3 Steps to Driving Sales Growth During a Recession
As 2023 moves into the second quarter, intense speculation surrounds us as to how the economy will perform for the rest of this year and into next. Many economists predict that the Federal Reserve’s dramatically tightened monetary policy — i.e., interest rate increases — make a recession inevitable.
Though these increases — designed to cool the highest level of inflation in 40 years — are having an impact on some consumer spending, unemployment hit a 50-year low of 3.5% in January. As we know, consumer spending drives the U.S. economy and unemployment is a solid indicator of a pending or actual recession.
So, will we have a recession this year or not?
I don’t know the answer to that question but I do know that if we do, it will be different than those we’ve experienced in recent years. In turn, that should impact our operating and selling strategies in independent insurance agencies.
The differences in this recession, if we have one, will be that it will feature higher-than-normal inflation, higher-than-normal employment, and a tight insurance market as a consequence of carriers’ inabilities to keep up with exposures and rates over the last two years.
These differences, coupled with the traditional conservatism and risk aversion that business owners and consumers exhibit when the economy cools, will create opportunities for agents to grow their books of business. Though a potential recession may look different than what we are accustomed to, our clients’ and prospects’ reactions will be the same as always — save me money!
3 Steps to Better Sales
Independent agents should see opportunities in the challenges these economic patterns and a possible recession could uncover. To seize those opportunities, agents should consider the following:
If the prospect is a commercial account that is suffering from lower sales and payroll problems, a controlled rate of increase may help. But, with inflationary impacts on sales prices of a variety of goods and inflation pushing up wages an average of 15% over the last year, many business owners may see profitability squeezed and revenue and head count changed, while not actually seeing their rate decline. They will still need to “save,” but how that is defined will likely be different.
For agents seeking to acquire new accounts in this kind of environment, a renewed commitment to technical creativity could set them apart from the competition.
Most business owners, and consumers, are accustomed to buying insurance with the same deductibles, limits, coinsurance and so forth. This is particularly true if they don’t regularly shop coverage with other agents and is especially true in the small commercial marketplace as agents don’t often change coverage schemes.
For them, often doing so is either too expensive or they are too complacent. As a result, considerable opportunity awaits in the recession we may experience for those agents who are willing to change things up.
Helping the prospect understand that flexibility and creativity in their risk management needs, coupled with your creativity and technical expertise is not only different than many prospects have experienced, it also is a sales tactic that will resonate strongly in the economic environment I anticipate.
Certainly, you’ll want impacts on insurance related to the looming recession in your sales presentations in the coming months. But you need to have an antidote to offer in terms of a “program” of regular, relevant communication that explains how the economy is affecting insurance, as well as what you are proactively doing to prepare and protect your clients.
This is a great time to enhance your website, increase your emails, devote attention to these matters in your newsletter and see your clients more frequently. If possible, point out when the incumbent agent is failing to do these things. These actions will resonate more powerfully with customers than they have in a long time.
Measure your sales velocity, which is last year’s written new business divided by last year’s commissions and fees. The average agency’s score is 15%, but the score of the top 25% of agencies is close to 24% according to the IIABA’s Best Practices Study. That’s a 62% difference. What’s your agency’s score? Whatever it is, raise the bar for 2023 and build your sales plan to hit it.
A recession is the time to invest more, not less, in marketing. When the world shifts more conservatively, agency managers tend to follow suit. That’s a mistake if you want to grow sales.
Dan Sullivan, founder of The Strategic Coach entrepreneurial coaching program says that “the eyes only see and the ears only hear what the mind is looking for.”
As an example, have you noticed that the appliance store is always having a sale when your washer, dryer or refrigerator breaks? That’s because they continuously have sales, but you don’t notice because you don’t have a current need and your mind isn’t looking for a solution. When the economy heads south, business owners and consumers look for solutions to their cost issues with insurance. As a result, your marketing will reach an audience with open ears and naturally experience greater results. This is the time to invest in it.
As I said in the beginning, I don’t know if we’ll have a recession this year or not. But I do think that even if we don’t, these strategies will be key. Renew your commitment to creative selling solutions, not price. Renew your commitment to investing in and driving communications and marketing. And, finally, renew your commitment to managing sales teams for results not activity. These strategies will result in sales growth. Really, growing sales in a recession isn’t all that different than growing them any other time!