On this episode, Paul shares five tips relevant to all industries facing pricing pressures.
Stretch the buyer’s time horizon into the future. Help them determine….
Move the conversation from price. “Remind your clients of the complexity of their needs.”
Remember, price is one of the greatest indicators of quality and performance.
Be sure you can answer the question, “What makes your solution different?”
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How do I sell insurance when the client focuses on price or premiums?
(Transcribed from podcast)
Today we have another question from the website. We’ve been getting flooded with questions lately, which is great. So make sure you visit TheQandASalesPodcast.com. While you’re there, you can ask me a question. I’ll turn it into a future show. Also, you can just connect with me or follow me on LinkedIn as well. Pretty easy to find: Paul Reilly, R E I L L Y. Reach out to me there. I’d be happy to answer your question if you feel more comfortable using that platform. But anyway, follow me there. We’ll make sure we answer your questions that you have.
So here’s the question coming from the insurance industry: How do I sell insurance when the customer focuses on price (or the premium)? That’s what they call it in the insurance world. So I know we’ve got have a lot of insurance peeps that listen to the podcast. We’re going to answer this question, but really the tips and ideas I’m going to share with you today, they’re for any industry that is facing pricing pressure. These are just good, practical tips. So the question goes on a little more explanation on this question. You know, with insurance, you can’t change the price. And that’s one thing this individual mentioned when she asked the question is, “Hey, we can’t change the price or the premium, so how do we sell value when they purely focus on price?” And that’s what we’re going to answer on today’s show.
Before we get into that though, a quick shout-out to our sponsors. First of all, The Creative Impostor Studios. Andrea does an awesome job. She just makes it easy. Whether it’s editing, whether it’s getting the podcast started or keeping it going. And I actually just checked the other day. We have now been downloaded in over 70 countries. Seventy countries, hard to believe. But the podcast continues to grow, and a lot of credit goes over to Andrea and her team. So we’re going to have a link over to her website on this episode’s webpage. Reach out to her if you need some help with your podcast.
Not only that, but more exciting news. Brand new book coming out this September. This book is going to be your go-to guide for selling through any sort of tough time. In fact, the book is called Selling Through Tough Times. It’s how you build your mental resilience and grow your profits through any downturn. And you think about it, salespeople face all sorts of tough times, whether you’re in a slump, whether you’re facing a tough competitor, industry disruption, a global pandemic, a recession, whatever it may be. You face tough times, that’s going to be your go-to guide. Until then, make sure you pick up your copy of Value-Added Selling. That will be your go-to guide on how to sell on value and not price. It’s available wherever you get your books, Amazon probably being the easiest.
So let’s get back to that question: How do I sell insurance when the customer focuses on price? Let’s talk about a few challenges that are specific to the insurance industry, and these are broader challenges. First of all, with insurance, it can be a tough sale because you are selling the customer on something that—they may never use it, hopefully. You don’t want a disaster to happen, whatever it is, life insurance—. In fact, when I bought my first life insurance policy, the guy who sold it to me said, “Hopefully this is one of those things where you give us a bunch of money and we don’t give you anything in return.” That’s true, right? Because if you cash it in, you’re six feet under, so you don’t want that. Insurance in all of its forms is basically something you’re buying that you hope you never have to use. So naturally people are going to be price sensitive when it comes to that.
Now, another piece here, when it comes to insurance, people are more likely to pay less because the pain that they feel. We call this a loss aversion. Daniel Kahneman, he did a bunch of work on loss aversion. With loss aversion, we don’t want to give things up. Losses loom larger than gains. That’s the way they describe it. So what we give up today, which is that premium, is painful to us. We don’t want to have to give up that premium, so we’re going to look for ways to pay the lowest premium. And although paying the lowest premium means that we might not be fully covered, that pain is in the future, so we’re not as concerned about that. The pain of giving up money today, that is in the present. So that’s the other challenge we face.
And finally, the third one. People are trained to focus on price when they buy insurance. The advertisements I see for insurance, whether it’s Geico, whether it’s Progressive, whether it’s Liberty, all of these companies cheapen the market because they focus on price. And they encourage other people to focus on price. And the reason they probably do this is because they can’t compete on value, so they’ve got to compete on price. And they flood the market with this message, and it trains the buyer to focus on price. And they’re successful companies so they’re doing something right. I’m not telling you that they’re unsuccessful. There are different ways to go to market. But as a salesperson, if you’re selling a more comprehensive value-added solution, you are trying to sell against companies like Geico and Progressive that are convincing buyers to pay less for insurance. These are the challenges that we’re facing when selling insurance.
Now I’ve got a couple of ideas on how we can help. Five tips for you today to help you sell your insurance when the customer focuses on price. First things first, you’ve heard me say before, we stretch that time horizon. And the reason we stretch the time horizon into the future, I should say, is because when the buyer’s thinking about the present moment, they’re thinking about what they sacrifice today. When they’re looking at two different insurance options, let’s say your premium is $1,000, the competitor’s at $900. They’re looking at what they sacrifice today, which is going to be that $1,000 premium versus the $900 premium. And they’re going to say, “Okay, well, I’m making this decision today. I don’t want to give up any more resources than I have to. I’m going to pay $900,” and that’s what they’re going to do if we get them thinking short term.
But if we get them thinking into the future, then we have a better chance. Because in the future, they’re more focused on outcomes—what they really want to gain. And when you’re buying insurance, what you want to gain is protection, peace of mind, all that good stuff.
So here’s what we would say. When we’re meeting with one of our clients, we say, “Let’s talk about our policy for a moment. I want you to imagine for just a moment or two, let’s say it’s a few years from now.” Get them out of the present. “A few years from now, let’s say you have to file a claim. What are your expectations at that point? What’s going to be important to you when you have to file that claim?” Now we’re transporting them into the future where they actually might experience our solution and the value that we bring. So we ask that question that gets them thinking long-term.
Next thing, we want to enlarge the conversation beyond price. That’s what a lot of your competitors are going to do. The cheap insurance providers that focus on price, what they’re going to do is they’re going to convince your customer that there’s nothing special about what they need, that their needs are just generic. And the reason they do this is so that they can focus on price. Instead, you need to remind your clients of the complexity of their needs. And once they’re aware of the complexity of their needs, they’re going to become more open to your solution.
So how we can do that is we can ask questions that cause them to think bigger. For example “Mr./Ms. Customer, when you’re making a decision to buy insurance, which is an important decision, what’s the criteria you use? What’s important to you? What do you have to have in the solution?” We’re getting them to think bigger.
And let’s say you’re talking to a business owner. You’re selling them on that insurance, and you say, “Mr. Business owner, thinking about the business that you’ve built here, let’s imagine for a moment that you were to experience a claim, something that could potentially disrupt your business. What do you expect from your insurance provider at that point?” We’re getting them to think past price. We’re enlarging the conversation. So we ask those bigger questions. That’s the second tip.
The third thing, introduce a benign sense of fear. People make decisions and they’re motivated two ways, either because they’re fearful of losing something where they want to gain something—that pain, that gain piece. That’s how we’re motivated. Usually it’s a combination of both. Introducing a benign sense of fear can help motivate that buyer. And I would do that by asking a question.
Let’s say, sticking with the first example, you’re selling a policy that is $1,000 premium versus a $900 premium. I would ask the customer this question. I’d say, “You know, Mr. Customer, we’ve, talked about what your needs are and how you want to be protected—the claims, things that are important to you. And you’ve experienced that with us. We have a track record. We’ve been serving you, supporting you. You can trust us; you know us. The only unknown here is how that other company is going to perform.”
You see what we did there? We just said, “The only thing unknown here how that other company is going to perform.” And then we can build on it more and say, “Given what’s going on in the world right now, does it make sense to introduce that element of risk?” See, we’re asking these questions. It’s just giving them that benign sense of fear. And once they feel that, price becomes less of an issue. So that’s the third tip. Make sure you introduce that benign sense of fear.
Number four—focus on the impact and the outcome. This is critical. In Value-Added Selling, we talk about the value formula, which is price + cost + utility + impact = value. It’s a comparison of those four different variables. We’ll talk about the utility and impact here for a moment. Utility is what your product or service does. That’s all utility is. It’s what your product or service does. Impact is how it really affects the buyer. So when you think about the different forms of insurance, what’s the utility of insurance? At a basic level, it’s coverage in the event of some sort of loss. That’s what it is. It’s coverage that you get compensated for in the event of some sort of loss. That’s the outcome of insurance. The outcome, it gives you peace of mind, helps you rest easy at night knowing that you are protected. That’s the main outcome. So when you’re talking about your solution, communicate the impact to the customer, not just the utility of what we do, which is coverage. Everyone provides coverage, but if you can provide coverage that will give them greater peace of mind, that will help them through a tough time in their life, that’s the real impact that moves people. So tip number four, focus on the impact, not just the utility.
And number five, do an apples-to-apples comparison. When you look at different policies, there’s a reason why your premium is going to be higher than other companies. And the reason why is because you offer a better solution. Let’s remember that the price is one of the greatest indicators of quality and performance. And the fact that your premium is going to be higher than the competition, that’s a good thing because you offer a better overall solution. The key is you’ve got to answer that question, “Why is there a difference in price?” What makes your solution different?
Do a side-by-side comparison with the policies so that you can highlight what makes yours different, better, unique. Paint a picture around it. For example, if you think about maybe average time to pay out a claim. Think about that. If your company tracks that, mention that. And if your competitor does not, or their time to pay a claim is much lower—much longer, I should say, mention that as well. It’s doing that comparison. That comparison is going to help explain why your solution is different. People aren’t opposed to paying more for something as long as you can prove the value and show what makes your solution different.
Well, that’s the show for today. Again, five tips for you. Number one, stretch that time horizon; enlarge the conversation; introduce a benign sense of fear; focus on communicating the impact; and finally, conduct an apples-to-apples comparison.
Make it a big day.