All businesses, including insurance agencies, should assess their account portfolio or book of business from time to time. One good method, developed by the Boston Consulting Group several years ago, provides a quick and easy way to evaluate your business and come up with some ideas for improving your existing business mix and hone your marketing plan. It’s called the BCG matrix. You can use it to examine your book of business or your product mix. Let’s use it to examine your book of business. The matrix is made of four squares: question marks, dogs, stars and cash cows.
Growth Potential increases from bottom to top
Profitability increases from left to right
- Question mark accounts have fairly good growth potential, yet they make up a relatively small portion of your business and at this point they may not be that profitable. Maybe it’s a group of clients and prospects that you haven’t quite gotten comfortable with yet. Maybe you’re trying to sell to seniors because everybody says it’s a good market, but you haven’t hit your stride. Maybe you’ve found a good market for auto body shops, but you need to make a little more effort getting your foot in the door to present your quotes.
- Dogs are dogs, accounts with little growth or potential and maybe even problem accounts that require so much attention they sap energy from more worthwhile endeavors. Maybe they’re not a single demographic or type of business. Maybe they’re just accounts that don’t pay their premiums on time or that end up wasting a lot of everyone’s time.
- Stars are up and coming winners, the kind of business you’ve been doing well with lately and where you see growth potential.
- Cash cows are accounts you have probably had for years that are stable, loyal and very profitable. Maybe your long-term disability specialization has really paid off so that it’s now a cash cow. Maybe you’ve done so well with auto body shops that you’ve put together an exclusive package with an underwriter and you’re signing up sub-agents now. That cash cow can help generate the funds you need to move into other products and target markets that are only question marks right now.
The BCG matrix is a useful way to take a step back and get a big picture of your book of business, a worthwhile exercise if you’re going to do some strategic marketing planning. Often stars are cash cows in the making. Question marks may become stars, though they might also end up as dogs. A class of business may fit into more than one category. Maybe your larger group accounts are cash cows, but your smaller ones are presenting problems and look more like dogs. You can also use the BCG matrix to evaluate the products you sell.
I’ll be doing a webcast soon on how to prepare an agency marketing plan. If you subscribe to my blog I’ll keep you posted. By the way, if you’d like a blank Word doc template of the BCG matrix, just click here to download it.