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Route Marketing is Dead

By Dick Wagner
January 29, 2010

Is the era of effective route marketing to insurance agents over? Marketing reps have been developing (or have been attempting to develop) relationships with insurance agents for years, with varying degrees of success.



Is the era of effective route marketing to insurance agents over? Marketing reps have been developing (or have been attempting to develop) relationships with insurance agents for years, with varying degrees of success.

The consensus was that insurance agents and brokers could or would refer property losses directly to the mitigation or restoration contractor. For many years this did happen, and many contractors received a lot of work and relied heavily on those referrals for their existence.

Traditional insurance route marketing usually goes like this: the contractor rep spends his/her day stopping at 15 - 20 or 25 agents in a given territory, dropping off magnets, cookies, a little bagful of goodies, a business card, or sometimes even literature and marketing materials. Then they roll to the next stop on their list.

This “Stop, Drop and Roll” method of marketing is probably the least effective way to market but sadly is the way most “marketing reps” perform the process. Since insurance agencies are open to the public, much like a store, they are easy targets for every salesman and marketing rep that cares to walk in. It becomes a bidding war, with sales and marketing reps vying to see who can deliver the best “bribe” of the day. Even when an agent or agency would consider referring work, the Stop, Drop and Roll reps often aren’t seriously attempting to get in front of those (the decision maker) in the agency that could refer work. To quote internationally known consultant Chuck Violand, “there must be a valid business reason to visit.” Just dropping off goodies isn’t a valid business reason to visit.

It seems the route marketing method is still being used today because it is easy to perform, requires less expensive reps, and doesn’t require a lot of supervision as long as the 25 stops are made each day. Plus, some business owners are uncomfortable in sales and marketing so they may feel “something” is being achieved by sending Stop Drop and Roll marketing reps into the territory. I know many contractors that require their reps to make 100 or more stops a week!

Without a Valid Business Reason to stop, the best thing being accomplished is that the business owner can feel good each Friday that their rep made all those stops. Forget that very little business was or will be generated. Feel-good marketing costs a lot of money with little or no return on the investment.

Today, it is more difficult than ever to make the case for having a legitimate reason to visit, considering what’s happening in the insurance industry and specifically the property claims arena. The world is changing – fast! The insurance industry is also changing fast. No longer are insurance agencies “easy” marketing targets. These insurance agents are getting five or six or 10 visits a day (or more in some cities) by hopeful marketing reps, making it difficult to set yourself apart from the never-ending parade of other vendors. Plus it is now a big interruption to their day and more often a huge annoyance or irritation.

Captive agents are increasingly restricted by the carrier and are often told
  1. not to refer contractors, or
  2. refer only the preferred vendor, or
  3. spend their time selling, not dealing with claims.
Insurance company consolidations are having the effect of breaking up long-time agent relationships, and more and more insurance companies are joining Third Party Administrator programs or adopting their own strict preferred vendor programs, further eliminating those established route marketing relationships.

And if that isn’t bad enough, these consolidations are directly impacting those “special” relationships that existed with many adjusters. Insurance companies are putting more restrictions on their claim staff, and claim office closings and consolidations are dramatically reducing or completely eliminating those long-standing adjuster connections. You know the ones: where the adjuster calls you on your cell phone and then has you ride with him to the loss, and then tells the policyholder that you are the contractor he recommends! Now let’s be clear; some contractors do get some work from some insurance agents, even without being on a preferred vendor program. I know a large contractor in Ohio that has a great relationship with a very big captive agent who disregards the insurance carrier directive and sends all of his claims to this specific contractor.

From my experience, this is the exception to the rule, and independent agents are somewhat more likely to be willing to refer work to contractors. However, even that won’t happen if the route marketer just goes through the motions of delivering silly bags.

It takes a skilled marketer that does his homework on the prospect, and then gets in front of the decision maker and presents a compelling reason why the agency should refer losses to that contractor. In large independent brokerages, the marketing rep must convince the claim staff (yes, larger independent agencies do have their own “claim staff”) to refer claims to them. Route marketing, once again, will not achieve this.

Even if you are on a preferred vendor program, understand very well that you are not secure. I can name many contractors that received a one sentence “Dear John” e-mail that says, “We no longer need your services. Thank you for your past service.” … or the contractors that received a phone call saying “Thanks for everything, but we have changed vendors.”

One contractor in Illinois had been doing business with the carrier for many years with great accolades and reviews. One short email ended the relationship, costing them $250,000 in lost annual revenue. A fickle and very rapidly changing insurance claims industry leaves you vulnerable to the same scenario!

And after all that bad news, here’s a little more: deductible amounts are skyrocketing at the demand of the carriers, with many deductibles now being a percentage of the insured value. A 3% deductible on an insured home of $200,000 means a deductible of $6,000. How many homeowners are going to call for the typical $3,500 water loss when they have to pay the first $6,000 out of their pocket? Where are you going to get the jobs to replace those that you won’t get anymore?

I advocate a totally different and much more effective marketing effort to establish long-term opportunities for sustained growth and profit. A better way may be to develop relationships with commercial, industrial and institutional clients, which will more often call you directly rather than rely on the carrier or agent to propose a mitigation or restoration company.

In my opinion, failure to develop commercial client relationships will be the demise of many restoration contractors, especially those that have relied heavily on smaller residential losses for the majority of their sales and profit.

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Dick Wagner is cofounder of The CREST Network, LLC, a Commercial & Residential Education Support and Training coaching company. He is also president of the SCRT and a Florida Guardian ad Litem, advocating for foster children.

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