Developing a Distribution Strategy
Insurance Experts' Forum, May 11, 2011
“We are not where we hoped to be.” When I hear these words, I have to cringe a little. The speaker is intelligent and well-meaning, but doesn’t understand that hope is not a strategy. A successful business strategy is usually the result of a well-thought-out plan to capitalize on an opportunity.
So how should you start to build a powerful strategy? First, know your customers extremely well. Customers might include individuals (the potential policyholder), commercial clients, employers or agents. Do the research to learn about their needs, wants and behaviors in order to understand their buying requirements. Then divide each customer group into segments based on meaningful differences. For individuals, you can segment them by age, education, occupation, ethnic background, family status or lifestyle. For businesses, start with size, location, years in business, number of employees or type of business.
The objective is to accurately understand their requirements so that you can:
1) Select your target market,
2) Identify the opportunity and quantify it
3) Design a product and/or service that they can’t wait to buy
It seems obvious—but note the win-win here—you sell a product (make a profit), and they get something they really want. But creating a good product is not enough. How your customers buy is also important. Do they like to do their own research, or do they prefer to rely on a knowledgeable representative? Is convenience more important than price? Are they Internet shoppers? Do they understand enough about the financial product to make a decision?
A distribution strategy might include direct sales, Internet marketing and/or agents. Keep in mind that to create an effective distribution strategy, it is not about how you want to sell; it is about how they want to buy. Even with a great product, your potential customers need to know you have it for sale. The marketing strategy includes developing brand recognition, advertising, positioning, and collateral. One of my favorite quotes explains this: “Doing business without advertising is like winking at someone in the dark. You know what you’re doing, but nobody else does.”
Our product and service deliveries are almost never just a single transaction. Ongoing service is required, and may even be a critical part of the buying requirement—you have to develop the supporting service strategy, including use of people and technology, before you go to market. Service can still be a differentiating strategy, so it is important to match the service delivery to the customer requirement; just like in the product design.
You are not out there alone. You have a host of environmental conditions to deal with, from a changing economy to new regulations. Understanding the current situation and anticipating the changes that are likely to come will help you design an effective product/service for both today and tomorrow. Also, you probably have competition. Just like knowing your customers, you must investigate your competition. At a minimum, outline their strengths, weaknesses, and key strategies.
Take all of this into consideration as you refine your options and develop innovative strategies. The goal is to create an offering that is exactly what the customer wants which differentiates you in a busy marketplace.
Now you have it—a coordinated set of strategies (product, distribution, marketing and service) that are designed to meet the exact requirements of an identified market segment. To fully implement the plan, add a few more components like a financial strategy and an organizational strategy.
Developing a comprehensive strategy can be complicated, but it is far more effective than just hope. A strategy clearly defines how you are going to reach your goal.
Ron Zimmer is a senior consultant for The Robert E. Nolan Co., a management consulting firm specializing in the insurance industry.
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