From time to time, an agent or broker will share a bewildering story about their retention. Part of their market territory goes south on them. A zip code or postal code. A class of business. A niche. The whole book even!
If I’m going to dig into this, I start with the fundamental question: What’s your retention strategy?
That’s usually a bit of a conversation killer.
After a little head scratching, the answer is usually along the lines of, “Well, we really take great care of our people.” Or, “I have a great staff.”
That’s a strategy?! The guy down the street never thought of that?!
It’s not a strategy. And the guy down the street would probably say the exact same thing.
Having a good staff, treating customers with respect and care…that’s just the ticket price. I won’t underestimate it. A great staff is a necessary - repeat, necessary - business practice.
But, it’s not a strategy.
A strategy must express your agency’s core belief about what effects a positive outcome in your retention, with a series of measurable and testable executions that bring that belief to life in the real world.
Retention is the great ’taken-for-granted’ in the insurance world. We all know - heck, we all LOVE - the fact that, in P&C, clients keep coming back. Year after year.
But - until you do the math - you’re probably grossly underestimating the compounding power of small tweaks in your retention…and the effect it has on long term wealth and equity.
Sadly, most management systems don’t elegantly (or accurately) reveal critical performance measures very well. So, when the monthly carrier reports come in, a lot of agency principals, do ‘quick head math’ to see how they’re doing.
Then the phone rings or a CSR pops in with a question, and we’re off to the races.
Here’s the single most important truth you need to know about your retention: how great a difference a few small points will make to your income over the next few years. It’s huge.
For example, let’s take a book with a million in revenue. At a (paltry) 85% retention - in other words, at an annual rate of erosion of 15% - that book will generate $5,551,045 in the next ten years.
Bump retention by four points, and it generates $6,568,024. (And, we’re still only at a weak 89% retention rate!)
Now, bump it up another four points, and it generates $7,855,664! A difference of over $2.3 million from the first scenario. (And, we’re still at a very achievable 93% retention.)
- The first thing to know about your retention is that if you raise it, you’ll make a LOT more money. And, if you calculate how much more, you’ll won’t be able to stop yourself from taking this notion - Retention Strategy - very, very seriously.
- The second thing to know. Loyal clients retain at 97%. (I’ve written about that extensively, including here.)
- The third thing to know is that you can help them become very loyal, very quickly, by communicating with them. Offering value. And doing it frequently.
- And the fourth thing to know, if you’re not right now, actively, strategically and openly, working to earn their loyalty, these 12 companies would love to have your customers.
And they are working on it. (I developed that list of 12 emerging competitors months ago. The venture capital community is making sure there are more around the corner.)
Want to know how much difference a few points in retention would mean to you? (How could you not? For most agencies, this is one of the most, if not the most important indicator of future income.)
- Download our ‘Easy Millions Spreadsheet’ here. Oh…and did I say, ‘FREE?’ Yup.
- Run the numbers.
- Share with your team.
- Commit to communicating - with value and frequency - with your customers.
- (And, for goodness sake, if you have seen how our software does this for you, see for yourself!)
Admittedly, most agents think that marketing automation for insurance agencies must somehow be about getting new clients or lead generation. That's a fraction of what it can do for you.
Serious business owners - 'insura-preneurs' if you will - understand the need for full spectrum marketing. And they never underestimate the power of retention.