One size does not fit all

With regulation, pressures of consolidation, the increasing role of technology and a growing pressure to show value for money, it is difficult for brokers to find the time to focus entirely on the needs of their customers.

The small to medium-sized enterprise market, while offering major potential for profit, is also one of the most over-simplified and least understood.

There are more than 3.86 million SMEs in the UK, ranging from the sole trader to a business with up to 250 employees, from motor traders to hairdressers, high-tech start-ups to hardened traditionalists.

As marketeers enthuse about the benefits of accurate customer segmentation and bespoke sales targeting, there is a growing recognition that one size certainly does not fit all, particularly in such a fragmented sector.

SMEs may resent being treated as a homogeneous mass - but with so many different types of business, how can brokers hope to address individual needs effectively?

Results from the recent Norwich Union SME Attitudes to Business survey, conducted by Holden Pearmain Research, identified four key SME groupings, each with distinct needs and operating styles. These have been classified as the stars, the strugglers, the clean kids and the next doors.

Stars

Business clients that are relatively large players with ambitious growth plans, but appreciate the role that insurance can play in their organisation and are always interested in understanding any recommendations, are probably 'star' clients.

They tend to be more established and secure and enjoy a strong relationship with their suppliers. They are optimistic and appreciative of the role of technology in their business.

These customers tend to value their insurance and they have to use it - being one of the most frequent - claiming segments due to their size.

They appreciate brokers' use of technology, but still like to maintain consistent contact with their suppliers; they make the most of their trade associations and are likely to be active in their business community.

Their rationale for using a broker is that they feel it gives them access to the best deal, but they are very interested in reviewing all the options and usually want significant input into the final purchasing decision.

They appreciate professional opinion and are happy to pay for it. Even if insurance was not a legal requirement, they would continue to invest in it.

Suggested tips for developing customers in the star segment include: establish one point of contact, ensuring they are the decision-maker in financial services purchases; use their involvement in the purchasing process as a way of further understanding their business; optimise the use of technology; and make the most of cross-selling opportunities as they see insurance as an integral part of their business.

Brokers should also be looking at networking opportunities at business, professional body and government agency events. Invest in the personal touch with personalised communications and, for example, a specially chosen, relevant gift for Christmas.

Strugglers

A business client that worries about the insurance cover recently sold to them, spends hours in a broker's office complaining about how hard it is to operate in their market, especially as their premium has risen again and lamenting the broker not having a greater understanding of the pressures they are under is, perhaps unsurprisingly, considered a 'struggler'.

The struggler is the business client that rightly or wrongly feels that forces are working against them - increased regulation, customers becoming more demanding, intensifying competition and professional services that are too expensive. Troubled by bad debt and slow-paying customers, money is a constant worry.

This group likes to think nationally but acts parochially. They tend to feel unsupported by their suppliers and worry about the impact of crime, retaining staff, the small print on documentation and how they will cope with increased legislation. They believe their suppliers only contact them when they want something.

They rely on their insurance broker to give them the right recommendation, even if they are troubled by the solution presented to them. Surprisingly, they do seem to have embraced the internet as a tool for researching business issues and their competition. But this has possibly made them more aware of their environment, increasing their concerns and playing on their insecurities.

As such clients spend more time worrying about the longevity of their business than planning for the future, they are inevitably high-maintenance clients.

The best approach is to arrange future appointments to make them feel you are supporting their business. At each meeting, allocate an amount of time to catching up. Ensure you have time to walk them through the insurance you are offering them and be prepared to reassure them about small print.

Brokers could also think about supplying strugglers with general business advice - for instance, legislation or health and safety advice supplied by the insurer - and not just when selling them something. The struggler is ambitious and, although there may not be any evidence of this in their actual behaviour, they will appreciate you demonstrating how you are providing them with ongoing support on a regular basis.

Clean kids

The 'clean kids' are newer, less established players in the market that are more independent, know the insurance cover they require, but are less reliant on brokers. They are unconcerned about the cost of insurance, as this is seen as a cost of being in business. Clean kids have a tendency to only contact their broker at renewal or when making a claim. They are also the least likely to have made a recent claim.

This group relies on formal avenues of advice and has a professional approach to running their business. They like to spend time doing business and thinking about how they can grow their business rather than what they see as administrative functions. This concentration makes them optimistic about the future.

When developing customers in the clean kid segment, brokers are advised to conduct some research before the first meeting. Review new products launched on the market and let them know how the policy will benefit them.

They appreciate formality and positive views and are looking for you to save them time and give them the best deal. More importantly, they appreciate a professional approach from brokers. This segment may also be interested in innovative new forms of cover. It is also worth considering ways in which you can help them to cut administration time, for example, by using email for quotes.

Next doors

'Next doors' tend to be local, established operators that appear to be lacking in ambition, but nevertheless feel secure about their business, expressing fewer worries and are generally less pessimistic than the strugglers.

They show little interest in changing or moving on generally but have embraced technology and frequently use email in business.

They are open to insurance advice, but try to avoid brokers when possible, unless they are sure they are getting the best deal. They do not expect premiums, like prices, to increase every year.

Brokers should reassure such clients they are confident they are offering them the best deal. Brokers should provide them with a multiple quote to demonstrate evidence of this and brokers should also be ready to explain the rationale behind any premium increases. When communicating with clients in the next-door category, brokers should ask if they would prefer to be contacted via email before doing so. This group favours the personal touch and wants to be reassured they are dealing with people they trust and believe in.

Interestingly, all the segments identified in the study recognised that brokers can have a positive impact on their business although, clearly, some businesses are more open to this than others. This can obviously be improved with a greater understanding of their market place. Being able to recognise and act on the specific requirements of different SME business types can help to cement the brokers' role as a business consultant and can play a major role in client retention.