Captive Resource Center

Businesses and Associations

Research & Information

A Strategy for the Niche Customer

by Daniel J. Labrie, V.P.
Housing Authority Risk Retention Group

Prior to 1980, niche markets were a small part of the insurance business, primarily serviced by traditional insurance companies. As a result of growth in niche markets over the past few years, this area has become a lucrative source of revenue for the insurance industry and its service sector. Because niche markets are unique in their insurance needs, they require a marketing and service strategy that is different from the traditional approach.

Marketing Mission Statement

To be successful, a two pronged marketing mission statement is suggested. These include identification of a target area within the niche market and the formulation of a partnership philosophy. Customers in this type of market demand a collegial approach in the development of products and services to meet their unique needs. Once the mission statement has been developed, a customer action plan should be mapped out.

Developing a Customer Action Plan

To develop the action plan, four key areas need to be researched:

• Know the Market:
  Who are the potential customers? What is their specific business? What are their primary insurance product and service needs? Who are the key contacts in the targeted customer companies? What is their business ìlanguageî(i.e. terms and buzz words unique to their business)? What is the predominant management style of the customer company?
• Know who interacts with the market:
  What federal, state, and local laws and regulations affect the customer? What governmental agencies may be involved? What companies supply materials and products to your customer? Who are the key contacts in these agencies and companies?
• Know the competition:
  What carriers are writing business in this market? How do they handle specialty business? What types of services and products do they offer? What is their marketing strategy? To whom do they market?
• Know your carriers:
  What primary and reinsurance carriers and service providers will you need to service your niche market? Do they have the capability to meet these customers insurance needs? Are they truly able and ready to service this market?

Implementing the Customer Action Plan

Building relationships with your intended customers is the first step in the implementation phase. The primary reason for our companyís success in the niche market has been our focus on building trusting relationships. Our customers demand loyalty and respect, and we make sure that is what they get. Part of this relationship building includes development of an open, two way flow of information. Make sure you stay in regular contact once this channel is established.

In developing your accounts, use your information channel to stay on top of what is happening with your customers. What are their changing insurance needs? What new products/services do they have that need to be insured? What changes in state or federal legislation will have an impact on the customer? Anticipate their needs and tailor your insurance products and services to meet these needs at the same time formulate good, consistent underwriting and pricing guidelines. Always be sure to focus on the total account. Meeting your customers needs is your primary concern, not the bottom line.

Problems

This type of market is of course high risk. There are three areas in which problems will occur: product failure, overselling, and finite market share. There is a very real potential for product failure. This could occur because there was inadequate research of the underwriting and service needs, inadequate investigation of past or potential claims risk, or because of inability to service the product once it is in place.

Overselling an existing product or creating service expectations beyond your delivery capabilities would very seriously harm your credibility. Word travels fast. Your customers will find out through a variety of sources if you have problems. Because your reputation and integrity are essential to success in niche markets, protect it. What is promised must be delivered. The formula we use is: Promised = Delivered = Happy Customer.

Dealing with the reality of finite market share requires a little creativity. Because, today, many companies of all sizes are exploring niche markets, it is essential that you are not limited to one product. Cross-selling and development of different but complementary lines among other strategies is suggested.

Niche markets are not an area in which quick, short term profits can be made. They require a significant initial dollar investment in capital, technology and staff. Niche markets can be a lucrative area, if you are willing to make a long term commitment.