Strategic Resources for Your Insurance Agency

Winning vs. Price Competitors and the Internet

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Here are two retailers in similar industries that are both impacted by the internet. One company is seeing a constant growth in revenues while the other company is seeing year over year declines:

 

2014

2015

2016

2017

2018

Nordstrom

12.54

13.51

14.44

14.76

15.48

Growth

 

8%

7%

2%

5%

Macy's

27.93

28.11

27.08

25.78

24.84

Growth

 

1%

-4%

-5%

-4%

*Values are in the billions 

The company that sells on service and quality has grown 22% over 4 years while the company that sells on price has declined 12% in revenues. Why is this? For Nordstrom which has higher prices, customers appreciate the value they get because of personalized service they provide that can’t be replicated on the internet. On the other hand, Macy’s customers likely see very little value in their product and in time ended up just buying things online. Many of Nordstrom's customers probably felt they wouldn’t get the services they are getting from Nordstrom if they buy online and have no issue paying more because they value what they are getting. Many of Macy’s customers likely stopped coming in or came in less after they started buying things online.

 

Here is food for thought:

  • Many of those who are shopping insurance on price are likely to change their mind on bottom line price if educated on the issues.
  • Some may not be coming to you on price, but for some other reason. When you sell them on price, it's not accomplishing what they intended and this won't win the sale.
  • People are more likely to buy on the internet if they are not getting the expertise and professionalism from their agent.
  • Those who buy on price are less likely to renew than those who buy on quality and service.

Those with excellent product knowledge and provide great service don’t need to sell on price. They will likely have excellent policyholder longevity, higher average premiums, high average coverages, lower loss ratios, win referrals and make significantly more per hour. They will also grow their revenues at a much faster rate just as Nordstrom has.

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