What Really Generates Referrals

by John Jantsch (This content from: Duct Tape Marketing)

So much of the literature on the subject of referrals focuses on the proper ways to network, ask for referrals, and create incentive programs for referral sources. While some of these more tactical things do indeed produce referrals for the organizations and salespeople that employ them, they are often little more than window dressing when it comes to the big picture.

Building a foundation that automatically generates referral momentum is not done through external actions – like some many things in life, you do it from the inside out. Plain and simple the most widely referred business are purely more referable.

I’ve studied a lot of businesses that easily generate referrals and they share some common internal tendencies as part of their brand and culture.

Make people look good

Looking at all business relationships with an eye on making prospects, customers, vendors, mentors, and staff look and feel good is a tremendously attractive internal quality. I read this quote recently and I think it works well here – “To a large degree, our success and happiness in life depends on how much people like themselves when they’re with us.” Joe Caruso

 

Ready to refer

We all know that giving referrals is one of the best ways to get referrals, but the difference lies in the systematic preparation. There is a big difference between understanding this philosophically and practicing proactively. Building your back pocket with a group of “best of class” providers takes work. You’ve got to discover, recruit, train and build the trust necessary to develop a proven network of providers who can help you add value to your client relationships, but once you do, the rest is pretty easy.

Keeps promises

The word trust is easy to use and even easier to lose. But, as Stephen M.R. Covey so correctly points out in his book, The Speed of Trust – trust is a hard currency and asset. Trust impacts how fast things are done and how much they cost. It is so much easier and less expensive to refer a business that keeps its promises.

Creates an experience

We will travel to the ends of the earth to be entertained or at least not bored to tears. The businesses we love to refer aren’t boring. They realize that it’s not just about the product and service they sell, it’s equally about the total experience – the marketing, the message, the people, the processes, the delivery are all carefully considered as props integral to a successful customer experience.

Educates, instead of selling

Nobody likes to refer a friend to a sales pitch, right? But, exposing a friend to information that might help them get more of what they want out of life, now that’s a different story. Even better when that information is packaged and presented in multiple locations, formats, and venues.

Adds value beyond price

In Bob Burg’s book the Go-Giver the main character, Joe, encounters the 5 laws of stratospheric success. The first law, the Law of Value states that your true worth is determined by how much more you give in value than you take in payment. This is a tough one for so many people because we often have no great baseline for the value we bring. The key here is to work tirelessly to understand, quantify and enhance the value our customer receives and the rest will take care of itself.

Does something talkable

My spell check isn’t balking at the word talkable, but I think it properly expresses this one. You’ve certainly encountered the concept of word of mouth constantly of late, but I think that concept tends to lean heavily on tactics and stunts, like viral videos, that might create a flurry of word of mouth. To do something talkable to me is to have something at the core of your business, a higher purpose, an inspirational story, a product or service that is simply brilliant, or a habit that makes people smile. Authenticity and consistency are what make something talkable.

Exceeds expectations

This one seems pretty easy, but why isn’t it. When someone buys a product, toss other stuff in the box, right? Maybe, but the only way to actually exceed expectations is to know what they are. And that’s where people fall down. In business and in life, it’s extremely difficult to exceed an expectation you have not participated in setting. Widely referred business work very hard to set the proper expectations and then it’s pretty simple matter to exceed them. So, you see exceeding expectations might also include understanding and attracting the right customers, laying exactly how you work to get results on the line, teaching customers what’s expected of them, and even saying no once and while.

Focus on even one of the internal mindsets and practices above and watch how much more referable you become.

I also created a public mindmap of this article and would love it if you would contribute your thoughts on the tactical elements of each of these principles listed above. You do have to sign-up for a free Mindmeister account to add your thoughts, but it’s a pretty cool tool anyway so you might like to play around with it. You can find the map here – http://www.mindmeister.com/23949165

Invest in People

Profitable Practice

By Deena Katz

June 1, 2009

During the Great Depression, two separate cereal companies, Post and Kellogg, were competing for the cold cereal market. Both companies had toasted flakes but most consumers were still eating oatmeal because it was hot and at least seemed healthier. As the Depression hit, Post-which eventually became General Foods in 1929-began to cut expenses, laying off workers and cutting advertising and marketing spending. The company focused inward, trying to protect its market share and hold on.

Kellogg, on the other hand, invested heavily in research and development and doubled its marketing resources, heavily promoting its new cereal, Rice Krispies, which debuted in 1929. Kellogg reduced the hours of the manufacturing plant’s three shifts and created a fourth, just to keep as many people working as possible. “I’ll invest my money in people,” company founder Will Keith Kellogg said in 1930. By 1933, Kellogg’s profits had risen 30%. Post’s profits had risen 18%.

Okay, we know we are not reliving the Great Depression and we also are not cereal manufacturers, but there is certainly something to be learned here. As revenues plummet all around us, business people share a natural tendency to chop costs and hunker down until the storm passes. The danger is that while you and your staff try valiantly to hang on, you are losing out on the enormous marketing opportunities that exist in turbulent economic times. That opportunity is to capture money in motion.

Many clients will be leaving advisors right now who promoted performance, and not only failed to deliver but also hid from their clients as markets collapsed because they had had no idea what to say, or what to do. During bull markets, financial planning’s process-based advice is often positioned as old-fashioned and conservative-but ultimately, it works. Today, many investors find that very attractive. As a result, you may benefit from the downturn.

DELEGATING GROWTH

But to capture money in motion, you need staff. That is, you need good staff-people who can not only retain clients, but who can also acquire them. This is a new twist from the past 10 years, a time during which many firms brought on great advisors who focused exclusively on retention. But don’t ignore the ability of all advisors to ask for referrals, hold seminars and represent the firm with knowledge, expertise and leadership. That is the core of organic growth.

For years, you may have handed clients over to your employees. But you may never have required your staff to take responsibility for bringing in new business. They have the security of a paycheck each month and may have come to believe that they deserve a bonus every year. They are often rewarded for the firm’s production, but that is not necessarily equivalent to their personal production.

With so many changes in the economy and your revenue, now is a great time to connect your marketing efforts with your compensation structure. Both are critical to the success of your firm. Invest in your people-but be sure to do so in a way that ensures that they are rewarded for the behavior you are looking to reinforce. Helping them expand their skills and leverage your marketing efforts should be your top priority.

I believe that the economic events of the past several months have redefined our compensation structure forever, particularly for RIAs. Base salaries are likely to shrink, and bonus structures will become much more complicated so that staff is motivated and rewarded for bringing in new relationships. Client retention, though important, cannot be the primary focus if a firm is looking to grow and stay profitable.

Think about this: The average age of an registered investment advisor today is in the 50s. Even if you decide to be the rainmaker until you drop dead, your firm should demonstrate depth in all areas, including marketing and leadership. Everyone should have to participate at some level.

Like many other firms, you have probably cut staff in order to meet both short-term cash flow and long-term profitability needs. But what you might want to consider is how to keep your remaining people working, while the firm takes less of the cash-flow risk.

CREATE A NEW COMPensation PLAN

You have probably already made some base salary adjustments. If so, freeze your current advisor base salary. Now, build on that base with bonus strategies that encourage the behavior you want.

For example, connecting with the right centers of influence can bring new business to the table, leverage time and maximize marketing results. Encourage your next generation of advisors to meet with these influencers regularly; in fact, reward them for it.

Next, you can develop a script your advisors can use to ask for client referrals. It doesn’t have to be slick or complicated; it might even simply begin with, “I wonder if you’d give me some advice, Mr. Client.” Include a list of times when asking these questions might be most appropriate.

For example, clients are more likely to refer you after you’ve completed a service with a positive result or quickly solved a client’s problem. Build these possible query times into your process.

Then, sit with each advisor and map out his or her plan for the next year, determining the minimum number of contacts and referral asks he will make. If he reaches his target, he shares in the bonus pool. If not, well…

In fact, some firms who use this method penalize advisors by 10%-15% for missing their annual marketing “touch” goal. To round out your referral incentive program, you might include rewards for additional activities such as writing an article, being quoted in the local newspaper or participating in some other event that brings visibility to your firm.

To balance this incentive compensation plan, you may also want to create a retention goal, with a penalty for losing clients (in which death, of course, doesn’t count). That way, your advisors are not neglecting their current client relationships in favor of marketing to new ones.

Your incentive compensation plan may look like this:

Individual Incentive Compensation Plan

1. Individual meets individual influencer goal of XX annually

2. Individual meets individual referral asks of XX annually

3. Individual meets individual production goal of XX

4. For client revenue lost, production is reduced two times

5. Should revenues (not including market) drop, individual incentive comp is XX% of normal amounts until return to high-water mark

6. Individual incentive comp is paid out XX% per year and is dependent upon firm retaining client

7. Any incremental cumulative revenue (in excess of $X,000) brought in by existing clients will be treated the same as new client revenues for that year’s individual incentive compensation.

While this example may not necessarily be the right structure for your firm, you can certainly get the idea. Most important to remember, in these uncertain times, you will want to focus on your future growth as well as your bottom line. Leveraging your current human resources and reviewing your compensation structure is not only critical right now, but it will result in your reaping much greater economic rewards in the future.

Deena Katz is an associate professor in the division of personal financial planning at Texas Tech University. She is also chair of Evensky & Katz in Coral Gables, Fla.

Five Steps to High Impact Client Meetings

By Dan Richards
March 10, 2009

Today’s number one priority for advisors is to have as many face-to-face and phone meetings with clients as possible.

Just talking to clients isn’t good enough, however. To get maximum return on your time, every conversation with clients has to achieve two goals.

First, conversations have to be seen by clients as advancing their needs and begin a good use of their time. My research with investors shows that one reason key clients are reluctant to attend meetings is because they are afraid of the “same old, same old” discussions, with little or no new information. Add in the hassle factor in many cities of fighting traffic and finding parking and it should be no surprise that clients become anxious about participating in meetings that do not convey value.

Second, conversations have to advance your agenda with clients, taking advantage of the best business opportunities with each client.

So how do you achieve these dual objectives, ensuring that meetings are a good use of times for both clients and advisors?

In conversations with investors and advisors, there’s one activity that has a high correlation with achieving both of these goals –the use of a written agenda.

Advisors who consistently use written agendas report that they make meetings more productive and help them stay on track.

Just slapping an agenda down in front of the client isn’t enough, though. To get full value, there are five key steps to creating that agenda.

Step One: Start with the end in mind

In “The Seven Habits of Highly Effective People,” Stephen Covey talked about “starting with the end in mind” – looking at every activity in the context of the outcome that’s ultimately desired.

When it comes to crafting agendas, advisors need to start with the end in mind as well. Before calling a key client to set up a meeting, identify the one or two most significant business opportunities that are available to you with that client – and then identify a primary and secondary goal for that meeting to capitalize on them.

There are lots of possible objectives, including consolidating assets that a client holds with another advisor, getting cash off the sidelines, meeting a broader range of a client’s needs and building better relationships with your client’s spouse, kids, lawyers or accountants. Or your goal could simply be to deepen relationships with a key client in a difficult period.

Once you’ve identified your primary and secondary business goals – but before picking up the phone to propose the meeting – write down the specific issues you’re going to suggest covering in the meeting that will help you achieve these goals.

Step Two: Get client buy in to the agenda

The next step is to discuss the agenda with the client, so that they see this as their agenda rather than yours.

When the client has agreed to meet, you could say something like: “There are a number of issues I’d like to cover in our meeting. Before I talk about them, what are the questions and issues you’d like to talk about when we meet?”

When your client answers that question and before introducing your items, take a pause and then say: “What else would you like to discuss when we meet?” That way, you really are giving clients the opportunity to put all of their questions and issues on the table.

At the end of the conversation, you should have an agenda that reflects the issues that both you and your client want to cover. Email that agenda to your client as a follow up to your conversation – and consider emailing it again as a reminder in the days immediately before you meet.

Step Three: Deal with soft issues before hard issues

As a general rule, your agenda will focus on hard issues related to a client’s investment, tax or insurance situation or their financial plan.

It’s obviously important to deal with these. Very often, however, in order to get clients to focus on the hard issues, you have to deal with their soft issues first – these days, those often focus around their fears, anxieties and apprehensions.

Here’s one way to consider starting a meeting to get at a client’s soft issues:

“Here’s the agenda that we’re going to be covering today.

Before we get into this, however, some people report that last year’s markets caused them to lose some sleep. Tell me, how did you find yourself affected by last year’s markets?”

If the client responds that they lost some sleep and experienced some anxiety as well, resist the temptation to leap in with an immediate response. Instead, sit back and say the five words that, more than any others, will help clients talk further: “Tell me more about that.”

Asking this question in this fashion gives clients permission to talk about their own anxiety and opens the door to a discussion about how they really feel.

Some advisors use another tack to ensure they are dealing with all of their clients’ important issues.  They’ll put the agenda on the table at the beginning of the meeting, containing all of the items that were agreed to.  The only difference is that all of the items have been pushed down by own item.

The line beside the first item on the agenda is blank.

Having given the agenda to the client, they go on to say: “This is the agenda that we discussed on the phone, with one change. You’ll notice that the first item is blank. That’s just in case there’s something that’s come up since we spoke on the phone or an important question that you’d like to talk about today.

Tell me, what else would you like to discuss that’s not on the agenda right now?”

Advisors who do this report that quite often clients respond that all of their issues are on the agenda, in which case they move on to item two.

With surprising frequency, however, advisors say that when given the opportunity, clients raise issues that they didn’t talk about on the phone – and often it’s these issues that are the most important matters discussed during the meeting.

A variation on this comes from one advisor whose assistant books her meetings. Rather than getting into client issues when the appointment is set up, at the outset of the meeting she says: “I’ve prepared an agenda covering some important issues for discussion today.  However, you’ll notice the first three lines are blank – those are for you to fill in with anything you’d like to talk about. What would you like to talk about in those first three points?”

This advisor has found that starting this way gets clients to open up – in some cases, the whole meeting is focused on those first three points and they end up scheduling another time to deal with the rest of the agenda items.

Step Four: Practice the 50 – 50 rule

One of the most important steps to productive client meetings is consistent use of the 50 – 50 rule.

What’s the 50 – 50 rule, you may ask?

For every 50 words you say in a client meeting, your client should say at least 50. Research on this subject is absolutely definitive – clients are more likely to report that meetings are a good use of their time when they are the ones doing the talking.

If you don’t believe this, consider this simple fact. Over the years, I’ve talked to many investors who say that one of the things they like best about their advisor is that he or she is a “great listener.” I have yet to run into an investor who says that the reason they like their advisor is because he or she is a “great talker.”

The best way to get clients engaged and participating in a meeting is to be sure to ask lots of good questions.

And the best way to ensure you ask good questions?

Take five minutes before a meeting to go through the agenda and beside each point write down questions you’re going to ask. That alone makes your chances of having the 50 – 50 rule work go up dramatically.

One pitfall that some advisors run into is that they are too busy taking notes in meetings that they don’t focus on maintaining eye contact and observing the client’s body language. As a result, they don’t completely engage with the client.

A simple solution to this comes from a top performing advisor with a bank-owned firm. She has an assistant sit in on meetings and take notes, so that she can put 100% of her focus on the client interaction. Doing this eliminates worrying about remembering key points and lets you give clients your complete attention.

Step Five: Translate the agenda into client outcomes

At the end of the conversation, the agenda has helped guide you through the meeting.

At this point, take the time to verbally summarize what you’ve talked about and next steps from the meeting.

For larger clients with whom you’re meeting two or three times a year, you could also say something like “I found today’s meeting very productive and hope you did also. I’d like to suggest that we plan to meet again in three or four months. Tell me, what specific issues would you like to devote more time to at that meeting?”

In other cases, where advisors have multiple meetings scheduled with an important client over the course of a twelve month period, as part of the agenda for the first meeting of they year, they’ll lay out a roadmap of the issues that will be covered in each meeting.

You have one final opportunity to remind clients that the meeting was a good use of time. Most advisors systematically create meeting notes, summarizing what was discussed and outlining next steps arising from each meeting. Consider creating a “client friendly” version of this summary – and sending it along to clients as a reminder of the topics you covered and the value they obtained from taking the time to meet.

Take the time to build a systematic process around written agendas into your meeting planning routine. If you’re like most advisors, once you’ve tried this for a while, you’ll be pleasantly surprised about the positive impact this has on the value and productivity of client meetings.

 

* Dan Richards conducts programs to help advisors gain and retain clients and is an award winning faculty member in the MBA program at the University of Toronto. To see more of his written and video commentaries and to reach him, go to www.strategicimperatives.ca.

When the Going Gets Tough, The Tough Get Creative

from OPEN Forum Blog: An American Express Blog by Diane Helbig

So you think the economy is hurting your sales. In all honesty, you are hurting your sales. There is plenty of business going on every day. People are buying. Their reasoning and process may have changed, but the end result is the same.

The difference between those who thrive and those who flounder is in their heads. Successful business owners and salespeople are DECIDING to succeed.

That decision propels them to be more creative with their process. Those who are struggling have DECIDED to listen to the news instead of listening to themselves.

There are three key ingredients to selling in a more challenging economy. They are:

• Attitude

• Creativity

• Action

Attitude

You’ve heard it said that Attitude is Everything. So true! Henry Ford said, “If you believe you can do a thing or you can’t do a thing, you’re right.” Your mindset is a large part of your success or failure.

So, do a gut check. What do you believe at this very moment? Do you believe that the challenges of the economy are insurmountable? Or, do you believe that with ideas, a plan, and some action, you can still succeed?

It is your attitude that will unlock (or bolt down) the door to your success. You can, most likely, see it already! When you believe in possibilities, you open up your mind to discovery. On the flip side, if you are negative you are paralyzing yourself.

The first step in your adventure is this – adopt a ‘can do’ attitude. Embrace the idea that there are possibilities.

Creativity

Once you’ve improved your attitude you are ready to do some real brainstorming. Take a look at your product/service offering and ask yourself how you can tweak it. Can you offer a ’stimulus’ discount? Can you add in complementary services? Can you barter with potential clients?

The young entrepreneurs over at Tees and Tats faced a real challenge when the economy took a turn. As merchants of high-end, limited edition tees, they found themselves in a situation where the economy was having an impact on their sales. Instead of giving in to what some would say was inevitable, they got creative and came up with a program to draw business. And they used the economic conditions as part of their program, tying the Dow Jones Index into their pricing platform. In essence they offered a rebate for every 100 points the Dow decreased. You can read their story here.

How’s that for thinking on your feet? It’s what I mean by creativity.

When the economy is good, people buy because of need and want. However, when the economy gets tight, people change their buying habits. The ‘wants’ can sit on a shelf, but the needs remain. Your job is to identify how your product/service is needed and how you can position your business as the preferred solution.

Have the new economic conditions created a new target market for your product or service? Have you considered that possibility? Think about it. Consider, as well, whether now is the time to add a product or service to your offerings. Some business owners are packaging their products differently as a way of adding value to their prospects.

Action

All of the above will do you no good if you don’t take action. A big mistake many business owners and salespeople make is hunkering down – I imagine to ‘weather the storm.’ The problem is that no activity leads to no activity! You have to act.

You have to take action on a daily basis – especially now. Look around. The most successful people out there are the ones who have embraced these ideas and are DOING something to build their businesses.

Visit your current clients. Touch base with them to find out how they are. What’s going on with them? Are there other ways you could be helping them? Building customer loyalty is key to current and future success. Those vendors who are helping their clients survive will be the vendors who are kept for years to come.

In addition to this, there is usually business there. Many salespeople win the first piece of business but never go back to find out what else they could be doing for that very client. Now is the time to uncover those missed opportunities.

Attend networking events. When times get slower you have more opportunities to get out and meet people. Getting out the door is essential. I submit that most selling these days is launched via networking and referrals. So, get out there and find those referral partners. This, of course, includes social media networking.

Reconnect with past acquaintances. When you’re busy it’s easy to lose touch with people. When times are tougher, slower, you can take advantage of the available time to reach out to those folks. They can be great referral sources.

Explore Strategic Alliances. These are relationships with individuals in complementary industries who are in front of your prospects. They provide you with another set of eyes and ears – like an unpaid sales team. And you do the same for them.

As mentioned above, some small business owners are bartering for their products or services. Remember, we all have needs. If you can match your need with a potential client you may be able to trade. Once they’ve experienced your product/service there’s a good chance they’ll continue to use you, either in a barter relationship or traditional.

I received a call from a past client a month ago. When I answered the phone she said, “What do I have that you want?” Well, that threw me for a minute. Then she explained that she wanted me to coach one of her salespeople and was wondering if we could barter for it. As it turned out, I did need one of their IT services. Deal made!

The people who are thriving in today’s economy are the ones who believe they have something of value. They also are taking action daily to do the things necessary to move their business forward. The lesson for you is this: you have to first adopt a positive attitude. That attitude will allow you to get creative with your messaging and your product offerings. A positive attitude and creativity won’t help you a bit if you don’t take them out the door!

The aggregator advantage: join forces to get through tough times.

Small independent agencies struggling to survive in today’s economy and insurance market face plenty of challenges-not the least of which is pressure from the insurers they represent. Many are tired of their insurers demanding more volume when in actuality ac·tu·al·i·ty
n. pl. ac·tu·al·i·ties
1. The state or fact of being actual; reality. See Synonyms at existence.

2. Actual conditions or facts. Often used in the plural. a small profitable agency is often more valuable to an insurer than a large unprofitable agency. The agencies are tired of missing profit sharing profit sharing, arrangement by which employees receive, in addition to their wages, a share of the net profits of a business. The purpose is to give them an incentive to increase their output through enhanced morale, less wasteful use of materials, better care of
….. Click the link for more information. from a company with a 14 percent loss ratio because they were $20,000 short of their minimum volume commitment. And more of them are taking action to do something about it.

Instead of going it alone, more agencies are looking at ways to combine forces through “clustering” or aggregating–pooling their resources to combine volume without giving up autonomy or ownership. Although the trend has been around since the 1970s, clustering is becoming more popular in today’s economy. According to according to
prep.
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

3.
….. Click the link for more information. the IIABA/Future One 2006 Agency Universe Study, more agencies in the under $1 million or $2 million annual revenue range are likely to engage in some form of aggregated arrangement, with 19 percent of respondents In the context of marketing research, a representative sample drawn from a larger population of people from whom information is collected and used to develop or confirm marketing strategy. noting their involvement at some level.

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And these arrangements work: In a recent ranking of the country’s top 100 agencies by an insurance trade publication, 28 percent were part of a cluster or aggregator.

These models, when carefully undertaken, can be a win-win-win: agencies gain market access and profitsharing, and minimize the risk of losing large accounts; insurers get distribution expertise and quality from agencies; and even regulators benefit because of the ease in managing profitability and loss results.

Volume aggregation has several characteristics that may be advantageous. It satisfies your company’s appetite for volume and allows you to attain profit sharing volume levels as a group when you might not meet them individually. It escalates the aggregated agents into higher percentage payout pay·out
n.
1. The act or an instance of paying out.

2. A percentage of corporate earnings that is paid as dividends to shareholders. levels for profit sharing and it increases profit sharing stability due to the aggregated books to sustain shock losses that the individual books’ abilities could not tolerate due to the small volume. These factors may make clustering more viable today.

Clusters are more accepted today than in the past. There are many different types of entities and structures, and they are constantly evolving. Companies are viewing them much more favorably fa·vor·a·ble
adj.
1. Advantageous; helpful: favorable winds.

2. Encouraging; propitious: a favorable diagnosis.

3. than in the past. Like any new idea, it took a while for people to get used to it, but it is now an accepted strategy for smaller independent agents.

Bill Wilson, associate vice president of education and training for IIABA IIABA Independent Insurance Agents & Brokers of America and director of the Big I Virtual University, recently approached consultant Peter van Aartrijk (www.aartrijk.com) and me to work on a paper about aggregators. This paper is now available to all subscribers on the IIABA’s Virtual University Web site (www.iiaba.net/vu).

In this paper, I categorize cat·e·go·rize
tr.v. cat·e·go·rized, cat·e·go·riz·ing, cat·e·go·riz·es
To put into a category or categories; classify.

---

cat aggregators into four broad groups:

(1) Agency franchise operations (AFO AFO Ankle-foot orthosis ): These offer a franchise arrangement and share revenue while providing market access; a compensation-based model rather than an upstream holding company concept.

(2) Market access cooperatives (MAC): The original agency “clusters” in which agencies retain ownership of their businesses, and thus their name, identity, location and assets.

(3) Agency platform operations (APO apo- 1 A prefix indicating a protein component in a conjugated molecule–eg, apoferritin, apolipoprotein, see there 2 Apolipoprotein, see there ): Taking the aggregator model to the next step, APOs provide service benefits of AFOs and MACs, and further agency structure benefits by setting up large automation platforms for members.

(4) Managed agency organizations (MAO MAO – An early symbolic mathematics system.

[A. Rom, Celest Mech 1:309-319 (1969)]. ): These attract large numbers of agents and provide a common management structure for all members, who usually share the ownership and manage the organization that oversees their agency books of business.

These classifications are really a chronological chron·o·log·i·cal also chron·o·log·ic
adj.
1. Arranged in order of time of occurrence.

2. Relating to or in accordance with chronology. evolution of how aggregators have developed. The first entities were franchises, like USI; then came market access cooperatives like Grindstone grindstone

or grind common metaphor for industriousness. [Pop. Culture: Misc.]

See : Industriousness Group (see page 24). Then agency platform organizations emerged, like Renaissance Alliance and more recently, managed agency organizations like United Valley Insurance Agencies. Another important distinction is that some of these organizations are organized as money makers for their owners. They may even take a percentage of ownership in your book. Others are groups of smaller agents helping everyone survive, with almost a non-profit mentality to their operations.

A BRIEF HISTORY OF AGGREGATION

The concept of agency aggregation has been around for nearly three decades, dating back to the 1970s, spurred by ongoing pressure from carriers for agencies to produce higher levels of premium. At the time, even some of the big brokers were having difficulty accessing errors and omissions errors and omissions n. short-hand for malpractice insurance which gives physicians, attorneys, architects, accountants and other professionals coverage for claims by patients and clients for alleged professional errors and omissions which amount to negligence. coverage, and infrastructure problems were appearing in the insurance industry. “More and more” seemed to be the mode of the day: Companies were demanding more and more premium, automation was becoming more and more important and more and more expensive. Talented and capable managerial and sales staffers also were becoming more difficult to access.

This led to the first aggregations, which took the form of franchises. Assurex was one of these original organizations that responded to some of these problems. As Assurex grew, other groups such as USI saw an opportunity and formed franchises largely based on other service distribution models such as real estate.

However, this model never really became a catalytic cat·a·lyt·ic
adj.
Of, involving, or acting as a catalyst: “Deregulation’s catalytic power . . . is still reshaping the banking, communications, and transportation industries” Ellyn E. driving force for smaller agencies, primarily because such arrangements were designed with larger agents and brokers in mind. The trend of smaller agencies pooling their resources in clusters created one of the few alternatives to being acquired or going out of business. The idea was for agencies to collectively access markets on a broader basis than they could individually. These pioneering aggregators understood they could realize enhanced profit sharing and income stability. They saw that they could do this on their own without having to go to a large entity to gain the benefits of aggregation. These became the market access cooperatives described above.

As the trend grew, carriers began recognizing the clout of clusters in terms of distribution reach and premium volume. In the 1980s, the early aggregators, which were primarily regional, began expanding into new states and developing new structures.

Over time, a generation of insurance agents sought a better way to do business. Renaissance Group, Wellesley, Mass., is a good example. President J. Bruce Cochrane approached a group of insurers with a better distribution model. Several companies signed on to his concept and he built an agency platform organization which set up its own automation platform, established a commercial lines underwriting Underwriting

1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).

2. The process of issuing insurance policies. floor and created an aggregated agency. The Renaissance Group targets larger agencies than the traditional aggregators and concurrent with market disruption Market Disruption

A situation where markets cease to function in a regular manner, typically characterized by rapid and large market declines. Market disruptions can result from both physical threats to the stock exchange or a unusual trading (as in a crash).
….. Click the link for more information. in the Massachusetts insurance market place, it simply built what was perceived to be a better mouse trap This article is about the video game. For the board game, see Mouse Trap (board game). For other uses, see Mousetrap (disambiguation).

Mouse Trap is a 1981 arcade game released by Exidy similar to Pac-Man It was ported to three home systems by Coleco; . The agencies were in the right place, at the right time, with the right idea. They developed a plan, capitalized themselves, implemented and executed. Now they are in the list of the top 100 privately held insurance agencies.

Finally, there are a limited number of groups that have taken aggregator characteristics, but really formed themselves like a large agency. United Valley Insurance Services, Fresco fresco (frĕs`kō) [Ital.,=fresh], in its pure form the art of painting upon damp, fresh, lime plaster. In Renaissance Italy it was called buon fresco to distinguish it from fresco secco, , Calif., actually manages itself in a more centralized cen·tral·ize
v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es

v.tr.
1. To draw into or toward a center; consolidate.

2. manner. Established in 1983, it is now a $500 million organization with 50 or more agencies and 50 or more insurers in the mix and a cohesive cohesive,
n the capability to cohere or stick together to form a mass. identity.

TWO MAINE AGGREGATORS

Today, insurance is more dependent on the financial market, and market swings have become more and more pronounced due to the dependence on reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. , making aggregators more important than ever.

I work with two in Maine: Grindstone Financial Group and Sevigney Group. These two are good examples because they have the longest histories as aggregators and the longest history with me.

GRINDSTONE FINANCIAL GROUP

In 1993, when I was regional marketing manager for an insurer that does business in Maine, a coworkers approached me and asked if I would help two agents who wanted to form an alliance to help small agents like themselves survive. These two agents were Blaine “Buzzy” Holmes of the Holmes Agency, Ellsworth, Maine Ellsworth is a city located in Hancock County, Maine, United States. As of the 2000 census, the city had a total population of 6,456. It is the county seat of Hancock County^GR6. (www.holmesagency.com), and Paul Tracy Paul Tracy (born December 17, 1968 in Scarborough, Toronto, Ontario) is a professional automobile racer in the Champ Car World Series. He also goes by the nickname “The Thrill from West Hill“. of the Winter Harbor Agency, Gouldsboro, Maine Gouldsboro is a town in Hancock County, Maine, United States on the Schoodic Peninsula. The town has many historically separate fishing and summer visitor villages, including Birch Harbor, Prospect Harbor, and Corea.^[1] The population was 1,941 at the 2000 census. (www.winterharboragency.com).

We retreated to a conference room in our regional office to build a mind map of the elements necessary to found such a group, and build a contract that would govern its existence. The basic planning process took 2 days. The process then proceeded to the attorney who developed a legal contract for the arrangement. Today the group is comprised of 19 agencies and growing. To support that growth, we recently have created a market access cooperative that rolls volumes into master codes with insurance carriers to improve results and efficiency for the carriers, who, in turn, realize enhanced profits as carriers and for the Grindstone Group.

One of the reasons Grindstone seems to work is that although the decision making includes all participants, the final judgment is limited to the original members of the LLC (Logical Link Control) See “LANs” under data link protocol.

---

LLC – Logical Link Control , Buzzy and Paul. The entity always has been structured as an LLC controlled by those two original members. The group makes decisions for the benefit of the members, not just for the LLC. It is managed almost with a non-profit mentality. I sometimes criticize crit·i·cize
v. crit·i·cized, crit·i·ciz·ing, crit·i·ciz·es

v.tr.
1. To find fault with: criticized the decision as unrealistic. See Usage Note at critique. Paul and Buzzy for not charging enough for what they offer, although that mentality is what makes the group so successful. All agency members pay all the same fees and charges. When I postulate postulate: see axiom. why they do not want to increase the fees to reimburse re·im·burse
tr.v. re·im·bursed, re·im·burs·ing, re·im·burs·es
1. To repay (money spent); refund.

2. To pay back or compensate (another party) for money spent or losses incurred. themselves for the effort to set the Grindstone Group up and run it, their response is indicative of why they are successful as an aggregator: “Howard, we make so much more money in our own agencies and suffer so much less grief from the insurance carriers for volume commitments and other areas, we want Grindstone to offer all of the benefits possible to all of the members.”

The group has hired Gary Hanscom (who originally worked with me and helped set up the contract) as its sole employee managing the marketing, contracting and affairs of the Grindstone Financial Group. Grindstone does not actively solicit members and adds members very selectively throughout Maine. In my opinion, their success is attributable to the cooperative nature of the principals and their attitude of existing to help small agents survive and thrive.

SEVIGNEY GROUP

The Sevigney Group (www.sevigneygroup. com) Wells, Maine Wells is a town in York County, Maine, United States. The population was 9,400 at the 2000 census. Wells Beach is a popular summer destination. History
The Abenaki Indians called the area Webhannet, meaning “at the clear stream,” a reference to the Webhanet River. , was founded by Leonard Sevigney, who is now partially retired. I became friends with Len years ago, when I was working for an agency in a nearby town. At his request, I did some risk management consulting Noun 1. management consulting – a service industry that provides advice to those in charge of running a business
service industry – an industry that provides services rather than tangible objects for some of his clients, even as his competitor. Sevigney Group was started even prior to the Grindstone Group, with the same mission: to help small agents survive. The group now includes 10 agencies, 9 of which are owners of the Sevigney Group. The group works with them to perform strategic planning Strategic planning is an organization’s process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. and visioning as they move forward. They are an agency platform organization, offering an automation platform and collective management assistance. Sevigney Group is successful and embarking on additional ideas and strategic initiatives to assist in broadening their distribution focus by helping smaller agents, even offering the right individuals the chance to “start” an agency with the group. Sevigney Group is located in a different geographic area than Grindstone and offers a different selection of services.

From an insurance company standpoint, the consolidation of distribution has created some strategic challenges. Aggregation provides a means to overcome some of the entry barriers faced by new entrants to the insurance business. Strategically it improves distribution and keeps it local. The consolidation of distribution puts the people who can make decisions further and further from the consumer. Aggregations realize economies of scale while keeping distribution local. These two aggregators are examples of helping to meet the goals of insurance companies while keeping local agents alive and thriving.

One of the fundamental factors driving both Grindstone and Sevigney Group is the owners’ commitment to ensuring that all members benefit from participation. Buzzy Holmes, Paul Tracy and Len Sevigney share strong business ethics business ethics, the study and evaluation of decision making by businesses according to moral concepts and judgments. Ethical questions range from practical, narrowly defined issues, such as a company’s obligation to be honest with its customers, to broader social and values above reproach re·proach
tr.v. re·proached, re·proach·ing, re·proach·es
1. To express disapproval of, criticism of, or disappointment in (someone). See Synonyms at admonish.

2. To bring shame upon; disgrace.

n. . They are trusted in the insurance industry and have earned and maintain that trust in test after test. This is an important fundamental in founding an aggregator.

The Virtual University article offers tools to evaluate different aggregators and to assist you in deciding a strategic direction for your agency. Peter did a wonderful job of creating these evaluations and gave us all some concrete tools with which to work in making a decision. The tools clearly lay out your options and help you delineate differences and evaluate your “fit” with different organizations.

Based on the paper, I have even developed a consulting package to help groups of agents set up an aggregator, and I am currently helping some groups to set up alliances. I have worked with one group since before it was founded and have built my model with their help. I also have a revenue-sharing arrangement with them for the consulting package that helps them recover costs and allows us to access them for some additional support and advice.

Some aggregators also include agency perpetuation per·pet·u·ate
tr.v. per·pet·u·at·ed, per·pet·u·at·ing, per·pet·u·ates
1. To cause to continue indefinitely; make perpetual.

2. options into their strategic planning scheme. The aggregator entity can sometimes improve the agency’s ability to finance a perpetuation or sometimes there are members of the aggregator that can provide the perpetuations for some of the members without options.

Justified or not, insurance companies continue to demand more from their agents. Aggregation improves and stabilizes distribution revenue and allows agents to share expertise and financial results as well as success and victories. It also provides an excellent forum for improved strategic planning and focus.

Aggregation is a way of capitalizing on improved economies of scale for everyone without losing the “small organization” customer service and philosophy. Companies receive more distribution points and fewer contact points. Agencies and their agents retain autonomy but gain clout with their carriers. Insureds continue to be served by local caring contact points. Communities retain local businesses rather than having a mega-agency move in and take the owner out of the store. Everyone wins, and with the improved perception of aggregators over time, no one appears to lose. Maybe this is one option you should consider as you think about the future.

ASK QUESTIONS BEFORE AGGREGATING

* MANAGEMENT: Who will manage it? Parity of philosophies? Levels of involvement? Levels of independence and interdependence in·ter·de·pen·dent
adj.
Mutually dependent: “Today, the mission of one institution can be accomplished only by recognizing that it lives in an interdependent world with conflicts and overlapping interests” ?

* INSURANCE CARRIERS: Mix of markets between agencies? Access and opportunities to additional markets? Closure on your current relationships? Health of other agency’s relationships? Carrier stability?

* FINANCIAL: Deferred interest in the value of your book? Of your agency? Will participation of another agency impact your ability to retire? To perpetuate per·pet·u·ate
tr.v. per·pet·u·at·ed, per·pet·u·at·ing, per·pet·u·ates
1. To cause to continue indefinitely; make perpetual.

2. ? How will participation in the group impact incentive compensation?

* OWNERSHIP OF EXPIRATIONS: Who owns your book (in part, or in full)? How does book ownership level with current contracts with producers, managers or owners? What will the impact be on current and future business? Will your actual realization of value be compromised in some way, even if your book ownership is left intact? Will the aggregator have a stated “economic interest” if you sell or leave the group?

* EXIT STRATEGY: What is the plan for terminating the agreement? How might future mergers and/or acquisitions be impacted by being part of an aggregator? If you choose to terminate, what will the cost be and how long might it take to terminate? How are existing markets affected at termination of the agreement? Will you retain access to the markets

you gain through the aggregator if there is a termination? Have others in the group terminated? If so, what is their experience? Are there any clauses, such as “first refusal,” that might impair im·pair
tr.v. im·paired, im·pair·ing, im·pairs
To cause to diminish, as in strength, value, or quality: an injury that impaired my hearing; a severe storm impairing communications. agency sale opportunities or value? If the termination is before the end of the year, what happens to incentive compensation?

* PERPETUATION: Are perpetuation plans mandatory or optional for members of the aggregator group? How does this affect your plans? Does the aggregator have “first refusal” or any rights in the perpetuation of your agency?

* E&O: Is E&O carried by the group or by individual agencies? How are agencies and producers protected as part of this larger group? What effect does another agency’s E&O liability have on your agency; are you protected?

* VOLUME AND QUALITY COMMITMENTS: How do the volume commitments compare between your current situation and under the aggregator agreement? How will current and long-term loss Long-term loss

A loss on the sale of a capital asset held less than 12 months that can be used to offset a capital gain. ratios be impacted? Are there penalties for higher than normal and/or rewards for low loss ratios?

* COMPENSATION: Ultimately, what will you receive in compensation after commission splits and other fees required by the aggregator? Are you better or worse off being part of the aggregator? Can you sustain your business without being part of the aggregator? Is there other support available through the aggregator that you might not be able to afford on your own, such as technology assistance, marketing support, sales assistance or training?

* GROWTH POTENTIAL: Will your firm grow more rapidly? Are there alternatives that are as valuable as aggregating, such as independence, online markets or merger?

* CUSTOMER SERVICE: How will client service be impacted? How will your community image change?

* BRAND: Will you continue to operate under your current name? How will you identify to the public with the aggregator group? Are there any restrictions on your participation in IIABA’s Trusted Choice program? Can your agency’s name be used within the aggregator group to promote itself and attract others?

* EMPLOYEES: Will staff morale be affected? Will your producers match the profile of the aggregator’s needs? Will your own in-house education initiatives be impacted? How will compensation, policies and procedures Policies and Procedures are a set of documents that describe an organization’s policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental change?

* SERVICES: If you’re paying fees, what services do you receive as a result? Are you required to use aggregator services, or is it optional?

* OTHER TERMS: Do the contract terms address all the issues you might encounter, such as dispute resolution, confidential treatment of proprietary information, notice clauses, governing law, indemnifications, procedures for amendments, and assignment rights, among others?

* OBJECTIVITY: Are you being objective? Are you basing your decision on data and is the decision supported by professional advice? Are you making subjective reasons for joining an aggregator?

Howard E. Candage, CPCU CPCU Chartered Property Casualty Underwriter
CPCU Cardiac Progressive Care Unit
CPCU Custody Pending Completion of Use , CIC CIC

circulating immune complexes.

---

CIC Circulating immune complexes. See Immune complexes. , is a consultant to the insurance industry, advising agencies since 1996 in training, planning and management, agency valuation, mergers and acquisitions, perpetuation plans, aggregator groups, and working with attorneys as an expert witness and in mediation mediation, in law, type of intervention in which the disputing parties accept the offer of a third party to recommend a solution for their controversy. Mediation has long been a part of international law, frequently involving the use of an international commission, . He has a background both as an insurance company regional manager and as an owner. His offices are based in Portland, Maine Portland is the largest city in the U.S. state of Maine, with a 2004 population of 63,882. Portland is Maine’s cultural, social and economic capital. Tourists are drawn to Portland’s historic Old Port district along Portland Harbor, which is at the mouth of the Fore River and part
….. Click the link for more information.. He can be reached at howard@hecandage. com or by calling 888-809-8605.

Doing the Same Old Thing Just Won’t Do

“Doing the Same Old Thing Just Won’t Do”

This is from a newsletter distributed from The American College.  The author was not stated.

The Valley Forge Companies, founded in 1967 and based in King of Prussia, PA, is a member of M Financial Group—the national network of elite independent insurance, investment, and executive benefit firms dedicated exclusively to serving high-net-worth clients.

So what are his firm’s clients telling their advisors?

“The upcoming election has some of our clients in a holding pattern in terms of wealth transfer decision-making,” Maher said. “Tax issues are the number one concern there. And while we certainly understand that, we also advise that complete inaction could have more significant, and usually negative, consequences.”

He stressed the importance of being ready regardless of who prevails in November.

“Our job always is to find innovative ways to advise clients, especially in uncertain times.”

Redefining Diversification
According to Maher, focusing on new ways to diversify business offerings can be constructive for firms seeking ways to differentiate themselves in the marketplace.

“Obviously I wouldn’t advocate abandoning bedrock principles: long-term asset allocation strategies and avoiding panic-based investing,” Maher explained. “But there are ways that practitioners can open up new streams of thought while maintaining a high-level of fiduciary responsibility.”

He said one such way The Valley Forge Companies set themselves apart was the introduction of an endowment-style of investing to families.

“We’ll advise our families to invest in a portfolio that looks like one Yale or Harvard might utilize, one that could include 20% private equity, and 25% hedge funds and other alternatives, in addition to the traditional stocks, bonds, and cash investments,” he explained.

The Multi-Family Office
Another innovation Maher is proud of is The Valley Forge Companies’ introduction of the Multi-Family Office concept to its clients.

“We will be bringing together 50 high-net-worth families into one office to provide them with advice on wealth transfer, allocation and investment management, philanthropy, legal, and taxation issues, all specifically designed to meet their financial services needs. It’s their back office,” Maher said. “The overwhelmingly positive reaction we’re receiving positions us well to be of great service to our clients.”

Adapt & Overcome
Maher believes that those firms willing to push the envelope with new ideas will be the ones that thrive.

“Complacency will kill you. Listen to the clients. Serve them first, and the rest will follow.”

These Brands Build Community

How these Web 2.0 companies build good relationships to build their brands

May 12, 2008

-By Brian Morrissey

Forging strong communities is a key for marketers looking to build brands online.

NEW YORK For Tony Hsieh, CEO at Zappos, meeting up with a customer at a bar in midtown Manhattan was perfectly natural. Most execs with 1,600 employees and doing over $1 billion in annual sales would probably pass on having drinks with an individual customer, but Hsieh is not your typical CEO. In the past week alone he had given away shoes on Twitter, sent out an open invitation to a company barbecue and solved a service problem a customer left in a blog comment. If this seems exhausting, Hsieh sees it as part of a larger strategy to build Zappos into a brand on par with Virgin.

“We think our brand is going to be different because we want people to feel there’s a real person they’re connecting with, whether it’s when they call us or through Twitter or any way they come in contact with us,” he said.

The path Zappos is taking has been forged by some of the Internet’s top brands, like Craigslist. It’s part of a newer crop of companies, including T-shirt phenomenon Threadless, handmade-craft site Etsy and review destination Yelp, quietly building powerful brands online on the strength of communities. For these companies, community is not a tactic or marketing plan line item, but core to what they do. It means being hyper-responsive to customers, laser focused on usability, unapologetically human and OK with customers determining the course their businesses should take. The bonus: When they take off, these brands don’t need to do much in the way of advertising, instead letting their customers spread the word.

Not that advertising was, at first, even a consideration. For the latest wave of Internet services that came of age after the dot-com bust, spending money on marketing wasn’t in the game plan. These businesses, which saw how sites like Pets.com and Kozmo tanked fast and hard, typically ran far leaner operations. Instead, the paragon for online success was, and still is, Google, which has built one of the top brands in the world without advertising at all.

Yet Google obviously invests heavily in its brand. Its home page may have nothing but a search box and links to Google’s services — which means the company is forgoing tens of millions of dollars in advertising — but it’s doing something more important: putting its customers first. Untargeted ads, even simple text links, goes the rationale, would put too steep a cost on its users.

This decision is “revolutionary,” wrote Havas Media Lab director and London economist Umair Haque on Harvard Business Online in February. “By choosing to invest in consumers over advertising, Google is a living example of a deeper truth: The future of communications as advantage lies in talking less and listening more.”

Craigslist has made a similar calculation. The 13-year-old company would hardly seem a brand icon, yet a Brandchannel survey in 2007 ranked it as the No. 7 brand. The site has such a bare-bones appearance that it doesn’t even have a logo. Its worth was recently estimated at $5 billion. Not bad for a 25-person company. For Craigslist CEO Jim Buckmaster, the decision to forgo ads on the site wasn’t a tough one because it didn’t fit into the simple rationale he and founder Craig Newmark have for the site.

“All we do is try to respond to what users are asking for,” he said. “That’s how we set our priorities. Users aren’t asking us to run ads, so it doesn’t come onto our radar.”

At the heart of these decisions is a simple fact of life with the Internet: Everyone is connected, and hiding behind glossy images won’t work when a Google search can turn up the good, bad and ugly of your company. In the analog world, it was different. Haque believes brands thrived on how difficult it was for people to get information. Logos, spokespersons and slogans combined to give consumers a way to make choices. But now, the Internet has turned that on its head. “The entire economic rationale for brands is gone,” Haque said in an interview. “Interaction is too easy now for brands to have power.”

Online-review site Yelp sees Google as the great brand equalizer. The Yelp brand, thanks to its trove of user-created reviews, shows up whenever someone in major cities like New York, San Francisco and Chicago types in a local business name. “It all comes back to whether customers are having a strong interaction with the brand on a regular basis,” said Yelp CEO Jeremy Stoppelman.

Unlike many offline companies, most Web 2.0 businesses have community baked into their DNA. T-shirt design site Threadless has grown to 750,000 registered users in five years by letting its community decide the direction it takes. The business is premised on user-submitted designs getting voted on by others. The most popular get made and sold on the site. And it has made large and small changes to its approach based on customer feedback. Last year, a user who never bought something from the site pointed out that Threadless should change its e-mail newsletters to show just the design, rather than the T-shirt on a model, a change the company made. Earlier, it created a critique section for designers to get feedback after seeing people had used their Threadless blogs for this.

“The community changes the brand to suit them,” said Jeffrey Kalmikoff, CCO at Threadless parent Skinnycorp. “We don’t have expectations of what Threadless will be. We just manage the parameters.”

That includes trying to manage the perception that the brand is getting too big. It turned down offers to sell its shirts in department stores, for example, and chose to open retail stores in markets like Chicago and Boulder, Colo., rather than New York and Los Angeles.

Etsy has been equally protective of promoting its brand. While it tried some advertising on behalf of the nearly 100,000 merchants who sell handmade goods on the site, Etsy found the ads didn’t fit well with what the company was about: an authentic antidote to mass-produced merchandise. The Brooklyn, N.Y., company’s CEO, Rob Kalin, said Etsy has built its brand more through focusing on its customers and relying on them to promote it. ( CLICK HERE FOR A VIDEO INTERVIEW WITH KALIN.)

“When you have a service that people feel enthusiastic about, they spread the word and pass it on,” he said. “If we were to take out big glossy ads in magazines or do television commercials, then that changes how people perceive what your company is.”

The problem with more established companies, according to Noah Brier, a strategist at Naked Communications, is that as they’ve grown they’ve lost their sense of what they stand for. “What these [Web 2.0] companies have in common is an absolute understanding of who they are,” he said. For Craigslist, maximizing revenue by putting ads on the site isn’t really considered, just as Kalin doesn’t think Etsy could have a unified brand message even if it wanted one.

“Our brand grows with a thousand different focal points, rather than one big mono voice of ‘Here’s our brand, come engage with us,’” Kalin said.

And while the early part of the Web was often about the ability to be someone else, the recent rise in social networking has put a premium on real identity. Facebook is only valuable to users if they interact as who they really are.

At Zappos, Hsieh sees his customers as human beings, not just “consumers,” and so makes customer service the defining feature of the brand. Last week, he flew to San Francisco with 20 employees to hold a surprise happy hour he announced on Twitter. An hour and a half later, 200 people showed up with “Zappos” written on their hands for free drinks.

“Tony realizes that in order to be successful you need your customers to love you,” said Michael Galpert, the Zappos customer who had arranged to meet Hsieh in New York. “You do that through great customer service.”

This was a necessity when Zappos began selling shoes online: People were skeptical about buying them from the Web, so Zappos implemented generous return and shipping policies. Its commitment to service can sometimes seem extreme. In 2004, Hsieh up and moved the entire company from San Francisco to Las Vegas because he found attracting and keeping high-quality customer service representatives was too difficult and expensive in the Bay Area. Rather than have customer service split off in a different location, the company relocated.

Zappos gives attention to all details of customer service, scrapping scripts in favor of encouraging regular conversations with customers. Also, service reps are not given time limits on calls and get latitude to address customer needs, even directing them to competitors if Zappos does not have a size or style. This has given the company a reputation for going the extra mile — and more — for its users. Last July, when the payment deadline for shoes a customer had ordered came and went, a Zappos rep e-mailed the woman to remind her the money was due. The woman told the rep the reason: She had meant to send back the shoes, which were for her ailing mother, but in the meantime, her mother had died. The company rep arranged to have UPS pick up the shoes, then actually sent the woman a flower arrangement and condolence card. A blog post the customer wrote about the event, “I Heart Zappos,” bounced around the Web, with customers contributing their own good experiences with the company. “If you buy shoes online, buy them from Zappos.com,” the poster wrote. “With hearts like theirs, you know they’re good to do business with.”

When asked about it, Hsieh — who said they don’t send flowers to everyone — explained that it pointed to the need to get company culture right. Without that, he noted, Zappos’ service will falter and the brand will suffer.

The experience of these brands is instructive for all companies, according to Adrian Ho, founder of ZeusJones, a Minneapolis agency. The transparency demanded of the Internet will require new approaches to creating customer loyalty. “Right now, we’re still at a point where if you have a big enough budget, you can cover up what you’re doing by spewing out some nonsense,” he said. “Clearly that’s going to change. We’re not going to know less about companies tomorrow than we do today.”

The Single Greatest Marketing Tool (PR)

The Single Greatest Marketing Tool
Lisa LaMotta, 07.25.07, 4:00 PM ET

Any entrepreneur can run a snazzy advertising campaign, if he or she is willing to pay for it. The trick is to get that kind of exposure without breaking the bank.

Such is the allure of “public relations”–the discipline of shedding a benevolent light on a person, company or cause, mainly by tapping the news media. The press is a powerful force: Clearly, Amazon.com (nasdaq: AMZN – news – people ) and Google (nasdaq: GOOG – news – people ) offer great services, but appearing in some 13,000 news articles around the world in the last 30 days helps get the word out too. And depending on the outlet and nature of the story, PR offers a potentially huge benefit that advertising does not: third-party approval.

“PR creates enough awareness that other people provide referrals,” says Ed Cafasso, a managing director at Manning Selvage & Lee, a global PR firm. “PR creates that kind of credibility.”

In Pictures: Five Do-It-Yourself PR Tactics

There are now some 200,000 PR “specialists” in the U.S. (not including those that are self-employed), according to the Department of Labor. Come to Manhattan and you might trip over one as you stroll down Fifth Avenue. Sadly, most aren’t very good at what they do (ask any journalist), but the good ones serve a vital function and can take your business to greater heights–or at least generate some nice buzz.

The best place to start looking for help is one of the 109 chapters of the Public Relations Society of America (PRSA) at www.prsa.org. The local Chamber of Commerce may keep tabs on nearby talent too.

Once you’ve narrowed the field, vet the survivors. Push them to offer a tangible strategy and try to estimate their ability to execute.

Some key questions: Which publications should I be targeting? What storyline will gain the most traction with each outlet? Can I speak with other clients? Who are some of the reporters with whom you have established relationships and might I be able to speak with them? (If that last one sounds implausible, apparently it’s not–Forbes.com spoke with six PR professionals who offered that same advice and claimed to comply with such requests.)

PR types often promise more than they can deliver, so manage your expectations. Some firms trot out senior executives at initial meetings only to stick less-experienced staffers on smaller accounts, says Giovanni Rodriguez, co-founder and principal at Hubbub PR, which caters to start-up companies in Silicon Valley, Calif.

Lesson: Make sure you meet the people who will be doing the actual work. If you need further comfort, look for the Accredited in Public Relations mark, or APR, meaning that the person passed a tricky exam administered by the Universal Accreditation Board.

When it’s time to talk money, request a menu of services and prices. Average monthly fees for an established U.S. shop are about $10,000, according to a recent survey of 100 firms around the country with revenues over $3 million. Some firms charge by the hour, and still others offer a la carte services–say, for running a special event or triaging a corporate snafu. Rodriguez charges start-ups a monthly retainer from $8,000 to $15,000. That’s not chump change, but it’s far less than many print ad campaigns.

Before you write any checks, set some performance yardsticks. While PR remains a squishy science, there are ways to loosely measure progress. The most common is the number of media references to your company in a given month. But there are subtler metrics, too, such as how many of your “core messages” were expressed in each article.

And remember: No matter how many times your company appears in the press, always ask your customers–either in person or through your Web site–how they heard about you. PR is an ongoing effort, and it needs constant tweaking.

“If you are not getting what you need from your agency, say something,” says Julie Adrian, head of the Chandler Chicco Agency’s Los Angeles unit. “Especially with small businesses, you have a finite bit of money to spend. We understand that it’s hard to give a chunk of that money to something that can seem so intangible.”

Rather save the money and handle your own PR? For starters, you’ll need a press kit. Most of that material will end up in reporters’ garbage bins, but a rare few might grab their attention.

The kit should include a clear description of your business and its goals, as well as a backgrounder on you–complete with compelling, relevant anecdotes worthy of a yarn. It should also contain copies of any media coverage you have received, testimonials from important customers and awards you have won. If there is an important technical aspect to your product, include an easy-to-follow description of how it works and why anyone needs it. (Note: Avoid any and all jargon; it will hasten your kit’s path to the circular file.)

For better or worse, PR has made its way into many college curricula. Mine the local schools for eager interns looking to pad their résumés at rock-bottom rates. The smartest can deal with the press, hunt for sponsorship opportunities (such as local events) and even develop a company blog to attract customers.

Applying for an award never hurts, either. Like positive news stories, awards confer credibility–and there are sponsors aplenty, including the Better Business Bureau, your local Chamber of Commerce, trade groups and even trade and mainstream publications. Beware, though: Most judges are looking for any reason to cull the field of applicants quickly, so mind the application rules unless you want to be summarily disqualified.

Come to think of it, that goes for dealing with stubborn journalists too.

Free business software (Source: BusinessWeek research)

Deals to Download

Software for you business that you can download—at no charge—and customize

Product	What it does	Need to know	Open-source
Desktop Applications
GIMP	Image manipulation	Has many of the same features as Adobe Photoshop	Yes
Intuit’s QuickBooks Simple Start 2008	Accounting	For startups and home-based businesses	No
Microsoft Office Accounting Express 2008	Accounting	For startups and home-based businesses	No
Mozilla Firefox	Web browser	Tabbed browsing makes it easy to juggle between multiple Web pages	Yes
Mozilla Thunderbird2	E-mail	May seem slower than Windows e-mail	Yes
OpenOffice.org	Word processor, spreadsheet, presentation manager	Some find that files are slow to open	Yes
Skype	Makes calls from your computer	Calls are free to other Skype members; cheap rates for other calls	No
Server Applications
Joomla	Web site content management	Comparatively easy installation	Yes
LedgerSMB	Accounting	Best for those familiar with accounting processes	Yes
MediaWiki	Creates a collaborative Web site	The same software that powers Wikipedia	Yes
Sugar Community Edition	Customer relationship management	Advanced features such as reporting, forecasting, and team management require an upgrade	Yes
Zen Cart	Creates a Web site with a shopping cart system	May want to hire a Web designer to customize	Yes

Source: BusinessWeek research

The Power of Positioning

How to distinguish yourself from the competition to be sure you have a preferred place in your target customer’s mind

by Christine Comaford-Lynch

You know who you are. But do your customers? Are you who you were last year? If not, have you communicated how you’ve changed?

Many emerging growth companies struggle with how to position their companies and communicate what they stand for. If you don’t do it right, the market doesn’t know whether to buy from you, whether you have the knowhow it seeks, or whether you’ll follow through and meet its needs.

Positioning is the process of distinguishing yourself from competitors in specific ways in order to be the preferred provider for certain market segments. It’s the act of designing your company’s offer and image so it occupies a distinct and valued place in the targeted customer’s mind. The main benefit of clear positioning is that it controls how the market perceives you and helps make your products and/or services more attractive. Here are my five steps to improving your company’s positioning:

1. Assess where you are right now. Start with this exercise: Ask a customer, a competitor, and a journalist for the three adjectives they would they use to describe your company, products, and overall image. Then ask yourself the following questions: What’s working with my current position? What isn’t? Do I want to change my position to increase sales? Secure a new or different customer profile? Revamp my product line?

2. Determine how you want to be perceived. This is an intentional act. When you determine the specific position you want to occupy in your target customer’s mind, you can craft your products, marketing messages, and image to convey and reinforce it. What are the meaningful differences between you and your competition? Take the time to do this right, as significant expenses will result when you redesign your Web site, marketing collateral, and product packaging, as well as if you overhaul your staff training process.

3. Select your target customers. All too often companies tell me their target customers are anyone who’s willing to buy what they sell. But this approach conveys desperation and a lack of focus. Craft a strategy that takes into account the following important questions: Will you benefit from making your image more exclusive and inaccessible or more of a commodity and more accessible? How does your target market define value? How do those people choose among vendors?

4. Factor in current trends. You’ve probably heard the expression, “If you want to be a market leader, find a parade and jump in front of it.” Countless companies are jumping in front of the environmental/sustainability movement with “green” products and services, and advertising their socially conscious business practices. What trends are on the way that might tie in with your company? Which should you distance yourself from, since they are on the way out?

5. Formulate your four levels. Repeat after me: Your business objective drives your business strategy which drives your market strategy which drives your positioning strategy. For instance, if your business objective is to have fewer customers who spend more per sale, your business strategy must reflect this in the products or services you will be offering. Your market strategy will consist of how to find those new customers and how to communicate with them. Your positioning strategy will determine the messages you communicate to your target customer to drive sales of your more costly product line.

If you aren’t happy with how people perceive your business, or you want to stretch to the next level of revenue or update your profile, you’re ready to reposition your company. Let’s examine the specifics of the positioning process. First, it will take you about two months to position your business if you are starting from scratch. The marketing team should be in charge of this process, and you can outsource a fair chunk of the research work. Here are the steps:

•Determine emerging trends on which you can capitalize. This will yield your vision viability assessment.

•Determine core competencies. This will yield your competitive threat assessment.

•Clarify the problem/pain you are solving. This will yield your target markets and analyses of them.

•Articulate the benefits/drivers/impacts of your products and services. This will clarify how your customers buy and who they listen to/are influenced by.

From the above analysis you’ll be able to synthesize your opportunities and understand the value chains in your target markets. The result of combining these two outcomes will yield your differentiating attributes, which form your positioning strategy and positioning statement. You can determine the net-net of your positioning statement by filling in the blanks in the exercise below.

For ______________________[customer segment] (which was derived from your target markets), __________________ [product/service] (your vision and offering) is _____________________ [the two to three most important benefits and reasons to buy] (your incentive value chain and core competencies). Because compared to _________________ [primary competitor/alternative], ______________________ [key reasons for differentiation] (these are your differentiating attributes).

Here’s an example:

For high-profile Fortune 100 CEOs, our Super Security Service provides discreet 24-hour manned protection by former Secret Service agents. Compared to simply hiring a bodyguard, you will feel safer with experienced professionals who have protected U.S. Presidents .

Positioning is best done with a blend of internal marketing staff, outsourced research, and an outside marketing consultant versed in positioning practices. It’s tricky to see clearly how we are perceived and what specifically we need to change. I’ll share more ideas in future growth strategy columns as I go through the reinvention and repositioning process in my own business.

Christine Comaford-Lynch, CEO of business accelerator Mighty Ventures, is the author of the best-selling book Rules for Renegades. She writes her column on small business growth strategies every other week.