Growing up on a small East
Texas ranch was a world different than today. Finding fun for my brother and I
typically included a large stick and a 4-10 shotgun. Neither applied the day
Clint decided to capture bumblebees. Some bumblebees don’t sting, but
nonetheless, what do you do with a captured one? “Make it into a kite,” he
said. It was a strangely odd thing to watch my brother hold a piece of thread
tethered to a hovering bumblebee. It was a very delicate process to tie that
thread around the bee and I’m sorry to report that a number of them paid the
ultimate price while we innovated the process. We learned two things. One was
to use a slipknot. This kept a far larger number of bees in one piece instead
of two. The second thing we learned was the length of the thread had to be
relatively short or the bee could not elevate and fly. Clearly, thread is heavy
stuff in a bee’s world.
Tongue and cheek here of
course, but sometimes selling in the direct response niche feels a little like
tying threads around bumblebees. It’s delicate work, however, as we repeat the
process over and over we begin to see obvious areas to improve upon. I want to
share 2 things that will greatly improve your profitability in selling. Up to
this point the conversion rate and the cost of the lead were
thought to be THE most important values to track. Out of 100, how many leads
become placed and paid cases and what’s the cost for each lead? These are the
questions I’m asked almost daily. As I said, they are important, but they ARE
NOT the critical values you should be tracking. You could say we’ve discovered
a slipknot that improves profitability.
Consider Two Agents
Consider two agents using the
same lead. We’ll use a quote request lead in our example. The average
conversion rate for most folks using this type lead will fall around 12% - 12
out of 100 will become placed and paid cases. How then can one agent have a
margin of profit of “X” and another 3X using the same lead? See the two boxes
below.
Note the differences in “apps
out” and “apps back”. Despite these differences the overall conversion rate in
these two models is very near 12%. But when we loaded our business model with
the day to day process and expense of running a direct response business we
discovered that Agent B’s profit margin was triple that of Agent A’s—this
with a third less “apps out” (20% instead of 30%). The first key we found then
was a need to focus more on “apps back”. We loaded different number sets into
the model and found wild swings in profitability—and the adjustments were
small. For example, a MINOR improvement in Agent A’s “app back” count (60%
instead of 50%) increased profit margins by a factor of 4. I should repeat
that. An “app back” rate improved by just 20% quadrupled profitability. The
lesson? Save time and money by working with serious buyers and redirect those
savings to increase “app back” figures.
Improve your “app back”
percentages by testing clients for seriousness. They must accept the exam,
agree to mode of premium and provide cash with sale or a signed PAC
authorization. Additionally, case management must be aggressive in follow-up
and collecting outstanding requirements. LeadBoss was built for just this
purpose. Successful use of LeadBoss increases the number of “touches” per week
the client receives in communication and allows the case manager to stay
organized and in control of pending cases—we call it managing chaos. We
recommend the use of event emailing through LeadBoss and weekly contact with
clients whose cases are in underwriting. Aggressive immediate follow-up for
requirements and signatures cannot be overstated.
Master Both “Keys” and Watch
Profits Soar
With Bumblebee Kites it’s
slipknots AND thread length. With Direct Response selling it’s “app back” and
the second key, “average case size”. If an agent improves his or her average
case from $750 to $800 it’s got to help the profit margin—but not by much,
right?? Wrong, even a modest increase of only $50 per paid case can double, and
in some cases triple, your margin of profit—yes, TRIPLE.
There are 3 opportunities to
increase your average case size in the selling process. Once in the initial
selling process, then with the “Up Sell” or “Plan Selection Sheet” that should
be included in EVERY “out packet” and then again at delivery. Your iSeminar
training covers these 3 critical opportunities to “up sell” and provides you
with the process and tools to maximize success each time. If you’d like to hear
an audio replay of iSeminar to review and hone your “up selling” skills let me
know and I’ll send you a link.
I made the case for
conversion rates not being critical to profitability above, but what about
cost of the leads? That one is easy too. When your profitability
improves by multiples your ability to buy leads at any price becomes possible.
We plugged lead costs as high as $150 per lead into the model where “app back”
figures were only incrementally improved. Even at that pricing the new model
substantially out performed the Agent “A” model. I repeat, lead quality and
pricing are important, but they are not THE most important things.
That’s it. You now possess THE
2 keys to driving profitability in your business. Become a slave to these 2
keys, “app back” and “average size case”, and watch your profitability soar.
Make 2005 your best year ever, and while you’re at it, make the commitment to
join us for 7 days in Cancun, Mexico in 2006. As always, we’re here to help, if
you have any questions let me know…………….
