agreement arises. When all options are explored, it usually becomes obvious that the only mechanism that can do the job is life insurance on each of the partners. Again the demand for life insurance is derived from the problem the partners face. Everyone benefits–the survivors and the decedent’s family. It is important to note that in most cases none of this would have happened had the agent not entered the picture.

Isaac Kubrick, legendary New York Life agent and John Newton, Russell award recipient, popularized the expression, “look for the loss.” That is how we create the demand for our product–not by extolling the virtues of the product itself. This is true even in the simplest of situations, such as how to pay off a mortgage in the event of the death of the breadwinner.

But sometimes life is more complicated and the creativity of the agent is put to task. A young person has an urgent need for life insurance to protect a growing family–but premium dollars are scarce. The agent in such a case must help to find the premium dollars needed. Often a split-dollar arrangement can be the answer, wherein the premium paying ability of one party (a father or caring employer) can be joined with the insurance needs of another party. Again, the agent is the catalyst for fulfilling the demand derived from the plight of the young person.

Life insurance involves “double duty” dollars in that it can meet the demands of multiple problems. I will use my own experience as an example. Many years ago I purchased a policy to provide for my son’s college education. The cash value of the policy created a reserve I could call upon if current income was insufficient to pay the college costs. And if I did not live to see him enter college the face amount of the policy would be payable and adequate to meet the demand for college expenses.

As it turned out, I was able to fund his education from current income. But I kept the policy with the thought that its value could provide a significant boost to my retirement income. Again, and fortunately, it was not needed for that purpose. Today the policy cash value is almost 80% of the face amount and I keep it to fund long-term care if that is ever needed. There have been many potential demands along the way and that policy has been there to meet any that could not otherwise have been met.

The gospel of some sales consultants is “sell the sizzle, not the steak.” But my contention is that the sizzle will not satisfy the hunger, which creates the demand for the steak.

We need agents who understand that we are essentially a problem-solving enterprise. We need them for the good of our clients as well as for the business in which we are engaged. That is probably the most urgent market demand present today, and it is not being met by many company recruiters.


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