Successful agents track and understand close ratios as a critical KPI (key performance indicators) to help determine where to focus sales and marketing efforts. The challenge is knowing what constitutes an optimal close rate. Top-performing agents with sufficient lead sources, targeted focus, and a solid portfolio of carriers can consistently drive 40% to 70% close ratios.
Historically, agents face a couple problems with close ratios. First, many have bought into the “quote-more, write-more” philosophy championed by company representatives. Time is a limited resource, just quoting without improving a hit ratio comes at a cost. Second, understanding the true “cost” of a quote is difficult. Costs incurred may include lead acquisition, reports (i.e. MVR shared cost), advertising/marketing, hourly pay allocated to process a quote, and opportunity cost of not pursuing other lead sources.
Understanding close ratios first requires tracking all sources of quotes and sales. The key is segmenting where appropriate, usually starting with the lead source (i.e. call-ins, website, referral partners, client referrals, etc.). Different lead sources will yield different close ratios. Second, understanding why quotes did not convert to sales is worthwhile. The reason for this is there may be an opportunity to pre-qualify leads and eliminate quoting those low-to-no-probability prospects and redirect that time towards higher-probability lead sources.
Agents that satisfactorily comprehend close rate by lead source, cost of quoting, and factors that trigger whether quotes are more likely to be sold or not (i.e. losses, price-shoppers) can then use that information to employ some best practices:
· Develop a pre-qualification process to disqualify prospects that may not be worth your time quoting. For example, if you write with home insurance carriers that will not take more than one loss in five years, ask the prospect before committing to start a quote.
· Allocate sales and marketing resources across multiple lead sources, optimizing yield. For example, let us say direct mail solicitation costs $30/quote (printing, mail and staff time) and yields a 20% close rate, but client referrals cost $60/quote (contact, referral gift and staff time) but yield an 80% close rate. While it may cost less to quote direct mail solicitations, spending $300 for 10 direct mail quotes would only yield 2 sales, while spending the same $300 for 5 client referral quotes would yield 4 sales.
· Directly tie sales goals into sales and marketing activity. Building on the example above, to write 10 new business accounts per month, you may need to see 20 direct mail quotes (20% close ratio) for 4 new accounts and 10 client referral quotes (80% close ratio) for 8 new accounts.
By understanding your close ratios, total cost-per-quote, and common disqualifiers, you can better determine where to focus lead generation and business development activities.