The Channel | On Rad's Radar

The Insurance Lesson

By Peter Radizeski, RAD-INFO Inc.  |  December 10, 2012

This article originally appeared in the Dec. 2012 issue of INTERNET TELEPHONY.

There’s a lot of talk about insurance in this political season. Insurance companies decide who they’ll cover, like in-home owners’ insurance in Florida. In health insurance, the insurance company decided not only who they’ll cover, but what they’ll cover. This maximizes profits for the insurance companies.

Maybe this is a model that CLECs and ITSPs should look at.

In a small way, fiber companies and MSOs have a similar strategy, but it revolves around fiber build out and three-year payback models. If the customer can be profitable to the carrier in three years, the company will construct a fiber route to his premises.

If not, either pay for the construction or find someone else.

Being choosy and able to say no is significant. Right now, Cox (News - Alert) wants a signed LOA before quoting out a prospect’s site. Prospect doesn’t like the LOA, so no quote from Cox. Prospect is flummoxed. There is a reason that companies have policies, and one of them is to be profitable.

Recently, I spoke with a hosted PBX (News - Alert) company exec about the difference between a CLEC sales approach and the hosted PBX company approach. The CLEC was working on lower margin while grabbing market share. The two CLECs have access to the capital to win deals on lower margin.

The hosted PBX company wanted to maintain margin, but didn’t like losing deals. Either you chase market share, or you chase profitability. In some ways it’s a public-versus-private debate. Public companies don’t have the same objectives or metrics that a private company does. Public companies have more access to capital, but are slaves to the transparency and need to maintain a share price.

This mindset is anathema to many private companies struggling for growth amid cash flow and capital issues.

I’m a big proponent of selective selling for four reasons. It is more profitable to be selective. The take-away close – the idea that someone can’t have your service – works in many cases. It’s easier to create a value statement or USP for a target audience. It’s also cheaper to market to a target audience as opposed to the general marketplace.

Learn from the insurance industry – be picky about who you target and sell to.

Edited by Braden Becker