Chipotle’s Innovative Approach to Management Applies to Life Insurance Companies As Well

May 23, 2014

Fast food restaurants face some daunting challenges.  The catch phrase “would you like fries with that” has become equated with the very definition of a dead-end job.  However, just as few kids grow up dreaming about working at McDonalds, probably even fewer harbor ambitions to break into the insurance industry. 

Most of us have our favorite fast food horror stories about poor service, improperly prepared food, and unclean premises.  However, we’ve also experienced that pleasant surprise when you enter a well-run establishment where everything just seems to click.  The fast food industry has responded to their personnel problems with automation, computers, and clocks.  They leave nothing to chance.  As long as an employee knows which button to push, they can pretty much prepare any item on the menu.  And to make sure they’re working efficiently, everything is timed, recorded, reported, and measured against corporate standards.  The only thing left to chance is a cheerful attitude and a willingness to work.  

This is what makes Chipotle’s approach so refreshingly different.  In a March 20, 2014 article in Quartz by Max Nisen titled “How Chipotle Transformed Itself by Upending its Approach to Management” they discuss how “Chipotle favors human skills over rules, robots, and timers.  Every employee can work in the kitchen and is expected to adjust the guacamole recipe if a crate of jalapeños is particularly hot”. 

This expectation is revealing in a couple of ways.  First, it’s indicative of the locally prepared approach that Chipotle applies to their menu.  Unlike other fast food chains, their food is prepared from fresh ingredients at each location — no frozen mass-produced packages shipped in bulk from a corporate factory here.  The second factor that makes this so unusual is empowering every employee with the expectation and authority to use their own discretion in influencing something as fundamental and important as the flavor of their food.  And it’s not just the manager – it’s every employee in the store. 

How many of us would consider allowing our agents underwrite their own applications on the fly or empower our CSR’s to deviate from written procedures at their discretion? 

In this era of automated underwriting, customer portals, and rules driven processing, Chipotle’s individualized approach to both their products and their people runs contrary to almost every industry norm.  How do they do it – and why?  Their rationale tracks surprisingly well with those of many innovative life companies. 

The critical factor is hiring the right people in the first place and then providing a structure for them to grow and improve.  Although this sounds simple and common sense, Chipotle’s process turns the typical fast food model upside down.  This new process was the brain-child of co-CEO Monty Moran. 

According to Moran, “the problem was we weren’t picking the best people.  Why?  Well, the best people don’t come from fast food that often to be honest and if they do they’re usually employed.  They’re not looking (for a job) if they’re good.  We were taking bad people and putting them over managers (who were) good people”. 

Moran went on to explain that “we don’t care about experience very much.  In fact, I think experience at another fast food restaurant is as likely to be a negative as it is to be a positive.  We look for people who possess certain qualities that you can’t teach.  You can teach somebody experience, how to hold a knife and prep ingredients or even how to run a restaurant.  A less experienced person is more likely to mess up, but when you hire bright people, they catch on quickly and come up with better solutions”.

A number of insurance agencies have come to the same conclusion, preferring to hire “greenies” with no insurance sales background so they don’t have to undo previously acquired bad habits.  However, while we rely on assessment tests and aptitude studies to help us filter out the best candidates, Chipotle has developed an exceptionally simple model.  To aid managers in their selection process, Chipotle came up with a list of 13 traits they wanted every employee to have – things that would become obvious even during a relatively short meeting: 

  • Conscientious
  • Respectful
  • Hospitable
  • High energy
  • Infectiously enthusiastic
  • Happy
  • Presentable
  • Smart
  • Polite
  • Motivated
  • Ambitious
  • Curious
  • Honest

How unscientific, right?  No psychological profiles.  No personality quadrants.  No predictive models.  Just 13 seemingly vague “attributes”.  On the other hand, who wouldn’t want each of their employees to mirror these traits? 

One could argue that this is too subjective to be meaningful but Chipotle has an answer to that as well.  They tested the effectiveness of this assessment method by interviewing a series of candidates for a few minutes on a stage in front of 2,000 managers at their annual managers meeting in Las Vegas.  According to Moran, “there is 80% – 90% agreement on which candidates possess those characteristics”. 

Once they get the right people on-board, the next step is to provide a clear career path so they won’t leave.  Although the lowliest workers in the company – the crew – receive hourly pay that is consistent with other fast food restaurants, there is a very clear opportunity for them to move up to Kitchen Manager, Service Manager, and then Apprentice where the average annual compensation is $50,000.  At Chipotle, advancement is not just an opportunity, it’s an expectation. 

According to Moran, “the first thing I learned was that the manager is absolutely the most important person at the company.  When I looked at how we trained and rewarded our managers, we didn’t treat them that way”.  The company also realized that “promoting managers from within would create a feedback loop of better, more motivated employees”.  In 2005 when they embarked on this new program “about 20% of their managers had been promoted from within.  Last year, nearly 86% of salaried managers and 96% of hourly managers were the result of internal promotions”. 

Those percentages sound incredible for an industry that is fraught with turnover and part time help.  

Moran claims the single common element among their best performing stores was a manager who had risen up from crew.  He claims to be able to identify a store that is well managed just by walking through the door.  “I walk into a Chipotle and the first thing I do is take notes on how I feel.  Is it fun, is it upbeat, is there camaraderie, is there pride?  Enthusiasm?  Is the place clean, does it sound and smell good?  Is the line moving fast?  Do the customers seem happy?” 

Granted – there is a big difference between processing life insurance applications and churning out burritos, but we’ve all had a similar experience of walking into a business and encountering that same energetic vibe that Moran described.  And why wouldn’t we want our customers to be left with a similar impression when they do business with our companies? 

So how does Chipotle identify which of their employees are best suited for advancement?  First off, Chipotle facilitates the feedback loop between workers and managers by letting workers identify the best potential mangers based upon recommendations from the staff at each location.  However, the criteria for advancement are highly unusual and, according to Moran, the most important part of their strategy.  “The foundation of our people culture, on which everything else stands, is the concept that each person at Chipotle will be rewarded based upon their ability to make the people around them better”.  In this shocking shift in strategy, Chipotle is the only fast food restaurant that “ties pay and promotion to how you mentor people rather than store sales”. 

On the surface, this seems so counter-intuitive.  After all, shouldn’t sales and profits be the key metrics for any successful company?  Imagine if our agencies measured the success of their agents by their mentoring ability?  Would any sales even take place?  Or what if our customer service representatives were promoted based primarily upon feedback from their peers?  How many of us would feel confident that we were identifying the best people? 

In response to these questions, one only has to look at Chipotle’s financial results – the company has achieved record growth by prioritizing mentoring.  The company went public in 2006 when total sales were $826 million.  Last year they were $3.2 billion.  The company had 9.3% growth in comparable store sales last quarter and both Moran and investment analysts have linked this success directly to company culture. 

On the one hand, Chipotle’s people culture differs dramatically from other fast food chains yet is undeniably successful.  On the other hand, one of the keys for every company’s success is to find the right people and then train and retain them.  Although Chipotle’s approach is unique, their priorities aren’t. 

Who are the most important people at your company?  What attributes do you value most?  Do all of your people have a clear path for advancement or are they leaving for other opportunities?  How much influence do your employees exercise in selecting their bosses?  Can you identify a single factor that is responsible for the majority of your company’s success?  Is it possible that the best way to maximize sales and profits is to prioritize elements that may seem completely unrelated? 

Regardless of whether you find Chipotle’s approach to be applicable to your company, successful companies should all be at least be asking – and answering – questions like these.  Otherwise, we risk having the question, “do you want a rider with that app” becoming the next catch phrase for a dead-end job.  

Hispanic Market – Part II – They are Coming After Your Customers Now

December 30, 2013

The LIC has been touting the opportunity presented by the Hispanic market for many years. We’ve had numerous speakers at our conferences, hosted workshops on the topic, and also published an article in our April 2012 newsletter. The rationale by now is well known and won’t be repeated here. Anyone still on the fence is invited to revisit our previous article on this topic titled “What Life Insurance Companies can Learn About the Hispanic Market From Oreo Cookies…In China!” However, despite a plethora of publicity and pontification on this subject, we find that many companies either remain unconvinced or have moved forward under the mistaken notion that communicating in the language of Spanish is equivalent to penetrating the Hispanic market itself.
It can’t be stressed enough – Spanish is a language, not a market. They key to success lies in understanding the culture, not merely translating documents and employing bilingual representatives.

Principal Financial Group has recently launched an initiative to encourage more Hispanic workers to save for retirement. According to Senior Vice President, Greg Burrows, “our research found that simply translating materials to Spanish without considering overall cultural views falls short in encouraging U.S. Hispanics to save for retirement”.. In research focus groups and live enrollment meetings, The Principal found when exposed to the new bicultural approach, many Hispanic workers took favorable savings action on the spot. In fact, according to Sheri Morgan, an employee benefits broker for The Unity Group, “I’d been doing meetings for this client for six years and I have never seen that happen before. I believe it was the bicultural nature of the presenter and the presentation that made the difference”.

It’s encouraging to see that more companies now understand the benefits of a bicultural approach to marketing. However, this is a concept that has been well understood by companies specializing in the Hispanic market for years – and their expertise in this area provides a huge competitive advantage that extends well beyond a single ethnic demographic. Where fluency in a language creates a clear divide between one group and another, biculturalism can reach across all spectrums.
In other words, the decision to focus on the Hispanic market may ultimately become more of a defensive strategy to keep your current customers rather than an offensive initiative to attract new ones.

Here’s why. Consider the decision by the nation’s top Spanish-language TV network, Univision, to launch a new cable venture with ABC News called Fusion, aimed at an audience of young Latinos (and other Millennials) in English. A recent article in the Pew Research Center’s Fact Tank newsletter by Mark Hugo Lopez provides the demographic argument for this decision. First, “Univision has been on a growth trajectory that many of its English-language peers would love to emulate. In July it finished first among all broadcast networks in TV’s highly-sought-after 18-to-49-year-old demographic groups”. However, recently its ratings among those groups have declined. Second, “the Latino population’s growth is now driven by the children and grandchildren of immigrants. This has been true since 2000 and has started to change the composition of the Latino population”. Third, “among young Latinos who rely on television for news, Spanish is on the decline. A new analysis of a 2012 Pew Research Center survey of Latino adults finds that fully 90% of Latinos ages 18 to 29 who get their news from television do so in English”. And finally, “a growing share of Hispanic households speaks only English at home. Overall, the number of Hispanics (31 million) that speaks English has been growing, as is the share that speaks only English at home”.

Launching an English only channel is something new for Univision – and so is targeting Millennials, the majority of whom watch little or no live TV. Their partnership with ABC also represents something new for both companies. In an interview with Univision CEO Randy Falco, he explains that “because of the expertise and knowledge of the Hispanic community, Univision will have editorial control. Sales and distribution will be ABC’s responsibility. But we are also going to rely on ABC for their worldwide news-gathering, as well as footage, feeds, and breaking stories”.

Another advantage that Fusion brings to Univision – it will be the first Univision program the company’s new CEO will be able to understand since Randy Falco doesn’t speak Spanish! It’s hard to imagine a more convincing example of how little a role language plays in Hispanic marketing than that.

Although Fusion’s primary target is Millennial Latinos who primarily prefer English, the bicultural differentiator they are utilizing is humor – a language that is universal to Millennials of all ethnic groups. In other words, Fusion is a legitimate threat to any TV station looking to attract Millennials – not just Hispanic ones.

A similar example is the recent launch of Al Jazeera America, most likely due to similar demographics among Arab-Americans where English is increasingly becoming a preferred language as second and third generation representation increases. However, the station’s tagline is “there’s more to it”, positioning the channel not as an English language alternative to the Arabic site but as an alternative news channel for anyone interested in a broader perspective on the news.
Here’s the thing: companies that have learned to navigate ethnic markets successfully through bicultural marketing are uniquely positioned to penetrate all markets – not just their targets. Many of the universal aspects that bind diverse ethnic groups together also appeal to all groups.

Nowhere is this more evident than when it comes to food. Everyone loves to eat and most people enjoy all kinds of ethnic foods. In fact, items such as pizza, tacos, and salsa have been Americanized to such an extent that they are no longer even considered ethnic food. However, the road to acculturation is a long one. Consider a recent article in Delaware Online titled How Goya Became Your Go-To at the Grocery Store. “Goya is the largest Hispanic-owned food company in the United States with sales of $1.3 billion in 2012. However, while Goya is the leader in Hispanic food, their products are mostly not imported, and the company is not even run by people with roots in Latin Culture. In fact, it was started 77 years ago by Spaniards who came to NY by way of Puerto Rico and is now headquartered in New Jersey”.

The strategies that have made Goya successful have allowed them to expand into other markets as well. For example, they now sell Indian and Chinese food, “in a bid to become the food company for all people new to America”. This has allowed them to position their brand as “a United Nations kind of label according to Bob Gorland, a supermarket consultant at Matthew P. Casey & Associates. He regards Goya, more than any other brand, as a section unto itself, much like the kosher aisle or natural foods area. As the general market becomes more interested in ethnic cuisines, Goya has positioned itself as the authentic option that you don’t have to rummage through ethnic markets to find. In other words, Goya is becoming white — which commercially, is a pretty unbeatable approach”.
This isn’t to say that Goya is becoming generic. Their whole distribution system runs contrary to the rest of the food industry. Most companies distribute their products directly to the warehouses of the major grocery store chains but Goya maintains their own warehouses and delivers directly to each individual store. Why? Because they recognize that each store serves a different demographic. “The staff researches local immigrant groups with the help of a business intelligence tool called Geoscape, as well as more enterprising techniques like hanging out at the local money transfer franchise to see where people are sending checks home to. That way, Goya knows how to stock exactly what Cubans or Salvadorans, or Peruvians are looking for, which creates brand loyalty”.

Macy’s successfully employed a similar hyper-local strategy with their stores as discussed in a previous LIC article here.
Life insurance companies may think their customers are safe from this form of encroachment. After all, there isn’t a recognized leader in Hispanic life insurance – yet. But this relief may be short lived. It’s evident that the companies who succeed at penetrating ethnic markets do so by employing the same strategies that are the foundation for success in any strategic initiative. The bicultural elements of The Principal’s Hispanic marketing strategy will most certainly have application to their retirement savings approach to all of their customers.

However, for an even clearer example, one only has to look at recent changes in the death care industry – the very heart of final expense and preneed life insurances companies!

Hispanics are grossly under-represented in the funeral industry. According to the American Board of Funeral Service Education Just 5 percent of the 1,589 U. S. mortuary school graduates in 2012 were Hispanic. By contrast, 17 percent of Americans are Hispanic. However, according to Francisco Sols, a mortuary science professor at San Antonio College, it is not necessary for a funeral director to be Latino to serve Latino families. You just have to have an awareness of the culture. A family is really looking not to have to explain their culture at the time of a funeral.

Hispanic death rituals are permeating the mainstream. According to a recent Wall Street Journal article titled No Bones About It: Day of the Dead is Finding New Life, Dia de los Muertos – Day of the Dead – is a Mexican tradition where on November 1 and 2, the heavens open and the souls of the dead return to earth. Their living relatives build altars with offerings of food, drink, and even sports memorabilia to entice them to come down, dine, and celebrate. The annual Day of the Dead celebration in Hollywood Forever Cemetery has grown from barely attracting 300 people in 1999 to an expected 35,000 in 2013. In addition to growing larger, each year the crowd is also more diverse with “Catholic, Filipinos, Jews, and Russian Orthodox building altars”. Corporate sponsors have also jumped on board. Nestle attempted to establish a Guinness World Record for the largest Day of the Dead altar in the US. Mattel has created a Skelita Calaveras doll for Day of the Dead. And Disney is planning a movie titled Day of the Dead with Pixar.
Dorothy Petrich erected an alter in the trunk of her deceased father’s 1940 Cadillac LaSalle to display at a Day of the Dead celebration in Old Mission San Luis Rey that attracted 25,000 people. “People who stopped by the car engaged in lively conversation about the dead. They also learned about her dad and his car hobby, but also about her grandmother’s love of Wrigley’s Doublemint gum and the fact her husband’s grandmother was an early female graduate of the Cordon Bleu cooking school in France. This is about remembering the dead with fun instead of throwing them in a garden, crying, and then forgetting them”.
Event organizer, Maureen Sullivan, indicated “we stick to the traditional roots but give the event a mainstream twist. For example, a Mexican woman “smudged” attendees with a smoking bundle of herbs. Folkloric dancers with skeletal faces pranced on the stage. Children decorated candy skulls with icing”.

Life insurance companies who ignore the opportunity of the Hispanic market do so at their own peril. The marketing strategies being employed to attract Hispanic customers are just as effective at attracting the same customers your company has focused on. In addition, as Hispanic culture becomes more main stream, your regular customers are going to become even more attracted to the bicultural elements of Hispanic culture just as they have with Day of the Dead or Goya food.
In an industry defined by evaluating, managing, and protecting against risk, it may seem easier for companies to just stick with the comfort of their current strategies and markets if they are already working well for them. However, as Fusion’s programming chief Billy Kimball observed, “with 380 other cable channels out there, playing it safe has the most risk of all”.
Do life companies need to have a Hispanic marketing strategy in order to survive? No — but smart companies who employ a bicultural approach to their marketing will have a bigger advantage and pose a greater threat to those who don’t. And that is a fact that translates into any language.

What Life Insurance Companies Can Learn From The Weather Channel

October 9, 2013

I would have loved to have been a fly on the wall when they first came up with the idea for a 24 hour weather channel. Sure, there may be some weather fanatics out there who are passionate about their favorite subject. And there may be some very impatient folks who don’t want to wait for their morning paper or local news. But weather is the epitome of what people talk about when they have nothing else to say. Why not just start the “24-hour small talk channel” and cover your bet with a variety of meaningless topics?

Well, I could not have been more wrong – The Weather Channel is actually awesome! But the world was certainly a different place back when it was launched in 1982. It was also two years after CNN showed us just how much people liked 24-hour channels that talked about the same things endlessly!

The fact that The Weather Channel not only survived but thrived is a tremendous testimony to good management. Yes, the world has changed a lot since 1982 but The Weather Channel (TWC) has evolved from a TV show into a data company that is leaving most of the recent technology start-ups far behind.

To see just how much TWC has changed one only has to look at their corporate slogans. Their original slogan was “we take the weather seriously but not ourselves” – no doubt in anticipation of the inevitable reaction from the general public: a 24-hour weather channel — are you serious? On the other hand, their current slogan — “Connecting people to the world’s best weather forecasts” – indicates a focus that extends beyond mere forecasting and confirms a commitment to the technology required to deliver their data in a meaningful way.

Right from the beginning, the company invested heavily in data analytics and technology, expanding quickly beyond simply offering 24-hour weather reports. They were sitting on a wealth of historical data and employed a league of highly educated meteorologists ideally suited to analyzing the information. This spawned a variety of specialized commercial products for weather sensitive industries such as airlines, energy traders, commodities traders, farmers, and sports teams.
In addition, TWC pioneered new hardware and software systems that allow local operators to cull through their national satellite feed in order to showcase just the relevant local data. They now provide weather reports to 250 radio stations and 52 newspapers across the country.

These diverse channels account for 10 percent of the company’s revenue with an expectation that this proportion could double in the next three years.

However, this is merely scratching the surface. Nearly 50% of the company’s revenue now comes from online resources. In fact, this has become such an important and fast growing segment that the company has recently changed its name from The Weather Channel to The Weather Company.

What makes their on-line audience so lucrative? Motivation. People turn to their TV for weather summaries – what is it going to do today or this week? They turn to the internet for very specific information – what is it going to do within the next hour or this afternoon? In addition, contrary to popular belief, weather enthusiasts aren’t a bunch of coach potatoes with nothing better to do than watch TV. More likely, their interest in the forecast is because they anticipate being outside doing
something – making them prime targets for advertisers. In fact, a NY Times article indicates that “the Web site has thrived in part by being a lifestyle guide, not a weather site; depending on the day, Weather.com highlights National Park profiles, a dog walk calculator, wedding planning tools, and automobile safety advice”.

Their mobile app takes things even further. A recent article in the Wall Street Journal referenced how hair care company Pantene targeted their mobile ads for frizzy-hair-taming products where the weather was humid, and hair volumizing products where it was dry. Other examples of very specific timing and placement include “insect repellent sells well in the spring in Dallas when there is a below-average dew point, but in Boston, spring bug-spray sales do well when the dew point is above average. Company scientists also found that the first day of above-average heat in Chicago results in a surge of air-conditioner sales. Meanwhile, in often-muggy Atlanta, people sit out hotter-than-average temperatures for two days before making a run to the appliance store”.

However, the most impressive example was when “the arts and crafts retailer Michael’s Stores, Inc. approached the company about advertising on rainy days when their customers often do craft projects. The Weather FX department took the sales data that Michaels provided and compared it with the weather records of areas that have Michael’s stores. The team found that sales of crafts surged not on rainy days but when the forecast called for rain three days in advance”. In essence, TWC was able to move beyond just providing an advertising platform into something more akin to a consultant.

It’s common anecdotal knowledge in our industry that people tend to think more about their insurance and financial security in the fall and less so in the summer. Most agents have also experienced better closing ratios whenever they venture out in especially poor weather – perhaps because people felt sorry for them? But are there more subtle yet persistent climatic influences? Is there an ideal barometric pressure that is conducive to a sale? With a product as difficult to sell as ours, one would think we would be scrambling for every competitive advantage we can find.

What else can life insurance companies learn from TWC?

The sheer agility and ability required for TWC to adapt and evolve in response to changing conditions is in stark contrast to the stodgy and steadfast environment that defines our industry. For many life insurance companies, realigning their product pricing every couple of years is the only evidence of innovation – and a pretty tepid one at that.

Also worth noting is TWC’s commitment to technology and data analysis. One could argue that our industry is fortunate because neither our agents nor our consumers seem to be demanding cutting edge mobile apps or twitter-enabled service access. As a result, we’ve been able to comfortably and safely follow five years or more behind other industries. But at what cost? TWC could have survived with just their 24-hour TV channel but with none of the growth or relevance they enjoy today.
It’s legitimate to wonder if part of the reason why our field force is aging and our sales are barely growing is because the world has changed but our industry hasn’t.

How can life insurance companies become better at adapting and innovating? Here, TWC provides another lesson: start at the top. In January 2012 TWC made a surprising announcement that they were replacing current CEO Michael J. Kelly with digital advertising veteran David Kenny. The motivation was a desire to expand TWC’s digital and mobile business more quickly. David Kenny’s background was surprisingly devoid of any weather-specific expertise. He’s not a meteorologist or a former commodities analyst or energy trader. Instead, he’s the past president of technology company Akamai, co-founder of digital advertising company VivaKi, and current Yahoo board member.

In TWC’s case, David Kenney was a good choice because his background was consistent with the company’s focus on expanding its digital footprint. This raises another good question for our industry – if we were to broaden our focus beyond life insurance, what would we focus on? What expertise would we be looking for that wasn’t actuarial, legal, or financial in nature?

Again TWC provides an excellent example. When they changed their name from The Weather Channel to The Weather Company, David Kenney opined that “the word ‘channel’ is too limiting. When Apple Computer decided to just be Apple, it broadened their minds to what was possible”.

Could the same result be achieved if a Life Insurance Company became simply a Life Company?

It’s an interesting question since our products certainly have a much broader impact than “insurance” implies. We make it possible for children to go to college. For families to remain in their homes. For people to die with dignity and for their survivors to celebrate their lives and mourn without financial stress. We facilitate the completion of plans for people who aren’t around to see them through and for the creation of a legacy that can be even greater in death than it might have been in life.

A company committed to quality of life rather than strictly insuring life would undoubtedly be thinking more broadly and be more open to alternative revenue streams and innovation. In this regard, a name change could certainly be a step in the right direction.

Consider the success that American General Life and Accident (AGLA) has had with their Quality of Life UL – a unique product that was designed to address the entire spectrum of risks associated with living as well as dying. The company even developed a trademarked mission statement around this concept that reiterates its commitment to “change the way Americans think about, purchase, and use life insurance”.

It’s impressive how TWC moved beyond a concept that they knew people probably wouldn’t take seriously and morphed into a technological and analytical powerhouse whose success rivals even the slickest of Silicon Valley start-ups. They took something that at its essence was very technical and geeky and built a cutting edge, useful, and accessible business around it. But even more importantly, they have been successful in executing their mission of “connecting people to the world’s best weather forecasts” and in the process have opened our eyes to connections that we didn’t even know existed.

What’s the forecast for your company?

How Do Life Insurance Companies Compare to the NCAA?

July 29, 2013

Who is the most successful coach in modern college football history? Unless you are a rabid football fan – or live in Ohio – the answer will probably surprise you. And with that hint, most readers are probably scratching their heads and thinking “someone at Ohio State”? But they would be wrong.

College sports are a big business. According to an article on Priceonomics.com titled “The Pseudo-Business of the NCAA” total revenue is $8 billion, yet only 1% of college athletes are responsible for 99% of that revenue. “The majority of student-athletes play in Division III, the largest and least competitive of the divisions in the NCAA. Many more play in lower divisions (that are not part of the NCAA) or in club sports”.

The chance to play on a top Division I sports team is the opportunity of a lifetime for the gifted 1% of student-athletes. In addition to the adoration, fame, and potential fortune if they are fortunate enough to turn pro, every athlete enjoys access to the best coaches, the best trainers, and the best facilities that money can buy – not to mention a scholarship to a prestigious and well-known university.

“However, even the elite big-money sports divisions are sharply divided in terms of commercial size. In Division 1A football, the biggest programs generate 14 times as much revenue as smaller teams. Among the conferences, the most successful (The Big Ten Conference) distributes over $150 million to its members while the tiny Sun Belt Conference splits just over $1 million”.

Revenue obviously plays a large role in how much a university is able to spend on their football programs. However, not all universities are fiscally responsible when it comes to athletics. In fact, “just over half of elite football and basketball programs turn a profit. Only 14 out of 120 athletic departments in the upper tier of Division I cover their costs. The remainder run a median deficit of $10 million”.

How can this be? One of the biggest factors is an “arms race” between the elite teams. Professional football and basketball leagues have only 32 and 30 team, yet the highest division of college sports has 120 teams. There are far too many teams trying to be elite. In their competition over windfalls from March Madness appearances and BCS bowl games, universities spend large sums of money gambling that a better coach, stadium, or marketing campaign can deliver them to the top of the pack”.

Smaller Division I programs, even among elite schools, have a very difficult time competing against the largest competitors. “A report from the Knight Commission on Intercollegiate Athletics sums up the problems facing a team in a small sports market:
Iowa State of the Big 12 is an example of a have-not school in a big-time conference. It brings in a respectable $17 million per year in football revenue. Among its competitors are Texas, with $73 million in football revenue. But Iowa State’s fans and boosters expect its program to retain coaches and build facilities at the same level as their richer Big 12 colleagues. Keeping up with the Joneses is extremely difficult if not impossible”.

It’s almost enough to make you feel sorry for poor Iowa State – but the point is well taken. Fans and supporters of all elite Division I schools have the same expectations for results, even though the available resources can differ drastically.

To put this into context consider the differences between the top domestic life insurance companies by size. MetLife was number one in 2012 with over $562 billion in total net assets. The number 25 company – Great West – is one tenth the size of MetLife with $55 billion in assets. Although not small by any measure, Great West is still only half the size of nearly 70% of the 24 larger companies ahead of them. Phoenix was number 50 in terms of size with $19 billion in net assets yet they are only half the size of 65% of their larger competitors.

Perhaps at some point a difference of a few hundred billion dollars isn’t that much of a differentiating factor? But even these large companies start to resemble Iowa State in terms of going toe to toe against much larger competitors. And just like Iowa State, the stakeholders for these companies have the same expectation for success, regardless of the competition.

How big of a factor is size in terms of success? In Division I football, it is significant. In a June 2010 article by Brett McMurphy on AOL News titled “Big Spending Ohio State” he observes that The Buckeyes had been to five consecutive BCS bowls, including the BCS championship games in 2006 and 2007. They won or shared the Big Ten title five years in a row from 2005 – 2009. And they spent more money on football than any other school in 2008. McMurphy goes on to painstakingly detail the win/loss percentages for each major Division 1 Conference against schools with bigger or smaller budgets. 89% of schools had a better than .500 record against schools with smaller budgets, compared to only 29% against schools with bigger budgets. This makes strategy simple: spend more to win more.

That’s not to say that one can simply “buy” a championship season – if only it were that easy! In the same way, larger companies don’t automatically outperform their smaller competitors. However, all things being equal, companies with more resources have an advantage over companies with less. Fortunately, in football as well as insurance, all things are never equal. Superior leadership, recruiting, brand awareness, and execution all help “level the playing field” to a certain extent, but don’t eliminate the inherent advantage that larger budgets provide.

Since the majority of life insurance companies are much smaller than the top 100 in terms of assets, perhaps it’s worth looking into the performance of the Division III schools where the majority of student athletes also compete?

Let’s go back to our original question: who is the most successful coach in modern college football history? That would be Larry Kehres from the University of Mount Union in Alliance, OH. In 27 seasons, Coach Kehres’ teams won 23 Ohio Athletic Conference Championships, posted 21 undefeated seasons, and participated in the NCAA National Championship game in 16 out of the past 20 years, winning 11 of them. His career coaching record is 332-24-3 (.924).

Mount Union is a Division III university. They have approximately 2,200 students (compared to more than 56,000 at Ohio State). They can’t offer athletic scholarships. Their facilities are modest. Their games aren’t nationally televised. And they are centrally located in a geographic triangle between Akron, Youngstown, and Canton – not exactly the metropolitan hub of the state. Yet Coach Kehres has created a football legacy that far surpasses anything the big money schools could even dream about, and he’s done it in a division where coaching is pretty much the only thing that distinguishes one school from another.

This suggests an important distinction between Division I and Division III. Although good coaching is critical to the success of any program, in Division I the coach is just one of many factors that discern one top program from another. This is not the case in Division III where “all things truly are equal”. When it comes to Division III athletic programs, it’s hard to find any factor that differentiates one program from another more than the track record of the coach.

For further proof, consider the recent winners of the prestigious Liberty Mutual National Coach of the Year awards. As stellar as Coach Kehres’ career has been, he hasn’t won this award since 2008. Instead, the first three-time recipient in the seven-year history of this elite award is Glenn Caruso of the University of St. Thomas, a private Catholic liberal arts college in St. Paul, Minnesota. Coach Caruso took over a program coming off a 2-8 season and posted records of 7-3, 11-2, 12-1, 13-1, and 14-1, culminating in an appearance at the Division III National Championship (where they ultimately lost to Coach Kehres’ Mount Union team).

Smaller life insurance companies share a lot of similarities with Division III universities. Many are located in rural areas with access to a shallow employment pool. In addition, smaller budgets make it difficult to attract top talent. Limited resources often restrict the ability to execute all of the key strategies that companies already know they should be pursuing, let alone invest in new innovations that might pay off further down the road. Advertising budgets are minimal. Market research is modest. Regulatory distractions are significant. And the economies of scale that larger companies enjoy are non-existent. Yet good leadership – like good coaching – allows excellent smaller companies to stand out among their peers.

Unlike Division III schools, however, smaller life insurance companies still have to compete against much larger competitors. There are no divisions in business to make the competition more even. This is different from Iowa State squaring off against Texas. This is like Mount Union taking on Ohio State — and winning – an improbable if not impossible outcome.

Fortunately, in business winning isn’t measured merely by points scored. For the past 22 years, The Ward Group has conducted an in-depth analysis of the financial performance of nearly 800 life-health companies domiciled in the United States. Each year they identify the top 50 companies that pass stringent financial stability requirements and measure their ability to grow while maintaining strong capital positions and underwriting results over the past five years. This is truly an elite group. These top 50 companies produced a 19% statutory return on average equity from 2007 to 2011 compared to 3.4% for the life-health industry overall. In addition, The Ward’s Top 50 outpaced the industry for five-year surplus growth (45.6% compared to 22.2%) and net premium income growth (42% compared to 5%) while achieving 4.6% lower expenses relative to revenue.

Just as with Division I football, one would expect the Ward’s Top 50 to be dominated by the larger life insurance companies. Therefore, it’s no surprise that such notables as NY Life, AFLAC, and USAA are on the list. However, nearly half of the companies on the Ward’s 50 have less than $2 billion in assets. One of the smallest companies is Bankers Fidelity with less than $150 million in assets. Bankers Fidelity is part of a group of small P&C and life companies owned by Atlantic American/Delta Group and has been ably managed by President Gene Choate for many years. Their disciplined focus on Medicare supplement and other supplementary worksite products epitomizes the way successful companies exploit niche products and markets.

Another interesting company on the list is Citizens, Inc., a NYSE traded company with less than $1 billion in assets and a remarkably creative business strategy consisting of selling small face life insurance products to modest and middle income folks along with large whole life policies sold to wealthy internationals. Citizens, Inc. has been perfecting this unlikely combination of protection/accumulation for two very diverse populations since 1961.

Two other companies on the list who provide further evidence of the benefits of focused niches are Homesteaders Life (less than $2.5 billion) and Funeral Directors Life (less than $1 billion). Both of these companies only sell preneed insurance. Forethought is a bigger example (less than $6.5 billion) of a preneed focused company, although they also sell annuities as well. Preneed is such a specific niche that even most people in the insurance industry don’t know exactly what it is!

In Division I football, bigger may be definitively better, but good coaching can create Division III powerhouses with records that surpass anything the marquis brands have achieved. In the same way, smaller life insurance companies are just as likely to match the financial performance of the best run household names given good leadership and a disciplined focus on mastering niche markets.

There are hundreds of “Division III” type smaller life insurance companies. However, the Ward’s Top 50 proves that there are also a lot of Coach Kehres type CEO’s running them.

So which playbook is your company running?

The Sales Magic Formula – What Life Insurance Agents Can Learn from Magicians

June 28, 2013

 

 At first glance, it’s easy to dismiss the world of magic as something completely unrelated to selling life insurance.  However, both groups face similar challenges in terms of winning over a skeptical audience of “non-believers” who are determined to not be tricked into doing something they don’t want to do.  For insurance agents, the majority of prospects have convinced themselves that they don’t need any additional insurance.  For magicians, their audience is conflicted between the demand to be entertained, the knowledge that magic entails deceit, and the desire to not be the one who is deceived.  In other words, both involve motivating a reluctant participant to let their guard down and acquiesce to outside influence. 

 

However, while most successful life insurance agents are content with one sale for every three attempts, magicians must succeed every time they perform.  This higher expectation for results makes it worthwhile to explore the differences and the similarities between these two skills. 

 

A book by Alex Stone titled “Fooling Houdini” http://www.amazon.com/Fooling-Houdini-Magicians-Mentalists-Hidden/dp/0061766216/ref=sr_1_1?ie=UTF8&qid=1354026814&sr=8-1&keywords=fooling+houdini provides a fascinating glimpse into the obsessive societies of magicians, mentalists, card sharks, and scam artists.  The book opens by revealing one of magic’s well kept secrets – the Magic Olympics.  Every three years the best magicians in the world “descend on a chosen city, armed with their most jealously guarded secrets, and duke it out, trick for trick, to see who among them is most powerful.  The Twenty-third Olympics in Stockholm were the biggest in history, with nearly 3,000 attendees from 66 countries and 146 competitors vying for medals in 8 events.”  Qualifiers must receive written authorization from the president of one of eighty-seven different associations sanctioned by the International Society of Magicians.  Events are divided between two primary categories – stage magic and close-up magic – and performers are judged for elements such as technical skill, originality, showmanship, entertainment value, artistic impression, and magic atmosphere. 

 

The Magic Olympics highlights an important difference between the primary focus for sales versus magic.  In sales, we celebrate results and honor our top performers based upon the amount of sales they produce.  In magic, they focus on technique and ability, creating an even playing field for a basement amateur to compete equally against the most famous Vegas performer.  How awesome would it be to have a Sales Olympics, where the best sales people from every industry came together to match prospecting, closing, and objection handling skills? 

 

Just as good sales techniques require a solid foundation of basic training, aspiring magicians must master a number of fundamental techniques before they can execute even the most basic of tricks.  For example, the first card trick that every aspiring magician learns is The Ambitious Card.  A quick search on YouTube reveals thousands of variations as each magician masters and modifies the trick to make it their own.  However, what the videos don’t reveal are the countless hours of practice necessary to master any one of the required techniques for the Ambitious Card trick to work.  Starting with basic fundamentals such as the mechanics grip, the push off, and the pass techniques, and evolving to a succession of ever more complicated card handling skills, magicians must tackle a gauntlet of difficult and unnatural hand motions that must be executed with a combination of perfect precision and casual indifference. 

 

Life insurance agents are correct to opine that the reason the first year commissions are so high for life insurance is because it’s so difficult to sell.  Perhaps one of the reasons it’s so difficult to sell is because our agents don’t spend enough time becoming truly proficient at it.  We want our agents to always be out selling – maybe they should be spending more time practicing?  Virtually every magician both professional and amateur has developed their own personal version of the Ambitious Card – wouldn’t it be great if our agents were equally committed and creative in developing their own version of “the medical close” or “the cost of waiting”? 

 

But too much technique can be a bad thing as well.  There are many life insurance agents who are experts on every product nuance and tax loophole but never sell a thing.  It’s interesting to note that despite the technical virtuosity that is a prerequisite for any successful magician, the Magic Olympic judges access far more points to execution than to the techniques themselves.  How often do we consider “artistic impression, originality, creativity, showmanship, or entertainment value” when measuring our sales force?  This is another important distinction and raises a key question about our sales training.  Why shouldn’t a meeting with a life insurance agent be entertaining?  Does our industry have to embody Woody Allen’s observation that spending the evening with a life insurance agent was evidence that there were worse things in life than death? 

 

Magicians represent the best balance between a dedication to technical proficiency and artistic showmanship.  This commitment to creativity enables magicians to customize their repertoire to not only accommodate the specific needs of various audiences, but also to differentiate their tricks from those of their peers.  In fact, when developing a new trick, magicians start with the desired effect they want to achieve, and then work backwards to figure out how to create the illusion.  They rely on a bevy of tried and true techniques that have been passed down from previous masters in order to figure out how to achieve the desired effect and then develop a story line to lead the audience through an entertaining and surprising narrative. 

 

In contract, most of our sales training processes are very linear, beginning with making the appointment and ending with closing the sale.  Skillful agents become proficient at overcoming every imaginable objection at every stage of the appointment process.  In this aspect, they are very similar to a magician developing a routine.  What’s missing is arguably the most important element – a story that captivates the prospect’s attention and leads them unwittingly yet willingly to the desired conclusion, potentially bypassing the usual objections before they are even considered. 

 

The best sales people will tell you that they sell with stories — facts and technique don’t motivate or inspire anyone.  What would your company’s sales training look like if it focused on turning out storytellers rather than sales people?  

 

Entertainment and showmanship are not the only reasons magicians focus so much attention on developing a story line.  Misdirection plays a crucial role.  In order for any magic trick to work effectively, it is critical that the audience’s attention be diverted away from certain actions at specific instances.  Although the idea of “misdirection” may carry a negative connotation in the context of salesmanship, the execution of this technique merely involves understanding some fundamental elements of human behavior that are prevalent in all of us.  This can involve something as simple as a tendency for an audience to focus on a hand that is moving rather than stationary, or something as nefarious as how susceptible we are to the powers of suggestion. 

 

For example, shortly after finishing Alex Stone’s book I met a local magician named Shaun Robison http://www.shaunrobison.com/index.htm who was a previous silver medalist in the Magic Olympics.  Shaun disclosed that in one of his routines he asks his audience to touch their cheeks with their finger while he is simultaneously touching his own chin at the same time.  He estimates that 90% of the audience members will end up touching their own chins rather than cheeks without even realizing it just because they are subconsciously mirroring his actions. 

 

Life insurance agents employ a similar technique by nodding their heads or continually seeking affirmation throughout the sales process as a means to get the prospect to nod and agree as well. 

 

In a chapter titled “The Mentalists”, Alex Stone discusses a personality test given by American psychologist Bertram Forer in 1948 to a group of thirty-nine college students.  Forer gave all of the participants identical results containing generic statements lifted from a newsstand astrology book.  “The students were then asked to rank the accuracy of their profiles on a scale of zero to five, with five being a perfect match and zero being poor.  The average score was a 4.26, meaning that a majority of the students thought the personality descriptions were spot-on.  Forer’s original result has been replicated dozens of times – to this day the average rating hovers around 4.2 – and psychologists have since given a name to the astonishing eagerness with which people will embrace stock personality sketches as unique portraits.  They call it the Barnum Effect, after P.T. Barnum’s famous dictum ‘We’ve got something for everyone’.” 

 

I will refrain from drawing any parallels between the above paragraph and some of the assessment tools on the market today. 

 

It turns out that the more personal information a subject provides, the more accurate they tend to rate their profile.  For example, “a person claiming to be an astrologer asked one group for their exact birth dates – day, month, and year.  The second group was asked to disclose only the month and year in which they were born; while the third group gave no information.  The participants then received identical horoscopes allegedly based on the information about themselves they had given.  Remarkably, the three groups rated the accuracy of their readings differently.  Those who had revealed no information about themselves gave it an accuracy rating of 3.24.  Those who had given the month and year of their birth averaged a 3.76.  And those who divulged their exact birth date, 4.38.” 

 

This certainly would seem to support the benefits of taking the time to do some thorough fact finding before making the sale! 

 

Mentalism is branch of magic that includes telepathy, mind reading, palm reading, fortune telling, ESP, clairvoyance, and metal bending.  Alex Stone learned a basic “cold reading” script and began trying it out as part of his act.  He would have participants write the name of someone close to them on a piece of paper.  Alex would then tear the paper up in front of them, while secretly peeking at the name through “an ingenious ruse known as the center tear.”  Then he would ask a few rudimentary questions about the subject and launch into the script until he ultimately “guessed” the person’s name and relationship.  He became so proficient at this routine that one man accused him of spying on him:  “You were watching me from across the bar”, he said.  “You must have been.  You were listening in on my conversation.  Otherwise, how could you know all that stuff?” 

 

These cold reading scripts are so effective that after visiting a “psychic” just to field test what he had learned, Alex Stone wrote that “later that day, I caught myself brooding over what Stephanie (the psychic) had said – that is until I remembered the source and pushed those thoughts aside.  And yet no matter how hard I tried to dislodge them, they had a stubborn way of creeping back into my consciousness.  One of the scariest things about mentalism is that even after you understand how it works, it still feels believable”. 

 

What does mentalism have to do with sales?  The MINDvention is the world’s largest mentalism convention and attracts participants from more than twenty countries around the globe.  Stone writes of his experience attending the Las Vegas MINDvention conference.  “With their suits and headset mikes, many of the guests at the convention looked like motivational speakers, and it’s no coincidence.  A lot of mentalists earn high-dollar fees giving mind-over-matter pep talks to major corporations.  There’s a distinctly business-class vibe to the mentalism industry, and the discussions at MINDvention were frequently loaded with corporate buzzwords.  There was a lot of talk of compliance technology, cold calling, spectator control, positioning, and negative closing.  Mentalism, I realized, was one part magic, one part acting, and three parts sales.” 

 

Mentalism is such a powerful tool that books about the subject contain “stern-sounding disclaimers cautioning readers that the methods therein were for entertainment purposes only”.  I will add a similar disclaimer here that capitalizing on this gullible aspect of our human nature for the purpose of inspiring positive thinking in corporate executives is very different from manipulating an elderly couple to buy a product they don’t need or understand.  However, the potential as a means for a sales person to better connect with his prospects in order to foster trust and relevancy is too significant to ignore. 

 

This brings us back to the common challenge that magicians and insurance agents face – the problem of winning over a skeptical and unwilling audience.  Alex Stone ties it all together with his summation about the key role that mentalism plays in a magician’s success.  “Whereas conventional magic tricks have a tendency to alienate the spectators – you know the secret, and they don’t – mentalism engages them on a deeply personal level, creating an illusion of intimacy.  The focus is on them and their problems, not on the magician.  If magic is about being fooled, mentalism is about being understood.  Whereas where magic creates questions, mentalism is about answering them.  I figured that mastering the techniques of mentalism might help me broaden my repertoire and make my magic more relatable.” 

 

What life insurance would not want to be more relatable?  What sales approach would not be more effective by focusing on the prospect rather than the agent?  And what close wouldn’t be more effective if the prospect felt they were being understood rather than fooled? 

 

Magicians recognize that the very nature of their profession tends to alienate their audiences.  There is a chapter in Alex Stone’s book titled “It’s annoying and I asked you to stop” – a refrain every life insurance agent has heard in response to their persistent prospecting.  However, through a combination of dazzling skill, imaginative story lines, and a touch of mentalism, magicians have found a way to not only win over their audiences, but succeed virtually every time. 

 

Perhaps by adding a little magic to our own sales training it’s possible that our agents could achieve similar success. 

 

What can Life Insurance Companies Learn from Steve Jobs’ Washing Machine

May 6, 2013

Much has been written about Steve Jobs so I have no intention of contributing redundantly to the accolades and analysis already asserted about his genius.  However, the question of how Steve Jobs might approach the challenges facing life insurance companies represents an intriguing intellectual exercise that hasn’t been tackled yet.  Granted, there are huge differences between envisioning sleek technological gadgets to deliver entertainment content to consumers and marketing legal contracts that pay off upon death.  In fact, it’s uncertain that, despite his genius, Steve Jobs would have made a decent insurance company CEO.  However, there are a few nuggets of wisdom in some early interviews that offer insight into how he approached basic business challenges, and those ideas are applicable to any industry. 

 

For example, in a 1995 interview with Robert X. Cringley for the PBS television series, “Triumph of the Nerds” Jobs was asked how he learned to run a company at such a young age when he had no management experience and training.  Jobs replied “You know, throughout my years in business I discovered something.  I would always ask why you do things.  Nobody knows why they do what they do.  Nobody thinks very deeply about things in business.  That’s what I found.  If you are willing to ask a lot of questions and think about things and work really hard, you can learn business pretty fast”. 

 

Nothing particularly earth shattering in that observation. 

 

However, at the very end of an interview with Gary Wolf published in Wired Magazine in February 1996, Jobs provides a more specific example of the type of questioning he pursues.  Wolf asks Jobs “is there is anything well designed today that inspires you?” 

 

“Design is not limited to fancy new gadgets.  Our family just bought a new washing machine and dryer.  We didn’t have a very good one so we spent a little time looking at them.  It turns out that the Americans make washers and dryers all wrong.  The Europeans make them much better – but they take twice as long to do clothes!  Most important, they don’t trash your clothes.  They use a lot less soap, a lot less water, but they come out much cleaner, much softer, and they last a lot longer.  We spent a lot of time in our family talking about what’s the trade-off we want to make.  We ended up talking a lot about design, but also about the values of our family. Did we care most about getting our wash done in an hour versus an hour and a half?   Or did we care most about our clothes feeling really soft and lasting longer?  Did we care about using a quarter of the water?  We spent about two weeks talking about this every night at the dinner table”. 

 

I had no idea there was such a difference between how Americans and Europeans washed their clothes.  I’m also glad I was never invited over to Steve Jobs’ house for dinner – what fascinating dinner conversations they had! 

 

It’s interesting to see how Jobs approached design from the perspective of defining values and priorities.  Who knew that even something as mundane as washing clothes can inspire an evaluation of different ideals and standards?  It seems that his obsession with understanding why things are done a certain way went beyond mere factual explanations and focused more on motivation, lifestyle, and preferences. 

 

Since I am only anecdotally familiar with washing machines (much to my wife’s chagrin), I embarked upon some personal research regarding what could be so wrong with the American system.  I was surprised to learn that the brands I was most familiar with were all manufactured by the same company — Whirlpool makes Kenmore, Maytag, and Amana washing machines in addition to their own.  The rest of the market is rounded out by other huge players such as GE, LG, Frigidaire, and Samsung. 

 

A quick look at these companies’ websites immediately revealed a disconnect between their approach to consumers and Jobs’ more thoughtful analysis of his family’s values and priorities.  The majority of the websites provide an excellent example of what life insurance company websites would look like if they were designed by actuaries – lots of product specifications supported by vaguely descriptive undefined terms whose meanings are unclear.  To Whirlpool’s credit, they offered a search option that allowed consumers to search by need or by product feature.  The “search by need” option more closely mirrored the values discussion that Jobs no doubt had with his family. 

 

So what type of washing machine did Jobs ultimately purchase?  “We ended up opting for these Miele appliances.  They are wonderfully made and one of the few products we’ve bought over the last few years that we’re all really happy about.  These guys really thought the process through.  They did such a great job designing these washers and dryers. I get more thrill out of them than I have out of any piece of high tech in years”. 

 

It’s probably important to note that this interview took place years before the first iPod was invented – this might explain why a washing machine garnered such an exalted position in Jobs’ technology hierarchy. 

 

The differences between Miele’s website and all the others are immediate and obvious.  While every other company positions themselves as an “appliance manufacturer”, Miele is selling “laundry care”.  Perusing their “features/benefits” section is a lot like eavesdropping on the conversations that took place at the Jobs family dinner table.  While the other manufacturers help consumers identify products by color, capacity, and cost, Miele reinforces the love of clothes and educates them on their care. 

 

It’s impossible to not see parallels between selling life insurance and selling washing machines.  Rookie agents love to launch into the technical differences between term and whole life while balancing the living benefits with the amount spent on premiums.  Veteran agents wisely spend the majority of their time helping consumers understand their goals and dreams in order to properly identify the most effective financial vehicles to achieve them.  In the same way, American manufacturers of washing machines focus on all of the wrong things.  One of the most prominent selection features on their websites is price, immediately eliminating the most attractive options from consideration for cost conscious consumers.  There is no evaluation of values and priorities.  No passion for clothing care.  No education or motivation.  And no meaningful explanation about why or how their technology is even relevant.  

 

So what insights can we apply from Jobs’ love of Miele washing machines to the life insurance industry?  What sort of things would Jobs love and hate about our products and processes? 

 

The number one consumer complaint about our products is that they are so complex that no one understands them.  Jobs’ notorious fixation on simplicity would undoubtedly compel him to hate our products with a passion.  Jobs is famous for immediately seeing the potential benefits of using a mouse to interface with a computer, and then driving his developers crazy because of his insistence that the mouse utilize just one button because two buttons was just too complex.  It’s amusing to conjecture about how he would have responded to a term versus whole life presentation by a hapless but well intentioned advisor.  This is a great lesson for life insurance companies.  For decades we have ignored consumer gripes about the complexity of our products.  It’s hard enough to get consumers to even think about death, and then we reward them for their foresight with complex financial products that offer multiple methods of solving a single problem.  Consumers want their survivors to be taken care of in the event of their death while insurance companies respond with a variety of underwriting, cash value, and premium guarantee solutions.  Anyone who has recently negotiated a new cell phone contract and navigated their way through a variety of roaming, minutes, and data options when all they really want to do is have the ability to make phone calls will sympathize with what we put our consumers through. 

 

Of course, a properly executed fact finding session does wonders to address this complaint and is a process that Jobs would probably have approved of.  After a careful and detailed evaluation of a consumer’s goals and dreams, the right life insurance policy is suddenly more of an obvious solution than a confusing choice.  In fact, the life insurance industry is one of the few industries to incorporate the dinner table discussion that was such a critical component of Jobs’ washing machine decision into a standard element of our sales process. 

 

The second biggest complaint consumers have about our products is the fact that they have to (in their words) “die to win”.  This is less a complaint about our products than it is about the nature of the life insurance sale.  Just imagine if Jobs had dictated that you could only buy an iPod as a gift for someone else – that’s essentially the position the majority of our consumers are placed in.  Certainly an emphasis on the living benefits of our products is helpful, but the fact remains that any living benefits, no matter how potentially lucrative, still pale in comparison to the beneficiary’s promise of a large lump sum payment in cash! 

 

And this brings us to another interesting query in the Jobs context – who is our primary customer?  Most companies have developed concise conclusions on this matter usually fixating upon their agents, their consumers, or both.  From Jobs’ perspective, it seems crystal clear who their customers are – yet in the case of the iPod, they could easily have made an argument that their key customer was the record companies.  After all, what good is an iPod without music?  Clearly the relationship with the providers of the content is critical to the success of their product, yet imagine how different the iPod would look if the needs of the recording industry were placed ahead of the consumer. 

 

It’s certainly possible to have multiple customer groups so this isn’t meant to be an indictment of companies who place their distribution ahead of their policyholders on the customer chain of command.  However, it’s also possible that choosing between policyholders and agents both miss the mark when it comes to identifying the true end users of our products – the beneficiaries.  If there’s a single insight that Jobs might have contributed to the life insurance industry it would probably be to design our products for the beneficiaries more than for the policyholders or the agents.  Yet this group is most often completely overlooked at least as respects discussions of who our customers are. 

 

And this leads to the final area that Jobs would probably find room for improvement – our product solutions themselves.  We alluded earlier in this article to one of the coolest features of any life insurance policy – that fact that at some point some named beneficiary is going to be given a very large check.  As appealing as this potential windfall may be, we also know that in most cases the actual amount of the check falls far short of the actual need for the dollars.  From this perspective, our products look less like solutions and more like financial triage.  Yet as with triage, it’s critical that priorities are established and the proper choices are made among a selection of increasingly inadequate alternatives.  Yet too often, consumers are left to fend for themselves – or to rely upon the advice of investment professionals who were never privy to the years of fact finding discussions that led to the insurance purchase in the first place.  It’s a bit like Apple coming out with the iPod without creating iTunes and just letting consumers figure out how to get music onto their sleek new devices. 

 

This is especially true in the case of final expense life insurance sales where funeral directors are in the position of having to implement a funeral whose cost has no coordination with the final expense life insurance policy intended to fund it.  Not only do funeral homes find themselves grossly underfunded in terms of meeting the expectations of the family, but the delays involved in processing a final expense death claim can often place the funeral home in the awkward position of having to charge interest or late fees since they have to cover the cost of the funeral up front.  Considering how controlling and obsessive Jobs was about understanding and meeting the expectations of their customers, it’s difficult to see how he would have left so much of Apple’s product performance left to chance. 

 

I realize we’ve read an awful lot into the fact that Steve Jobs loved Miele washing machines, and have used that insight to make some pretty significant leaps to life insurance.  However, there is one hidden gem in Jobs’ love affair with Miele that I have never seen appear in print anywhere.  People always ask why all Apple products begin with i – iMac, iPod, iTunes, iPad, iPhone.  The Jobs interview took place two years before the release of the first i product – the iMac.  In Jobs’ keynote address he indicated that the i stood for “internet”.  However, he also hedged his bet by claiming that the i stood for a litany of other terms such as individual, instruct, inform, and inspire.  It is fascinating to note that Miele’s iconic logo has also incorporated a distinctive i with a long slanting line over it for nearly a century.  In fact, consumer research has indicated that consumers can recognize the Miele brand merely by their distinctive i alone. 

 

So did the Apple i merely reference the i in internet or was Jobs subtly influenced by the logo of a washing machine he claimed to be “the most thrilling technology” he had encountered?  The world may never know, but keep in mind that you heard it here first! 

A New Approach for Motivating Mediocre Agents

May 2, 2013

Wanted:  entrepreneurial minded individuals who want to be their own boss, own their own business, and control their own destiny.  No limit on how much money you can earn.  No experience or specific education required.  No requirement of capital investment or loans.  No franchise or territorial limitations.  Training and support provided.  Apply at your local life insurance company or agency. 

 

Considering how attractive we make it for someone to become a life insurance agent, it’s curious that the challenge of recruiting and retaining a successful field force is one of the most persistent problems our industry struggles with.  This is even more perplexing since our training tools have been tested, honed, and documented over more than a century. 

 

There are no shortages of highly sophisticated assessment vehicles that adeptly predict the aptitude of the prospective agent to help companies identify the most promising candidates.  Prospect inventories consisting of the names of 200 friends, family, and acquaintances ensure a wealth of warm contacts to help the new agent get on their feet.  Highly effective and time tested sales tracks and telephone techniques turn potentially problematic interactions into routine exchanges and rout responses.  All aspects of the sales cycle, from appointment making, case opening, fact finding, needs assessment, case closing, and the all important referral talk, have been refined to a science and captured and conveyed in interactive multi-media training technology. 

 

We rationalize the high agent turnover rate with the justification that selling life insurance is just hard – and that’s certainly true.  But the most successful agents will tell you that selling insurance is not difficult if you’re disciplined.  Successful people just do more of the unpleasant things that unsuccessful people don’t want to do.  Anyone who has ever persisted through a weight loss program, an exercise regime, or has quit smoking understands this simple truth.  In fact, successful agents often tell rookies to expect to be grossly underpaid their first few years in the business until their client base is established, and then overpaid (or at least more than adequately compensated) thereafter. 

 

The life insurance compensation structure supports this expectation and the pyramid of modest but steady first year sales against a foundation of increasing renewals confirms it.  The agent who consistently produces a reasonable amount of persistent, quality business can eventually expect a predictable cash flow consisting of renewals, repeat sales, and referrals from satisfied long-time customers. 

 

Why then, is it so difficult to get many of our agents to reach this point? 

 

Assuming that our assessment and training tactics are effective (that’s a topic for a future article), one obvious place to consider is whether our incentives are aligned with our objectives.  At first glance, it’s difficult to argue that the direct cause and effect of commissions is anything but perfectly aligned, especially considering how much emphasis is placed on new sales.  You want your agents to sell new policies?  Offer them five to ten times more compensation in the first year than you do in subsequent years and you have certainly provided adequate incentive.  Combine that with the ability to qualify for lavish trips to exotic locations and report their status on a weekly, monthly, and quarterly basis to their peers as well as to their spouses and you’ve expanded the motivation well beyond the agent’s bank account. 

 

The effectiveness of this approach is evident from the number of perennial top producers that dominate sales for every carrier or agency.  This rare breed of agent combines the discipline and competitiveness of a world class athlete with the dedication and practiced effectiveness of a virtuoso musician.  Every aspect of our support structure is geared toward identifying, motivating, and rewarding this unique individual. 

 

Yet our industry is littered with the “also ran” agents.  The more mundane minions who eventually settle for mediocrity in return for the freedom that comes from being self-employed.  Often times, they are the beneficiary of a working spouse with access to affordable health care, and are able to indulge in the illusion of full-time employment by occupying themselves with busy work that passes for customer service, prospecting, or continuing education.  These agents rarely qualify for conventions, are content to cover their expenses, and maintain their dignity by the sheer fact that they have survived in this business while so many others have failed.  Although not highly motivated for sales, these agents are often the most technically knowledgeable and have the most loyal and well serviced – albeit small — customer base. 

 

Given the different priorities, it’s easy to see why no amount of first year commissions or alluring conventions are going to profoundly impact the behavior of the mediocre agent.  Yet there are far more agents who fall into this category than industry superstars.  The challenge of finding a means to leverage this significant, yet largely idle resource has significant implications for companies of all sizes and types of distribution, especially considering that they have stubbornly remained resistant to all of our promotions, campaigns and motivational contests. 

 

Author Dan Pink’s new book titled “Drive: the Surprising Truth about What Motivates Us” uses 50 years of behavioral science to overturn the conventional wisdom about human motivation.  In an MIT study with economists from the Federal Reserve Bank, the University of Chicago, and Carnegie Mellon, three levels of rewards were offered for performance of a variety of different tasks.  Similar to the life insurance commission system, people who performed fairly well received a small reward, those who performed “medium” well got a medium reward, and those who performed exceptionally well received a large cash prize.  Not surprisingly, for simple, straight forward tasks such as those involving mechanical skills or memorizing strings of digits, this reward structure worked very well.  However, for tasks requiring even the most rudimentary cognitive skills, conceptual thinking, or creativity, the reward structure actually seemed to have the opposite effect – the highest performers actually performed worse. 

 

These results ran so contrary to accepted economic theory that they repeated the study in Madurai India where they could afford to offer top performers a large reward that was actually quite substantial.  The results were the same.  Eventually, similar studies were conducted for economists, psychologists, and sociologists with the same outcome – for more complex tasks the traditional “carrot and stick” approach de-motivated rather than motivated most top performers. 

 

Although the reasons behind these surprising results are subject to debate, there seems to be some consensus as to why this bizarre behavior occurs: once people are paid enough to take the issue of money off the table, they become motivated by things other than more money.  This certainly explains the behavior of the typical mediocre agent who is comfortable with just meeting expenses.  It’s also consistent with the behavior of the top performer, whose motivation is a complex combination of ego, professional pride, competitiveness, and lifestyle so money remains an important factor. 

 

So how do you motivate the monetarily content?  According to Pink, there are three key motivators – autonomy, mastery, and purpose.  Autonomy is the desire to be self-directed – to have control over one’s time and destiny – and is certainly core to one of the most appealing aspects of insurance sales.  Mastery is simply the desire to continually improve one’s abilities and is reinforced by the occasional inverse relationship between new sales and the number of professional designations an agent has attained.  Purpose is simply the desire to make a contribution – to be a part of something bigger than oneself – and is also occasionally confirmed by the number of mediocre agents who become highly involved in their local professional associations and community groups. 

 

This isn’t to say that successful agents aren’t also motivated by these same factors.  In fact, most top agents relish their independence, avidly pursue professional designations, and are aggressively engaged in their communities as well as in their industry.  Examples abound in other industries as well.  For example, Google allows their employees to spend 20% of their time working on whatever they want to work on.  This gift of autonomy wasn’t just generosity on the part of Google management – half of their new products were created as a result of this freedom.  The emergence of free open source software such as Linux is a good example of how “purpose” drives the very successful.  What else would explain why a highly skilled software programmer would voluntarily commit their very limited free time to do even more programming in order to create a free software package for no remuneration? 

 

 

Another good example of how the highly successful are motivated is the emergence of free and open source software with the Linux Operating System being an excellent example.  It’s difficult to imagine what would motivate a  On the other hand, this behavior is consistent with Pink’s motivating factors. 

 

So what does this mean for the mediocre agent? 

 

In an article titled “Forget Carrots and Sticks, They Don’t Always Work” Dan Pink writes about an unconscionable act committed by the management of Red Gate Software in Cambridge, MA:  they eliminated sales commissions for their sales force — and sales actually increased.  The reason for this drastic step was because their salespeople were constantly finding ways to game the commission structure.  As a result, Red Gate management was spending increasing amounts of time developing more complex compensation structures, and their sales force spent more time finding ways to work the system to their advantage.  Both parties became less focused on their primary purpose – making great software and selling it to customers who needed it. 

 

Pink wasn’t advocating for companies to eliminate commissions, but Red Gate’s difficulties are certainly echoed in the insurance industry.  Red Gate joint CEO Neil Davidson Pink succinctly summed up his decision on his blog:  “Imagine you could construct a sales robot, programmed solely by the rules of any sales structure.  How would it behave?  It would steal deals off other salespeople, sell customers software they didn’t need, argue with its boss over its commission and backstab its colleagues”.  Although his conclusions may be a bit extreme, the challenge of aligning a life insurance company’s persistency, mortality, and quality of business goals with agent activity certainly raises questions about the overall effectiveness of our commission structure.  At the very least, there is much more emphasis placed on new sales over service or quality of business, and there is often a resulting dichotomy between the home office and the field as they each pursue somewhat mutually exclusive objectives.  Red Gate found that once their managers were freed up from policing their sales force and arbitrating disputes, they could focus their activities on more useful activities.  In addition, the arrangement encouraged more teamwork and collaboration between salesmen as well as between the sales force and management.  According to Davidson, “rather than relying on carrots (sell more and you can buy the new car) and sticks (don’t sell enough and you won’t be able to feed your kids), we were compelled to make our salespeople’s work more interesting, to set better goals, and encourage teamwork”. 

 

It will take someone with much more courage than I have to promote the elimination of commissions, especially since our current structure works so well with top performing producers.  However, if Red Gate’s experience is consistent, an argument could be made that replacing commissions with a salary equivalent for mediocre producing agents could result in increased sales, a higher quality of business, and the ability to focus on more important issues for field management. 

 

For the top agents, it’s clear that our current compensation structure works well.  However, there may be better ways to leverage the army of also ran agents who are immune to the motivation of commissions and conventions.  Assuming Pink is correct and these agents are primarily motivated by autonomy, mastery, and purpose – and assuming Red Gate’s commission elimination experience is transferrable to the insurance industry – then there may be an opportunity for enhancement. 

 

Although it may sound crazy, consider the implications of converting your long-term mediocre producing agents from commissions to straight salary.  Freed from the need to produce new sales, the sense of autonomy for these agents increases significantly and they will be able to focus more on mastery and the higher purpose of servicing their clientele and contributing to the greater good of the industry and their company.  And if Red Gate is correct, their production will increase as well. 

 

There’s an inconsistency in our current field management structure where the top agents are also the first ones to take time out of sales in order to participate in a carrier’s top producer panel or advisory committee.  Furthermore, these master prospectors are also the most frequent recipient of company leads and orphans, even though they need them the least.  Meanwhile, mediocre agents are most often left alone, as if their modest business practice requires their undivided attention.  Attention from the Home Office is considered an intrusion or a distraction, or at the very least, as unproductive.  Yet these agents are the first to sign up for a home office new product rollout, or the latest Continuing Ed seminar.  They are also the first to mentor a new agent, volunteer at a local life underwriters meeting, or serve on the board of their favorite charity.  They have plenty to contribute and lots of time to do so – as long as they don’t have to prospect or sell too much. 

 

The disconnect between motivating with a high first year commission and agents who are more interested in maintaining a comfortable rather than a profitable professionalism is obvious – yet we continue to beat these agents with the same impotent stick that rewards new production while ignoring the significant contribution they can make to a carrier – if the right motivation is provided. 

 

For example, consider substituting a portion of commissions for this group of agents with a salary equivalent and enlisting them to work one day a week in partnership with a carrier. 

 

One of the reasons why successfully selling life insurance is so hard is because it requires a wide range of very specialized expertise.  The organizational skills and discipline required to maintain a constant inventory of prospects and a high level of productive activity often runs contrary to the creativity and entrepreneurial spirit that attracts most top sales folks in the first place.  For many top producers, the secret to their success is an effective staff that picks up the slack to supplement a producer’s weaknesses.  In the same way, it’s the rare marketer who possesses equal skills to master creative promotional campaigns, market analytics, strategic planning, product management, sales training, advanced sales, and field management.  Fortunate companies are able to parse out these responsibilities to a staff of specialists, but many small companies require their personnel to do double and triple duty – often well outside of their comfort zone and area of expertise. 

 

The minions of mediocre agents represent an untapped supply of available labor, many of whom possess specialized expertise that can contribute greatly to both the home office as well as top producing agents – the trick is to impose the proper motivation.  However, many of these agents have already made their motivating factors very clear through their involvement in various industry and community organizations as well as their commitment to professional development.  By redirecting their desire for autonomy, mastery, and purpose to a higher purpose of working in partnership with a home office, these highly skilled but ineffective producers can become highly valued home office partners, freeing up marketing staff to focus instead on identifying and developing that next million dollar producer. 

 

When Don Royster was EVP of Georgia Life, he embarked upon a radical restructuring of their field force.  Using LIMRA assessment tools to classify agents as having greater selling skills or service skills, they then reassigned their agents either to the field or to the home office in order to leverage each individual’s greatest strengths.  A similar opportunity exists by changing the emphasis for performance for mediocre agents.  Rather than continuing to beat them with the stick of new first year commissions, smart companies can offer them separate compensation contracts that reward persistency, service, professional development, 

Life Insurance Companies are sitting on a Treasure Trove of Social Media Content – They just don’t know it

April 13, 2013

Let’s face it: most people don’t “like” their life insurance companies.  Oh sure, they may connect with personalities created by multi-million dollar ad campaigns featuring Flo, or an accented gecko, or even mayhem personified, but the expense  involved is far beyond the reach of all but the biggest companies.  Plus the most recognized insurance brands are generally P&C rather than life companies.

 

What’s to “like” about life insurance?  Not much unless you’re dead.  Consumers view it as a “die to win” proposition and there is an element of truth to that.  We can extol the virtues of living benefits until we’re blue in the face, but the fact remains that our products perform best when they are used for the primary purpose they were intended.

 

For the most part, a consumer’s relationship with their life insurance company is fairly static.  Other than the occasional change of address or bank account, there’s not a lot going on.  Sure, there are plenty of reasons to review and update your policy annually but very few people do and our products still deliver their promises admirably, even if not optimally.  There aren’t a lot of opportunities to engage.

 

There’s also nothing “cool” about life insurance, but  that’s probably a good thing.  Although it would be great to be identified as a fun and hip industry, it’s difficult to reconcile those attributes with the motivation to manage risk and provide stability during traumatic times.  Plus I’ve visited hundreds of home offices and can attest to the fact that, although a fortunate few companies have succeeded in creating a refreshingly casual and creative culture, the fact remains that our industry tends to attract employees who are more risk adverse than reckless.  These folks tend to stay with a company for the majority of their careers resulting in a work force that is decidedly middle aged and as complacent as they are competent, regardless of the number of air hockey tables or popcorn machines installed in the workplace.

 

A lot of people enjoyed the recent Taco Bell Super Bowl ad “We Are Young” featuring a rowdy bunch of seniors sneaking out of their retirement home for a crazy night of drinking, dancing, and tattooing http://www.justjared.com/2013/02/03/taco-bell-super-bowl-commercial-2013-we-are-young-video/ .  This commercial reminded me of most life insurance companies’ social media attempts.   No matter how hard we try to appeal to a younger audience by conveying a fresh and edgy image, we still end up looking as out of place on Facebook as these  elderly folks at a rave club.

 

This doesn’t mean that social media won’t work for our industry.  We just have to remember the two critical elements of any successful social media effort:  authenticity and original, meaningful content.

 

So let’s begin by getting in touch with our inner nerds and admitting that life insurance companies sell the peace of mind that comes from the promise of a future financial payout.  And since that payout occurs when someone dies, we will also inevitably be linked to tragedy and heart break.  Although it may be possible to cleverly turn this into something alluring, amusing, or even avant-garde, do we really want to?  Our products are for people who understand that it’s not “if” but “when” we die – they are not for folks who still believe in their own immortality.  In fact, the people who truly understand the value of our products are usually the ones who have benefited from them.  Making light of that relationship undermines the significance of what they have experienced as well as the importance of our contribution.

 

But how effective is it to use social media to shout “hey, we’re really boring and stodgy but we’re reliable and trustworthy and that’s just the way you like us”?  Or “when you’re thinking about dying, think of us”!  Or “go ahead and laugh at us — we take ourselves seriously so you don’t have to”.

 

There is a better way.

 

Life insurance is a gift for the living from the deceased.  It is universally understood that there’s little motivation to buy our products unless you care about someone.  The generosity required is a testimony to the irrational behavioral economics that define us as humans.  After all, once you’re dead, how much will you really care if your bills are paid and your family is provided for?  Fortunately, our sense of responsibility to fulfill our obligations and also the desire to leave a legacy are strong motivators.  Even in death it seems that we still care very much about what people think of us.  The very least we can do as insurers is make a concerted effort to see that these objectives are met.

 

Sadly, in the majority of cases the amount of life insurance is inadequate to satisfy all financial goals.  In addition, carriers have minimal influence in making sure that what proceeds do exist get used wisely and for the purpose they were intended.  However, when it comes to leaving a legacy, we have plenty of leverage.

 

Anyone with elderly parents or who has spent any time around a nursing home understands that older folks have some pretty interesting stories to tell.  They also have a different perspective and a recollection of the world when it was a very different place.  In fact, when you dig into just about anyone’s life, there is usually an abundance of intriguing twists, coincidences, and insight that make for an engaging and inspiring story.  There are tales of heroism, self-sacrifice, and generosity in all of our pasts.  Unfortunately, barring a famous few, most of these heroics are known only to the closest family members.

 

Obituaries rarely do justice to the lives they are intended to represent.  They are little more than news flashes reporting dates, times, locations, and genealogy.  Our lives are much richer than the mere facts of our existence.  Every now and then, an obituary will hint at a more profound life, tipping off a reporter of the possibility of a human interest story and a chance to share more details.  I’ve often wondered about the reaction of the family members when a total stranger calls them to say “I just read your Aunt Millie’s obituary and she sounded like a remarkable person.  I’d like to write a follow up article about her life if you’d care to provide some more information”.

 

Who wouldn’t be honored and flattered by that request?

 

The next time someone calls your claims department wouldn’t it be great to offer something more meaningful than just your condolences?   Before you drop that claim check in the mail, take a moment to check out the online obituary.  Then call your beneficiary and tell them their Aunt Millie sounded like a remarkable person and you think the rest of your policyholders would be interested in knowing more about her so you’d like to do a follow up piece for your company’s Facebook page.

 

Who wouldn’t be honored and flattered by that request?

 

Your twitter feed now consists of headlines like the following:

  • Mary Smith — chance encounter on the subway leads to a successful career in the publishing business
  • Bob Jones — war hero regaled family with stories from Pearl Harbor
  • Millie Stewart — raising seven grandchildren at seventy years of age
  • Bill Beck — master electrician worked on all of city’s biggest jobs – and some of the smallest
  • George Johnson — grandchildren cite impact their grandfather had on their lives
  • Gertrude Booth — she died doing what she loved best – helping others
  • Paul Morris – sacrificed his education so his brother could go to college instead

 

And so on.

 

If you consider how many claims your company pays every day, there is a limitless supply of material to represent your company positively in the eyes of your policyholders and their beneficiaries while contributing original, authentic, interesting, and inspiring content to the social media universe.

 

But who’s going to want to read any of this?

 

Well, you can bet that every one of Aunt Millie’s friends and family are probably going to “like” her Facebook article.  You can also bet that they will probably share it with others.  In fact, it will probably be posted and reposted on their pages, and those of friends and family members.  It will also probably elicit comments and other anecdotes and be added to any of the other online tributes to Aunt Millie’s life that have already been created.  It’s also a good bet that they will appreciate what your company did for her – and for them – and will take that into consideration when they’re ready to buy insurance.  Multiply that by a considerable number of claims each year and you’ve produced a significant amount of highly focused marketing content without spending a lot of money.

 

You don’t need to hire a twenty something social media consultant to scour the internet for content or think up crazy contests or funny anecdotes.  You just need someone with good writing skills and you’re more likely to find that among your current middle aged work force than in someone freshly out of college.  More likely, all you need to do is facilitate an on-going discussion between your marketing department and your claims department and let them work out the details.

 

But there is a much larger audience than just friends and family members.  Consider StoryCorps  http://storycorps.org/ .   According to their website, they are an independent non-profit whose mission is to provide Americans of all backgrounds with the opportunity to record, share, and preserve the stories of their lives.  Since 2003, StoryCorps has collected and archived more than 45,000 interviews with nearly 90,000 participants.  Millions listen to their weekly broadcast on NPR.  Their efforts have produced a number of NY Times bestselling books, CD’s, and DVD’s.

 

Apparently there is a tremendous amount of interest in the extraordinary stories from everyday people living normal lives.

 

There is also a higher purpose.  StoryCorp indicates that they do this “to remind one another of our shared humanity, strengthen and build the connections between people, teach the value of listening, and weave into the fabric of our culture the understanding that every life matters. At the same time, we will create an invaluable archive of American voices and wisdom for future generations.”

 

Life insurance companies can provide the same thing but with a greater urgency.  Since our subjects are deceased they’ve missed their chance to archive their stories unless their beneficiaries do it for them.

 

Perhaps there is something “cool” about our industry after all.  We’re in a unique position to honor the lives of our customers, create a lasting tribute for their friends and family, and share in a public manner the otherwise private successes of ordinary people.  And we can do this while creating authentic inspiring social media content that represents our companies and our industry in a positive manner.

 

If StoryCorps’ experience is any example, people really “like” this.

 

 

 

The Funeral Industry’s Success with Celebrant Services Gives Life Insurance Companies a Reason to Celebrate

August 11, 2010

My friend Billy died in June of 1996. It wasn’t unexpected as he had been suffering from Hodgkin’s Lymphoma for many years, but it was still difficult. Billy lived next door to me and, although we grew up together, we drifted apart in adulthood. He moved back home to live with his parents when he got sick and I had also moved back and bought my parents’ house so we found ourselves neighbors once again and reconnected. His sister asked me to speak at his funeral and it was one of the hardest things I have ever done.
I’ve done a fair amount of public speaking, but what’s the right way to address a funeral? I had a lot of “Billy” stories about things we had done together as kids, but which were appropriate? The crowd was very diverse, consisting of his family, our neighbors, his friends and co-workers and numerous other people that I didn’t even know. I wanted my tribute to be both heartfelt as well as consoling. I wanted to move the audience with laughter as well as tears, while at the same time leaving his family with the gift of pride. However, at the same time, I had my own mourning to deal with. I wasn’t sure if I could deliver my monologue without choking up completely, and I really hadn’t had the time to process my own grief.
In the end, I think I did okay. I did tear up, but didn’t choke. People laughed. People cried. My “Billy” stories seemed to have been accepted in the spirit that they were intended. And most importantly, the process of preparing my presentation ultimately helped provide me with a different perspective on my own bereavement.
Most of us have probably been to more funerals than we care to remember and none are particularly pleasant. But isn’t it interesting that occasionally we attend one that we thoughtfully pronounce to have been “an especially good one”? And what made it, if not good, distinctly better than the others? Most likely it wasn’t because of an unusually beautiful flower arrangement, or an especially elaborate casket, or even a particularly stirring bagpipe dirge. And although we also tend to measure the “value” of a funeral service by the length of the line at the wake, we also understand that a funeral is not a popularity contest and that timing and circumstances significantly influence attendance. Furthermore, regardless of how skillful the funeral director, all of us hope that even on our worst day, our corpse will not be considered to resemble us identically in life.
So what made those rare funerals so memorable? In virtually every instance, it was the quality of the speakers. Usually it was the Pastor who knew the deceased intimately and was also an experienced and inspiring orator. Or it might be the gifted grandchild who was close enough to the deceased to have a treasure trove of well-told tales yet still removed enough to be able to keep their grief in check. Or better yet, the lifelong best friend who knew the deceased better than anyone, and could address a crowd as casually and intimately as they could a poker game. The best funerals might include all three.
Unfortunately, most of us don’t consider public speaking ability a criterion for choosing our friends. Those most qualified to speak about our life’s experience are those closest to us, and therefore the least emotionally equipped to do so at the time of our demise. So we often turn to “the second stringers” – people who knew us well enough to be able to say something, yet not so well as to be too stricken. The ability to find someone who knows how to construct an articulate, interesting, and moving eulogy is relegated to a hope rather than an expectation.
Funerals are for the living, and the living want to laugh and cry while reliving memory after memory of the many facets that define our lives. We want to learn things about the deceased that we never knew, and surround ourselves with people who share our sense of loss and can help fill the void with new stories or different perspectives. We come away from the best services either wishing we had gotten to know them better, or feeling proud and satisfied because we were one of the fortunate few who did. Yet too often this important task is relegated to the generic ramblings of a religious leader with no personal relationship. Or the meandering mumbling of a well intentioned, but inarticulate relative. Or worst of all, the sob wracked wrenching of a widow bravely attempting to auto-pilot through the day.
Ernie Heffner, Dean of the ICCFA University College of 21st Century Services, clearly understands this dilemma and makes a compelling and persuasive argument in favor of the Celebrant Services certification program offered by the college. His very articulate and thorough discourse is detailed in the May 27, 2010 issue of Memorial Business Journal http://memorialbusinessjournal.files.wordpress.com/2010/06/mbj-01-21-05-27-101.pdf.
Heffner Funeral Services and Crematory in York, PA had been perennially ranked #1 in terms of market share as well as customer satisfaction in a highly competitive market with 23 other competitors. In most instances, maintaining a top position in such a mature market consists of incremental growth in terms of market share as well as volume. Yet when Heffner started offering Celebrant Services, in less than a year his case volume was up 6.3% and his market share was up 16.5% while total deaths in his county actually declined by 9.5%!
What are Celebrant Services? In Heffner’s case, “usually a day after the funeral arrangements are made with the funeral director, the family comes back to the funeral home for what is essentially a story time. It is a wonderful time to not only get stories about the loved one but also it does an awful lot to help them on their journey with their grieving. During the services, “there is an opening introduction, which should be done by the funeral director, who serves as sort of the master of ceremonies before handing off to the celebrant whose role is like a consultant between the family and the funeral director, to make sure all of the family’s wishes are coordinated”.
The genesis for this idea came from some persuasive statistics indicating a decline in the number of people who actively participate in religious services. “Surveys taken 40 – 50 years ago typically revealed that about 80 percent of the population in the United States actively participated in organized religious services on a regular basis. Today, would it surprise you to think that those numbers are nearly reversed, with only slightly more than 20 percent of the population actively participating in religious ceremonies on a regular basis?”
As Heffner wryly points out, “we’re getting the rent-a-pastor. Some of them are nice folks and everybody probably has one or more that they call when a family isn’t formally affiliated with a church. And you are sitting there with your fingers crossed hoping that clergy person doesn’t say ‘Bob’ when the deceased man’s name is ‘Bill’.”
Although I haven’t given a lot of thought yet to exactly how I’d like my own arrangements to be handled, I can confidently state that having some stranger offer generic platitudes while mixing up my name is not the way I want to go!
As if we needed even more potent proof of the power of Celebrant Services, Hefner also shares the results of his marketing efforts – although to call it “marketing” might be generous. Heffner just wanted
to let the community know that they were offering Celebrant Services so they chose a simple, two-sided newspaper insert to get the message out. In Heffner’s words, “we couldn’t have made it more difficult for people to have an idea about preplanning or to take positive action. There is no business reply, there is no mention of preneed and there is no suggestion to contact us. It just says this service is available. Ironically, the insert has attracted more preneed business than some of the firm’s targeted preneed promotions. ‘What we found is that people are coming to us to preplan to get this type of service’.”
I know. It doesn’t usually take me this long to finally bring my articles around to the subject of insurance; but in this case, I hope the lengthy set-up was worth it!
Preneed and final expense companies take note. We often state that life insurance is the type of product that needs to be sold rather than bought, but in Heffernan’s case, it appears as if Celebrant Services merely need to be “introduced” in order to spark interest. The implications of this as respects our prospecting methods are significant.
The foundations of both preneed and final expense lead generation efforts have long focused on the fear of death. It’s no wonder that the primary respondents to our direct mail campaigns are usually the elderly or the ill. But nearly everyone likes to talk about themselves. And Celebrant Services provide a means to shift the conversation away from the dull details of death to a lively discussion about the aspects of life that we most want to be remembered. It also creates an opportunity to bring other family members and loved ones into the conversation and shifts the life insurance purchase decision from a selfless act of generosity, to a means of funding a fitting tribute on the life of the person most often writing the check.
I had a lucky coincidence occur while researching this article. I stumbled across a unique funeral home network called Life Story Funeral Homes and they just happened to have an establishment in Traverse City, MI – and I just happened to have a trip planned to drive my parents to Traverse City to attend a family reunion. The timing couldn’t have been better. Not only was Vaughn Seavolt, owner/manager of the Traverse City Life Story Funeral Home available and willing to meet with me, but I was flush from spending 11 hours alone in the car with my Mom and Dad, pumping them the entire time to take advantage of these precious last few years we have together.
Life Story Funeral Homes are sort of like Celebrant Services on steroids. The funeral director is still specially trained to facilitate what is best characterized as a Celebrant Service, but after meeting with the family, all of the stories and pictures are then passed along to a highly specialized and skilled staff. What makes Life Story so different is that they offer something tangible and permanent in addition to a wonderful ceremony and a personalized eulogy. Life Story employs professional writers and graphic designers who quite literally tell the deceased’s life story from birth to death. This story is then captured and conveyed in a comprehensive multi-media presentation that includes a four-page full color Memory folder, thank you cards, DVD, interactive personal webpage, and life panels.
How good are they at what they do?
Well, their claim to fame is that the Heritage Life Story Funeral Home in Grand Rapids, MI had the opportunity to create the Life Story for former President Gerald Ford. In fact, you can see his “life story” on their website here: http://www.lifestorynet.com/memories/19211/
But although that’s impressive, that’s not the best part. Certainly, President Ford’s life provided a lot of material to work with in order to tell his life story – after all, it’s the stuff of television documentaries and Saturday Night Live skits. But take a look at any other random obituary on their website and you will find the same sense of drama, detail, and accomplishment conveyed for each person. The truth is, when you look deep enough and from the right perspective, all of our lives are presidential to someone, and Life Story does a remarkable job in capturing that.
Now that’s the way I want to be remembered. And that’s the way I want my parents to be remembered. And if there were a Life Story Funeral Home in my town, I would drag my parents down there in a heartbeat and actually enjoy – yes, enjoy – going through the pictures and stories from their lives to make sure we had it right before it was too late. And I would happily prearrange the transaction just so I knew it was taken care of. It’s a heck of a lot easier than spending 11 hours in the car driving to a family reunion and much more effective!
What a refreshingly different perspective than the prospect of picking out caskets and urns in a basement office.
Life Story’s business model turns traditional funeral home pricing on its head. Since the primary product is a professionally produced tribute package, funeral directors are much less dependent upon mark-ups on caskets and other goods and services. In this way, Life Story directors are indifferent as respects cremation or burial, and can readily sidestep the bereaved family’s indignation about spending so much money on something that will ultimately be burned, buried, withered, or forgotten. Instead, their primary focus is on the life celebration, which is the ultimate point of the funeral service to begin with.
The significant advantage of selling something tangible should not be lost on the life insurance industry. Preneed is at least linked to a specific contract for goods and services, but most life insurance sales are intended to fund a well understood but broadly defined future objective with a price tag that can only be estimated at best. Life Story provides a tangible product that is much desired by consumers and readily lends itself to life insurance funding either in a casual manner like final expense or with a firm prearrangement through a Life Story Funeral Home.
Insurance agents often use a financial fact finder as a door opener, as well as a means to best evaluate their customers’ needs. Not surprisingly, many people are reluctant to share such confidential information with someone they’ve just met. On the other hand, most people are happy to talk about their family, their lives, and their accomplishments. In the context of an emotional decision such as the purchase of life insurance, this is exactly the sort of conversation that will have a much greater influence on the decision to buy than the delivery of a personal balance sheet and income statement. Regardless of whether an agent is selling final expense, preneed, or multi-million dollar estate planning policies, the lessons from Celebrant Services and Life Stories are too important to ignore and speak to the heart of what has always been fundamental to the life insurance sale.
It is often said that a life insurance agent is never truly in the business until after they have delivered their first claim check. Perhaps the day will come when our policyholders have an equal expectation that their insurance agent is also the one most qualified to deliver the eulogy. At least when that day comes we won’t have to worry about them forgetting the deceased’s name.
For a short video of my interview with Vaughn Seavolt at the Traverse City, MI Life Story Funeral Home please click here: http://www.youtube.com/watch?v=deRjVJCHs5k

A Plea for Passion — Important Lessons from the Beer Industry

July 13, 2010

I love beer — but I don’t love the tasteless fizzy yellow beer that is mass produced by the global mega producers who dominate the US’s production. In my youth, I would make pilgrimages to the single store in Syracuse that had a wide selection of over-priced imports that at least provided an alternative of color and flavor, despite the fact that the indelicate treatment inflicted upon these temperamental brews during their trans-Atlantic voyage made every purchase somewhat suspect.

I was thrilled when craft-brewed beers recently became less of a fad and more of a legitimate business. In fact, today the United State arguably enjoys the widest and most diverse beer selection of any country in the world. Most any store offers a decent selection of local favorites and when I’m traveling and have an evening free, the first thing I do is search around my hotel for a brewpub and invariably I am rewarded with a location that is easily within driving distance.

So, with my beer obsession confession out of the way, you can imagine my pleasure when I realized that very valuable lessons for insurance companies flowed quite freely from the frothy confrontations that define the beer industry. And what better excuse to indulge than to seek out inspiration while researching and writing this article? For a truly “multi-media” experience, I highly recommend that you accompany your reading of this article with a generous pint of your preferred peccadillo.

But before we jump into what insurance companies can learn from brewers, it’s helpful to have some understanding of the state of the beer market in the United States. Despite the rosy picture I’ve depicted above, from a connoisseur’s perspective, the state of the beer industry is shameful! According to the Brewers Association website, less than 7% of the $101B in US beer sales in 2009 came from craft brew sales. In the 2009 documentary “Beer Wars”, Anat Baron reports that 90% of the beer consumed in the United States was manufactured by “the big three” – Anheuser Busch, Miller, and Coors. More recently, the “big three” were consolidated into “the big two” as SAB Miller and Molson Coors merged in June 2008 and Anheuser Busch became part of Dutch conglomerate Inbev in November 2008. According to the movie, Budweiser dominated the domestic beer market with an incredible 50% market share. Although the insurance industry has its share of merger created giants, no single brand dominates our industry the way Budweiser does with domestic beer.

Obviously, there’s nothing inherently wrong with well managed large companies dominating their industry. What makes this fact so interesting as respects beer is the virtual “indistinctability” of their products. In the movie, a number of rabid fans are interviewed making impassioned pleas for their allegiance to Bud Light, Miller Light, or Coors Light. Yet in blind taste tests (conducted unscientifically in taverns using brown paper sacks to disguise the bottle – it’s hard to maintain academic protocol with any reasonably extensive test involving alcohol) – none of these opinionated consumers were able to successfully select their suds of choice.

It’s hard to imagine a more compelling tribute to the power of marketing and the dominance of behavioral economics than the concept of millions of consumers stubbornly sticking to a preferred brand that is virtually indistinguishable from its competitors. Yet just try offering a Miller Light to a Bud Light man and see what happens. According to Baron, Bud spent $500 million dollars in advertising to reinforce the fact that their loyal customers chose wisely. Drinking Bud or Miller has less to do with taste than with a statement about the sort of person you are – much the same way that pick-up truck owners differentiate their choices or smokers choose their cigarette brand.

Enter the microbreweries.

Honed in the kitchens and garages of individuals who simply wanted to share the excellent taste of their high quality product with others, they quite literally grew by one bottle and one bar at a time. With little to no marketing budget, no sense of brand, limited resources, and often with no practical business experience, the growth of most microbreweries more closely resembles that of a budding artist than an emerging manufacturer. Obsessed with quality, creativity, and flavor rather than growth, market share, and shareholder value, these small hand-crafted brews are a welcome oasis to the small segment of the population that actually wants to taste their beer. In fact, for those of us who truly love beer, the concept of remaining loyal to a single brand is ludicrous when there is so much selection and so many factors that weigh into deciding which bottle to open. Beer can be matched with food, with the climate, the season, or even with a preference for light, heavy, dark, bitter, full, or fruity. There is no single favorite – there are many favorites – depending on the circumstances. The most defining feature for a favorite is the fact that it’s available!

At the end of 2009, there were nearly 1,600 breweries competing for that tiny left over slice of the US beer market – the most domestic breweries since prohibition. The largest of these is the Boston Brew Company, maker of the Sam Adams brand. In fact, as a result of all of the recent merger activity, Boston Brew Company is now the largest American owned brewery in the country. One would think that this lofty title endows some clout, but in the words of founder Jim Koch, Boston Brew Company’s annual production is so small in comparison to Budweiser that “my passionate life’s work is (equivalent in volume) to their industrial waste”.

Try to imagine the competition in the life insurance industry defined in a similar manner with nearly 95% of sales coming from a few global giants offering virtually identical products differentiated by the effectiveness of vast marketing budgets rather than the product itself. Then try to imagine the remaining crumbs of the market being wrestled over by more than 1,500 small competitors who rely solely on quality and creativity to distinguish their products.

It raises an interesting question: what would quality, creativity, and flavor look like in the life insurance industry? What would a small regional insurer look like if it were started in someone’s kitchen and inspired solely by the desire to share a truly appealing product with the general public?

Interestingly, although the market share breakdown is different, from the consumer’s perspective our products certainly seem to share the same “indistinctability” that defines the major beer brands, albeit without the cool marketing to go along with it. Those of us in the industry may debate the differences in dividend scale or premiums per thousand among competitors, but to the consumer, all whole life contracts are pretty much the same and all types of life insurance are equally confusing. Certainly there are a few unique and even moderately creative life products being offered, but it’s the rare consumer who has even the remotest understanding of these distinctions.

This commoditization of life products certainly puts the small, regional insurers in a difficult position if they can only offer the same product as their highly heeled competition. Smaller companies can’t compete on marketing dollars and will have a hard time winning the case for superior financial stability. Certainly service and responsiveness is one area that smaller companies may have a leg-up, but once a life insurance transaction is completed, there’s not a tremendous amount of urgency for ongoing interaction with the purchaser.

Frankly, most of the differentiation between insurance companies is directed towards their agents rather than consumers – and that brings up another interesting lesson from the beer industry. Although there are 2,850 independent beer distributors in the United States, the vast majority of their business is generated by the largest manufacturers. As a result, the craft breweries have very little influence and even less truck space. Their products are largely carried as an accommodation since they represent such a small portion of a distributor’s total volume. The same holds true once their merchandise gets into the store, where it’s all about shelf space and product placement. Consumers are greeted with a virtual billboard of brands from the large manufacturers, all strategically positioned in the coveted eye level position, while the craft brews get pushed to the bottom, the back, and off to the side of the rack.

This contrasts greatly with the insurance industry. While small companies may have difficulty recruiting the largest IMOs, there is still plenty of distribution to go around. In fact, given the fact that larger companies require such significant volume to increase sales by a meaningful measure, the current state of distribution in the life insurance industry may actually benefit the smaller companies better than their larger competitors.

This brings me to my final point about how smaller life insurance companies can learn from the beer industry. In the movie “Beer Wars”, Sam Calagione, founder of Dogfish Head Brewery, talks about the $9 million dollar loan he and his wife were undertaking personally in order to expand the brewery operations. Sam mentions that he had been approached by a number of venture capitalists who were interested in investing in his company and helping him take it public. Sam resisted their overtures because he didn’t want to grow at a rate that would distract him from their labor of love. He felt that people were choosing to support smaller companies that are on a human scale rather than the big behemoths. How many of us approach our jobs or our companies as a labor of love? How many of us have spent our entire careers in the insurance industry but have never used the words “job” and “passion” in the same sentence? And how many of us would leverage our personal assets in order to fulfill a dream of providing more people with a quality life insurance product?

A striking example of this passion is evident by looking at the history of the Boston Brewing Company. Jim Koch is a fifth generation brewer who recreated in his kitchen the original recipe that was developed by his great (and then some) grandfather Louis Koch in 1860. He was so impressed with the brew that he wanted to share it with the world. This was in 1984 – well ahead of the craft beer revival. He named the beer Sam Adams after the Boston patriot who also inherited a brewing tradition from his father. Further fostering a personal touch, in the mid-nineties, Boston Brewing Company bought the Hudepohl-Schoenling Brewery in Cincinnati – the same brewery where his father apprenticed in the 1940’s. Despite having grown into a fairly large publically traded company, the Boston Brewery still rests upon a foundation of family tradition and integrity.

Contrast this with the experience of August Busch IV, also a fifth generation brewer with the Anheuser Busch company. In April of 2008, IV stated that his company would never be bought under his watch. In June 2008 Inbev made an acquisition offer which was rejected, resulting in a lawsuit in July 2008 to keep Inbev from contacting Anheuser Busch’s shareholders. By November 2008 the acquisition was completed, IV was relegated to board member, and the new owners began undertaking an aggressive series of budget cuts, layoffs, and consolidations.

So, smaller life insurance companies can take heart — by comparison craft breweries have a much more difficult challenge to overcome in their industry. I’d like to propose a toast to the innovative and courageous microbrewers whose lessons from building a business model based upon passion and quality are as practical as they are inspiring. Now if I could just decide which microbrew to do the toast with – thankfully there are so many choices!


Follow

Get every new post delivered to your Inbox.