There is an old English rhyme which goes: I wish my deadly foes no worse; Than want of friends and empty purse. And in business there is no question but that good friends and a full purse go hand in hand. At Independent, our friends are important to us and, while in most companies today you are likely to hear people telling you about the importance of 'customer segmentation' we prefer to talk about 'choosing our friends'.
As the analysts will tell you, there are a number of ways of looking at the strength and prospects of any company. The obvious one is the balance sheet – but there is
another way which will probably give you a lot more information about where the business is going and how significant its place in the market is likely to remain: talk to its customers.
In our case we have not one set of customers, but two. There is the all important relationship with our brokers and then there are the policyholders who are our brokers' clients. Both are in a very real sense our customers and we enter into a complex three-way relationship with them which is central to our business focus.
The optimum
As you might expect, our success over the years has led to more and more brokers wanting to work with us. But, paradoxically, one of the biggest reasons for this success is that we have worked with fewer and fewer of them every year. Believe it or not when Independent began its life, through the takeover of the business of Allstate in 1987, we inherited 10,000 brokers and agents. Clearly no-one – certainly not a small company as Independent was then – can do business effectively with 10,000 business to business customers.
But what is the optimum number for a company of our size today? 5,000? 1,000? 500?. Currently, we have just over 1,000 agencies, but we follow through the 80/20 principle, and knowing that we get 80% of our business from 20% of our customers, we take great care to cater for these special customers. We unashamedly identify the cream of the broking profession, some 200 brokers, and tell them that we want to get closer to their business.
But, to go back a step or two, how do we identify the brokers we want to do business with in the first place?
Firstly, we define who we want our customers to be. That may sound like simply rewording the question, but it underlines the nature of our offer to brokers, which is based on the way we look at an insurance risk.
We always apply three basic principles to assess the merits of a risk: Source, Adequacy and Management – SAM for short. We want to know where the business comes from, whether there is the right base for pricing the risk and the attitude and approach of the policyholder. If SAM is right we proceed; if not we don't. That is the Independent offer – and it means that we only work with brokers who share our thinking on the fundamental things.
Building relationships
Having defined the customer, how do we then build a relationship?
We usually start by compiling a profile of the business and its people: What is their history? How forward thinking are they? What sort of clients do they have? Who are the key figures running the show? People are the key to it all – and we find out a lot about their likes and dislikes, their background, their business philosophy. All of that gives you a feel for the company. Call it the art of client relationships.
But side by side with the art of client relationships, there is also the science – and at Independent we run a customer relationship management system called SADAM – it stands (in spite of the sinister undertones that name carries) simply for sales and development agency management. This is where the data is logged on each business client. It tells us all the important management information we need: what returns are we getting on our investment; how effective our marketing methods are; what the customer responds to and what doesn't work.
SADAM calls for total co-ordination between all areas and departments of our business. Everyone in the organisation knows that the broker pays the wages and that SADAM is an integral part of our healthy relationship with each customer. It only works if information is fed into it and if the people who run it update their colleagues so that, for instance, sales presentations are always fresh and relevant.
The vital component
And that brings me back to our chosen few – our 200 most important customers. How do we get close to them?
Independent has never been a company to cut corners in the job of building relationships with our brokers and the current Absolute 2 roadshow is a good example of how we are prepared to pull out all the stops. The top people in the company take a lead role in the tour which is based on two luxury, presentation coaches and will be on the road for four months. That means we are willing to carry the absence from the office of key staff for weeks and months on end in order to communicate more closely with our top brokers.
The Absolute tour is one of our biggest investments in business-to-business relationships – and we know that it pays off.
We develop ideas with our customers, listen hard and then have a drink and a meal afterwards. It is the perfect solution for us – a superb blend of business and hospitality – and all on the broker's home patch.
And that, of course, is how customers become friends and how our friends help us to survive and flourish. One of the big words at Independent is 'loyalty'. All our marketing efforts are directed towards creating and increasing loyalty. There is no easy route to achieving this – but at the heart of it all is the understanding that in business there is nothing more important than that the customer remains your customer.
