Are your customers really profitable to your insurance agency? Of course, some of them must be or you wouldn't be able to stay in business. However, if you're spending a lot of money and effort on marketing and not seeing a lot of return, it's time to evaluate your account profitability. Account profitability tools can help make it visible.
What Are Account Profitability Tools?
Account profitability tools are programs with metrics that allow you to understand different dimensions of your business profitability. For instance, you can look at the net profit margin of your business to understand your revenue minus your expenses and consider the overall profitability of your business. You can also compare the expenses you have now with the expenses you had in the past to consider whether it's becoming more expensive to run your business. Finally, you can segment your accounts into different types of products and customers so that you can understand where your revenue comes from.
Understanding the Profitability of Your Customers
An account analysis is important to your business because it allows you to see your customers in a new light. Yes, you know that certain customers require a lot of extra assistance. However, some customers may actually cost you money.
According to Forbes, "Unprofitable customers consume more resources than they pay for." They use up time and energy that could be spent on other customers or on the development of new products or marketing strategies. Strategic CFO states that "Not only do you need to address gross margin but you need to consider the costs to service that customer." While it might seem unkind to evaluate your customers in this way, you're doing all of your customers a kindness by considering how you can best serve them in a focused way. Without that drain on your time, you can make your agency's customer service better.
Understanding How to Relate to Your Customers
Account profitability analysis also allows you to understand how you should service your customers. For instance, if you like to follow up with a personal phone call about an insurance product and you spend a lot of time doing this, does it actually matter to your bottom line? It's easy to get stuck in outdated practices that cost time and don't change much when it comes to customer service. Instead, use data to understand how well – or how poorly – those practices are serving your insurance agency. Profitability analysis allows you to critically consider the overhead of different types of insurance products and determine whether you want to change the way you connect with customers or change the types of products you offer.
Do you deal in a range of insurance products? You may spend an extraordinary amount of time focusing on marketing certain products, and you're not sure about the return. A profitability tool can help you see exactly what areas are profitable and consider whether you should expand those areas. Are you making a lot of money from your insurance products for those who live in apartment buildings? This could reflect the opportunities in your area or the ease of working with those customers, but it's information to consider as you move forward in business. An enhanced focus on those products that make the most money and on those customers who are actually profitable will allow you to become more successful in your insurance business.
Do You Need to Reskill?
What do you need to do to make your customers and your products more profitable? You don't always have to get rid of existing products and customers: sometimes, you need to outsource a particular task to a specialist or train your existing employees to do a task more efficiently and effectively. Using account profitability tools allows you to reflect on all of your options and consider how you can become more profitable.
When you're marketing insurance, we're on your side. Talk with American Agents Alliance today to connect with other insurance agencies and with the resources you need to become successful in the insurance world. Contact us today.