Using Profit First for your insurance marketing KPIs

Editor’s Note… Happy November folks, you may notice some changes happening with the Sooter Consulting website. This is because Sooter Consulting is going through a redesign! We are excited to introduce a new website to you all soon! In the meantime, today’s question-asker comes to us asking about a topic we went over last time. 

I'm 35 and just starting to build my agency. I work as an EA under a national broker, selling P&C, Life, and Health insurance. I've been in the industry for about a decade now, and I recently came across your business advice on managing marketing and right-sizing teams. You mentioned that a lot of insurance agents spend heavily on marketing but don’t have the systems in place to ensure an excellent cashflow. That really resonated with me, and I want to avoid falling into that trap. What kind of KPI framework have you seen work well for successful insurance agencies? How would a Profit First professional approach my dilemma?

Donna: 

There are so many different ways to measure the effectiveness of your marketing, and I won’t be able to cover them all in one blog. However, there are a few essential statistics to track with every marketing strategy. These are your: Cost Per Lead, Lead Conversion Rate, and Policy Growth Rate.

Let’s talk about your Cost Per Lead as many insurance agents neglect to consider this when developing a marketing plan. Effectively, every lead you make has an opportunity cost, and if your opportunity cost is higher than your sale then you will face cashflow management issues. Consider this, if you spend $10,000 on a marketing initiative and get 500 leads, your CPL is $20. If you sell each policy at $197 a month, then your return on investment is effectively $177… before considering the rate you pay your team, other expenses, and yourself. Lowering your CPL is crucial because it means bringing in leads without burning through your budget. I will talk about minimizing these considerations in a future blog post. For now, keeping an eye on your CPL ensures you’re getting the most out of your marketing expenses. 

Of course, naturally the next part is your Lead Conversion Rate. Getting leads is excellent, but we need to turn those leads into customers. For example, if 25 of your 500 leads become a customer, your conversion ratio is 5%. At that point I would highly suggest looking at your sales process or the quality of your leads as one of them isn’t working. 

These metrics are vital to growing your agency, but it’s crucial to regularly review and ensure long-term effectiveness. Here’s my cheat code for that, consider your agency’s policy growth rate. Compare the number of policies at the start and end of a given period, calculate the difference, and divide by the starting number, and multiply by 100. For example, if you started with 200 policies, and ended with 250, that’s a 25% growth rate. A steady increase should mean your agency is on the right track, but if it’s flat or shrinking it’s time to look further into the nitty gritty of your other vital KPIs. 

I’ll be frank with you, marketing will be the hardest part of starting your insurance agency. There will be a lot of trial and error, and you must have reasonable expectations for your efforts. However, understanding the statistics behind your marketing reduces that trial and error significantly. 

Thanks so much to this week’s question asker! If you would like to send in a question to Donna consider reaching out to us through LinkedIn or the comment section below our blog!