Is Your Insurance Agency Already Targeting a Niche Market?
While you may classify yourself as a "generalist," it's possible you're already serving a specific market segment. Here's why it matters and how you can uncover your hidden specialties.
A niche market is a group of potential customers who share common qualities. This definition could apply to businesses in a specific industry or people with similar financial interests.
The reason niche markets matter for your agency is because they're usually associated with higher than average profit margins. An agency that sells the same product to the same type of client again and again typically develops efficiencies, which make their staff more productive.
While it's tempting to refer to yourself as a "generalist" for fear of losing out on sales, the opposite may be true. Niche marketing can lead to a higher volume of sales, assuming the target market is big but not too big to attract a lot of competition.
How to Find Your Niche
You may not know it, but there's a good chance your agency is already serving one or two niche markets. Why? Because most new business comes from referrals, and referrals typically come from businesses and people that share similar characteristics.
Over time, your agency builds up a solid reputation and gains a high level of comfort discussing the unique needs of a particular market segment.
Take some time to run a list of your accounts organized by SIC codes. Do you spot any patterns? It's likely that 25% or more of your business comes from a couple niche markets.
Next, set up a meeting with your key staff members to review the list and brainstorm even more possible niche markets.
- Are there existing niches in your area?
- Do any of your staff have experience or connections in other industries?
- Are any of your staff members involved in hobbies or other outside activities?
Once you have your list, refine it by describing each group's needs and interests. You want to make sure you have access to insurance products that can help them. Also, make sure the target market is big enough to be profitable.
Typically, it's safest to select several niche markets to focus on. That way, the loss of one market would not spell the end of your agency.
So what did you find out? Is your agency already targeting a couple niche markets? Those segments just may be your ticket to higher profit margins.