When recession hits, budget cuts are an obvious measure. Make sure you avoid a kneejerk reaction or risk losing business, warns Barbara Bradshaw

I read that Japan, Germany and France are officially out of recession. In the UK, there have been some signs of the much-vaunted “green shoots” that the pundits offer as evidence of our re-emergence. Doubtless it will take longer to flourish here due to the heavier exposure to the banking problems – but how long will it be?

No business recovers immediately after those green shoots are seen. Insurance broking took longer to feel the pinch than other sectors, such as manufacturing, and commensurately will recover more slowly. Indeed, maybe some irrevocable damage has occurred to the business prospects of this section of our industry.

Brokers are reporting losses of small to medium-sized commercial accounts alongside home contents customers. While home insurance has not been consigned as an unnecessary expense totally, it is being increasingly commoditised by the aggregator sites that assault our television screens regularly. That business is inherently loyal or, rather, has been loyal. Once gone, it will be extremely hard to pull it back into the broking fold.

Swinging the budgetary axe

As in all businesses during a recession, budget cuts inevitably come under the microscope. In broking, costs of regulation are a major issue, even without the swingeing increases imposed, but unfortunately they can’t be avoided.

Instead, the first two obvious things that are often slashed in a recession are marketing and training spend. My opinion, and that of many of our successful IIB members, is that those cuts are fundamentally the wrong move.

Why should marketing avoid the cut?

Marketing is an easy victim for the axe partly because very few firms measure the results of their promotional activities and are therefore unaware what spend gives the real returns and what is just a “nice to have”.

But, marketing is – or should be – the key method of generating business. If a firm stops marketing itself and its products, then it becomes just another name on the high street that a customer may or may not “trip over” (and if you are on a side street or on the first floor or above, you’re unlikely to even have the benefit of foot-fall traffic).

So, an alternative view is to act while many of those around you are moaning and groaning. Start by looking at every aspect of your marketing spend and consider whether each one actually brings in business or if it is just nice to have. Then, look at innovative ways of getting your message across to potential clients.

It’s hard, or perhaps nearly impossible, to compete with offers such as 2 months “free” on tradesmen’s vehicles, 52 days free on motor insurance, or 12 months for the price of 10 on home insurance. In a year’s time, those offers will probably be rescinded or just disappear. Will you be ready to compete and claw the customer back? And, remember, effective competing is primarily down to marketing.

If people hate dealing with call centres (and most seem to be of that mind), then you already have an advantage. Many people –- conscious of cost – still dislike or distrust internet sales.

You have to demonstrate and communicate to your customers before you lose them that there is added value in placing their business through a qualified insurance broker. Commission disclosure can be turned into a virtue – after all, does anyone seriously think that the likes of Comparethemarket or Tesco work for nothing? In many instances, there is more than one mouth to feed in their food chain.

What about training?

Any broker worth their salt puts training near the top of their agenda. But this recession has effectively brought on something of a moratorium, where all efforts must be to keep business buoyant and prepare it for the future as we climb out of the financial abyss.

Staff training is vital, but in a recession it must reflect the real world. While it would be ideal for staff to be certificated technically, reality means that the emphasis has to be on gaining and retaining business.

The so-called softer skills, such as excellence in staff motivation, caring for the customer and the ability to close a sale or renewal, will see the business through this cycle. I should note that the term “soft skills” is an anachronism: it’s seriously hard to sell or cross-sell, let alone motivate your staff effectively. And these skills must come to the fore in times of recession.

To sum up, there have to be at least a dozen sound reasons why a customer should deal with a broker. You should be telling them – that’s marketing.

And while communicating that message effectively gets the customer through the door, having staff who understand the customer’s specific needs and then sell knowledgeably will be what helps the broker to survive. IT