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ASSESSING
YOUR COMPETITION
One critical step in marketing -- assessing your
competition -- merits your regular attention. Why? First, because there is more competition
than you imagine, even though you do not see it from others who sell what you sell
(more on this later). Second, because we live in a financial environment of accelerating
change, keeping up with those changes means knowing who else also keeps up, who leads
the innovation process, and what innovations make the most profits. Third, because
if you understand your competition, you will be better able to understand your clients'
and prospects' questions and concerns as they compare opportunities in the course
of making their buying decisions.
What competition?
If you think that you compete with others who sell the same products as you, you
are only partly right. You really compete with a variety of things that work hard
to attract and distract your buyer's thinking and dollars. Here's why.
In the seventies, corporations began posting huge profits, interest rates were rocketing
upward, and consumers started demanding more of the growing pie. Prior to this, the
consumer had psychological values attached to their dollars. The savings dollar was
applied to savings accounts, certificates of deposit and other savings vehicles such
as life insurance and, for many, even the family home. The expectation: slow, steady,
reliable appreciation. The investment dollar was the dollar put at risk, to whatever
degree, in vehicles that felt less secure than savings: mutual funds, stocks, bonds,
commodities, real estate and other non-guaranteed growth instruments.
Then, instantly, the difference in the consumer's mind between their savings dollars
and their investment dollars evaporated. Buyers demanded product comparisons that
they never required before: between life insurance and mutual funds, between CDs
and more speculative investments. They often bought into interest rates because they
did not understand gross and net yields. Sellers pushed rates as the sizzle, rarely
disclosing the actual size or quality of the steak (yield after taxes and all costs).
In personal finances, investment buyer strategies to reach long-term objectives gave
way to frantic, tactical myopia in search of quicker gains and a personal sense of
winning something in an increasingly difficult game.
For sellers who offered single-range products such as stocks,
bonds, insurance, CDs, etcetera, the competition became every
other financial vehicle that attracted the consumer's interest...as
well as the consumer's desire to spend money on other things.
Personal financial planning became the solution to sorting out
the consumer's confusion with the dizzying array of strategy
and product choices, extravagant claims of anticipated
performance, and sometimes outright lies.
Interest-sensitive insurance products were born (UL), born
again (VL) and born again (UVL).
Personal financial planning shook out over about 15 years, and
now that the marketplace is stabler and better regulated, it is on
the rise again.
To further demonstrate the erosion of consumers thinking
of life insurance as a savings vehicle, and the insurance business' waning faith
in life insurance as a profit maker, insurers are now retooling their operations
towards investments and looking to accumulate assets under management. Lest anyone
think the Prudential and the others insurers following this trend are visionaries,
or that the life insurance agency distribution system failed because the agents sold
the easier sale (investments rather than insurance), do not forget the role of the
consumer in this scenario. Buyers buy what buyers want. They can only want what they
know about and understand. The failure of the agency system is a marketing failure,
nothing more or less. Financial planners, the banks and other venues for distributing
life insurance will demonstrate this as their increase in market share of insurance
sales accelerates. The role of the life insurance agent and broker is changed forever.
New consumer thinking in a changing world, and new competition for the consumer's
attention, encouraged marketing innovations few dreamed of as little as ten years
ago. In another ten years, because of the computer revolution first in hardware and
now in software, you won't recognize your former self -- your self of today. You
will innovate, adapt, overcome and computerize...or you will dry up and blow away.
In marketing, death's breeze blows in a fair wind.
Sources of Competition
Many things compete for the financial consumer's attention.
Buyer confusion, especially over the vast and rapidly changing
array of products available, as well as their risks, makes client
education a critical marketing and selling issue.
Seller confusion and uncertainty, especially about the very
nature of the products s/he sells, fuels buyer confusion.
The press for making transactions and creating cashflow
preoccupies product manufacturers and distributors who face
decreasing margins, so taking shortcuts in marketing and
selling is encouraged or ignored, causing increasing distrust in
the marketplace and greater difficulty satisfying consumers in a
profitable manner. In this way that we create our own insidious
problems, we seem to be like a snake eating its own tail.
Complexity in product design makes many products difficult
for buyers and sellers to understand, leading to hesitation and
indecision, meaning fewer sales or purchases in amounts less
than the buyer really needs.
Similarities in like products make it very difficult to differentiate
yourself and your products from others who do what you do
and sell what you sell.
Similarities in unlike products (e.g., comparing VL and mutual
funds) make it difficult to clarify recommendations made to the
consumer for whom this type question is important.
Concerns over insurer solvency distract buyers and sellers from
the consultive process. In Canada, for example, the Canadian
Association of Life Underwriters publicly raised the issue of
agent and broker liability for selling products of licensed but
eventually insolvent insurers. In response, Standard and Poor
issued a special report on 40 or so Canadian insurers and the
future of their ratings (a downward trend), which all serves to
further erode faith in a financial services business already on the
verge of being called the next savings and loan debacle. You can
pooh pooh the fall of the insurance business and be right, but
you cannot deny that fear and loathing cause many buyers to
hesitate at a time they most need the insurance, which in turn
makes insurance sales suffer and leaves consumers less than
adequately covered.
Unscrupulous sales claims create sales that tie up consumer
dollars and take them out of the market. This is exacerbated by
the continued reluctance of the insurance business to accept
replacement as being at all advisable for the consumer, and by
the continued unscrupulous replacement of insurance by
brokers and agents who know how to help themselves but not
their clients.
People and products that can differentiate themselves in the
marketplace. The whole idea of value-added marketing is for a
provider to differentiate itself from other providers by adding
value above what consumers expect and what competitors
routinely provide. At some point, adding value as a
differentiation strategy must end because most added values do
not carry with them correlating added costs to the consumer, so
margins thin out and higher volumes of sales must make up the
difference.
What are the questions?
The best way to assess your competition is to periodically ask yourself the right
questions about what is going on in your marketplace and target markets. The following
ones should get you started.
What companies and products do I keep running into in
competitive situations and in the buyer's thinking?
Do I really understand these competing products?
Am I skilled at discussing these products with my clients,
prospects and centers?
What are these products' real strengths?
What are their real weaknesses?
What are my competitive advantages?
How do I demonstrate the advantages of buying from me?
Are these competitors worth the effort to market against?
How do I market against them?
Where do I need to improve to be more competitive?
Do I really want to compete, or would I rather be the
competition and set the standard?
What innovations can I offer and raise the standard in the
marketplace, counting on most of my competitors' reluctance
also to innovate or to put capital into growing their businesses?
How are my clients' and prospects' attitudes changing?
Am I leading my clients' and prospects' thinking through
education and advocacy, or am I following the trends and only
reacting?
Do I need to do more to compete for my clients' and prospects'
attention?
Am I part of the solution, or am I part of the problem?
Are my markets defined clearly enough?
Do I really know what they need, want, can afford?
What clear solutions do I offer?
Are they clearly the clients' best value solutions?
Can I improve upon how I deliver my messages to my markets?
How?
Do I make it easy to do business with me?
Do I make it interesting and compelling to do business with me?
Can my clients, prospects and centers hear me above the din in
the marketplace, or are they passing me by?
Am I utilizing the computer to full advantage?
There are questions here about other products and companies, as well as ones about
how you are marketing. These are all legitimate questions to help you understand
the true nature of your competition, which may include your being in your own way
and keeping you behind competitors who are innovating, adapting to changes in the
marketplace, and setting the next higher standard of competition. You don't want
to end up discovering what Pogo had learned when he said, "We have met the enemy
and they are us."
How to Compete
There are myriad ways to compete for the consumer's investment dollar, but here are
some choices you may want to consider exploring and adopting.
Know the nature of the products you sell, and how to explain
them by concepts, by benefits, then by features, in that order. If
you sell life insurance and disability income replacement
insurance, you must understand and practice Due Care, too.
Try this: explain a product you sell without a ledger illustration,
using a picture, if possible. If the concept works well, the
details are easier to understand, if they are still really wanted.
Provide buyers with what they want, or explain why they
cannot have it and what the alternatives are, leading them
through a discovery process that arrives at a convincing
conclusion how to attain their goals. Try this: lay out the
financial decisionmaking process you lead your clients through.
If you cannot explain it, how convincing do you think you can
be as an advisor?
Understand that commission sales are dying, not because
product manufacturers want to cut you out, but because
consumers increasingly trust paying fees more than
commissions. This means clients will pay you deductible fees
for your good counsel and advice. Fees for managing assets
will replace commissions as products of all types become as
unbundled as possible. Watch for financial management to
supplant financial planning as the watchword in affluent
markets first, then middle class markets later. (And remember
you heard it here first.)
Laptop computers will bring such efficiency and effectiveness
to the consulting and selling process that advisors working
without them will be at a serious disadvantage in marketplace.
Laptops with docking stations and enhanced peripherals are
already replacing desktops as main computers in many
practices.
The computing power of the laptop will be far less important
than the software you use. Your software must make the
complex uncomplicated, the involved simple and easy to work
through, and your presentations so conceptual and graphic that
images, analogies, metaphors and parables become routinely
compelling forms of "evidence."
High touch or high tech will no longer be a legitimate question for marketing
or practice management. The future, which is here now, requires high touch and high
tech, and your high technology should be devoted to providing you the means for becoming
and staying very high touch. Multiple meaningful contacts with multiple clients,
centers and prospects to develop mutually productive business relationships make
the most profits in the long-term personal financial practice.
Take time out each week to think through who your most suitable markets are,
what messages you should be delivering to those markets, what the best means of delivering
those messages are for you, and what you must do to consistently deliver those messages
to your markets. If you devote one day per week to marketing, then the remaining
days should be filled with good selling opportunities.
Know exactly how you are going to demonstrate that you are, and how you are,
different in an appealing way.
Make an action plan of things you will do repeatedly to deliver your messages
to your target markets.
Just few reminders of what to think about as you start and work through another year
of turmoil and opportunity in the world of consumer finances. Best wishes.
John H. Melchinger is a marketing consultant and coach to in-practice financial
and estate planning professionals, since 1984.
He can be reached by email at melchinger@bigfoot.com.
Peruse my home page at http://fsc.fsonline.com
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