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Business Insurance Marketing PlanIdeal Business Support Services

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Table Of Contents

1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.0 Situation Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.1 Market Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2.1.1 Market Demographics . . . . . . . . . . . . . . . . . . . . . 32.1.2 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . 32.1.3 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . 42.1.4 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . 5

2.2 SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.1 Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.2 Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.3 Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.4 Threats . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2.3 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.4 Products Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.5 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.6 Critical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.0 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.1 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.2 Marketing Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . 83.3 Financial Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.4 Target Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.5 Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.6 Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.7 Marketing Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.8 Marketing Research . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4.0 Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.1 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 104.2 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124.3 Expense Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

5.0 Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135.1 Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145.2 Marketing Organization . . . . . . . . . . . . . . . . . . . . . . . . . 145.3 Contingency Planning . . . . . . . . . . . . . . . . . . . . . . . . . 15

1.0 Executive Summary

Ideal Business Support is a full service support agency for the insurance industry. Ideal offers a wide range of support services tailored for insurance agents. Ideal will specialize on a few offerings, but can do almost anything. While the support service market is competitive, most companies are generalists. Ideal will stand out by concentrating on the insurance niche.

Ideal Business Support's mission is to provide the customer with the finest business support services. We exist to attract and maintain customers. When we adhere to this maxim, everything else will fall into place. Our services will exceed the expectations of our customers.

Ideal has two strong competitive advantages. The first is insurance industry knowledge. Sarah Helpinghand, the owner, spent five years previous to Ideal working as an insurance agent. This experience is priceless. This experience will allow Sarah to better serve her customers by leveraging Sarah's insight into customer needs and preferences. Additionally, the value of networking based on Sarah's previous insurance relationships will give Ideal a large leg up on the competition. By having already established relationships with many people within the industry, Sarah will be able to leverage these professional connections.

Lastly, Sarah will be designing an intensive training program to share her intellectual capital regarding the insurance industry with the rest of her company. All employees will go through this training.

Ideal is projected to reach profitability by month 11 and will have profits of $44,000 by year three.

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$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

2003 2004 2005

Exclusive agents

Insurance brokers

Annual Sales Forecast

Ideal Business Support

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2.0 Situation Analysis

Ideal has entered its first year of business. Marketing will be a key component for achieving sustainable profitability. Ideal offers specialized support services, concentrating on the insurance business niche. The basic market need is for support services where the service provider is quite familiar with the specific sector that it is servicing. Ideal will meet this need by having insurance industry experience to support its service offerings.

2.1 Market Summary

Ideal has gained good information about the market and is aware of the common attributes of the most prized and loyal customers. This information will be leveraged to better understand who is served, their specific needs, and how Ideal can better communicate with them.

The profile for Ideal's customers consists of the following geographic, demographic, and behavior factors.

Exclusive agents

Insurance brokers

Target Markets

Table 2.1: Target Market Forecast

Target Market ForecastPotential Customers Growth 2003 2004 2005 2006 2007 CAGRExclusive agents 7% 78 83 89 95 102 6.94%Insurance brokers 8% 123 133 144 156 168 8.11%Total 7.66% 201 216 233 251 270 7.66%

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2.1.1 Market Demographics

Ideal has gained good information about the market and is aware of the common attributes of the most prized and loyal customers. This information will be leveraged to better understand who is served, their specific needs, and how Ideal can better communicate with them.

The profile for Ideal's customers consists of the following geographic, demographic, and behavior factors.

Geographics

• The immediate geographic target is the city of Layton, NJ; with a population of 165,000. • A 35 mile-radius is in need of the support services. • The total targeted population is 201 insurance agents.

Demographics

• Male and female agents. • The typical age of the agent is 29-47. • The typical age of the insurance practice is one to three years old. There are more

established practices, but in general Ideal will be serving newer firms. • The firm has one to three agents working for it. Firms that have more than three agents

typically have an in-house support staff.

Behavior Factors

• Are trying to keep overhead low by outsourcing non-essential activities. • Have a need for support staff, but need the support staff to be up-to-speed in terms of

industry knowledge. Therefore, a general support staff agency is not ideal because of the learning curve necessary to get them up to speed for special tasks.

• Tend to support other locally-owned businesses as a sign of support. • Agents would prefer to concentrate solely on working with clients and solving their needs

for insurance as opposed to dealing with administrative details.

2.1.2 Market Needs

Ideal is providing the market with a range of support services for insurance agents. Ideal seeks to fulfill the following benefits that are important to its customers.

• Industry Knowledge: Agents do not have time to train support staff with all the intricacies of the insurance industry. Therefore it is of significant value if the support service has industry insight.

• Convenience: The services must be available when the agents need them. Additionally, it is difficult to precisely forecast when the need will arise.

• Customer Service: In order to build a sustainable business, the customers must be 100% satisfied with Ideal's services. This business philosophy will be ingrained in all employee's minds.

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2.1.3 Market Trends

The market trend for insurance agents (and for other service providers as well) is to outsource non-essential activities, allowing the business to concentrate on their core competencies. This allows the business to focus more precisely on their business model. Reasons for this trend are:

• Decreased overhead. • Decreased training costs for non-essential employees.

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150

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300

2003 2004 2005 2006 2007

Exclusive agents

Insurance brokers

Market Forecast

Ideal Business Support

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2.1.4 Market Growth

The support service industry has become a $498 million industry in the U.S. within the last couple of years. From 1997-2000, the growth rate for the industry has been 5.6%. It is forecasted to remain at 5-6% for the next three years. By outsourcing non-essential activities (non-essential relative to their core service offerings) the industry should have no problem maintaining this excellent growth.

Another growth factor has been the progressive acceptance of insurance as a prudent risk management strategy. With recent unexpected events such as El Nina effects, "acts of God," and terrorism, the insurance industry is likely to continue to grow as people and companies hedge their risks with insurance.

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1.00%

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Exclusive agents Insurance brokers

Target Market Growth

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2.2 SWOT Analysis

The following SWOT analysis captures the strengths and weaknesses within the company, and describes the opportunities and threats facing Ideal.

2.2.1 Strengths

• In-depth industry knowledge. • An efficient, comprehensive training program for employees. • Extensive industry-specific network connections.

2.2.2 Weaknesses

• A limited marketing budget to generate visibility. • The inability to quickly scale to a large increase in demand. • Ideal's name lacks brand equity.

2.2.3 Opportunities

• Participation within a growing industry. • Working for an industry that is required for almost all Americans. • The ability to spread overhead costs over an increasing customer base.

2.2.4 Threats

• Somewhat risky due to the regulatory nature of the insurance industry. • Future competition from a support staff franchise. • As computer technology continues to become more and more efficient and useful, it could

decrease the need for support staff services.

2.3 Competition

The competition consists of many different support service companies that offer a wide range of service offerings. None however target the insurance industry only. While companies that provide services to different industries offer adequate service, there is an advantage to hiring a company that only serves your industry and is much more knowledgeable regarding your specific needs.

The buying patterns of the agents mimic a long-term relationship. If customers are happy they will generally stay with the same service provider. There is generally a break-in-period for new customers where both parties spend time getting to know each other and the different needs each has. If this can be done up front once, then it is more cost effective than jumping from provider to provider.

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2.4 Products Offered

Ideal Business Support Services offers support services for the insurance industry. Ideal's service offerings will be diverse, however, Ideal will be specializing in transcription, database management, word processing, and website development and maintenance.

These services will be typically used by insurance agents who do not have the need to have a full-time person on payroll and the equipment in overhead. Ideal will be able to come in on short notice and serve the agent.

2.5 Keys to Success

• Generate repeat business. • 100% complete customer satisfaction. • Competitive pricing. • Industry expertise.

2.6 Critical Issues

Ideal is still in the speculative stages as a start-up business. The critical issues that they face are:

• Ensure that Ideal is able to quickly meet the demand for their services. • Quickly gain market penetration. • Establish Ideal as the premier support service company for the insurance industry in

Layton, NJ.

3.0 Marketing Strategy

While Ideal's marketing budget is not huge, they recognize that in order to generate business they must spend money on marketing.

Ideal will have four different marketing activities.

• The first will be advertising; ads will be placed in both the Yellow Pages as well as the regional industry trade journal.

• A second marketing effort will be networking, leveraging all of Sarah's industry contacts.• The third activity is participation in the regional trade show.• The last source of marketing is a direct mail campaign for local perspective customers.

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3.1 Mission

Ideal Business Support's mission is to provide the customer with the finest business support services. We exist to attract and maintain customers. When we adhere to this maxim, everything else will fall into place. Our services will exceed the expectations of our customers.

3.2 Marketing Objectives

• Increase repeat customers. • Decrease customer acquisition costs. • Generate brand equity, quantified by an increase in unsolicited service requests.

3.3 Financial Objectives

• Profitability by the end of year one. • Steady, sustainable growth. • Decrease training costs by 2% a quarter.

3.4 Target Markets

The insurance market that is in need of support services can be broken down into two segments

• Exclusive Agents: These are agents for only one type of insurance, such as State Farm. The agent will sell all the different types of coverage that State Farm offers, but only State Farm insurance. While the selection here is limited, the advantage of the exclusive agent is that they usually have a very strong relationship with that company which is good if there is ever any claim issues.

• Insurance Brokers: These agents do not have an exclusive contract with any one insurance company. They can offer insurance from multiple companies. The advantage of this set up is that they can offer a wider range of service offerings than an agent who only sells one brand of insurance.

3.5 Positioning

Ideal will position itself as the most experienced insurance service support company in the Layton area. This positioning will be achieved by leveraging its competitive edge.

Ideal's competitive edge is a specific, deep industry knowledge of insurance. While having this specific knowledge will preclude a lot of the market, it makes a small part of the market quite attractive.

This deep industry knowledge is based on Sarah's five years spent as an independent insurance agent. Sarah will gather all of this intellectual capital and process it into a training program so it becomes organizational knowledge.

This approach is somewhat backwards relative to the norm for the support service industry. Generally, the background of the company owner is from the support staff industry. They then apply the support staff proficiencies to the industry of their different customers. Sarah believes that the intricacies of the insurance industry are far more complex then that of the support agency.

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Her rationale is that she can pick up the few things she does not know about support much quicker than having to learn about the underlying industry that is served.

Sarah's industry access is valuable for networking as well. Having spent time in the industry, Sarah developed many strong relationships with agents. Having established these relationships creates a trust bond that is significant for attempting to transform the professional insurance relationship to a support service based relationship.

3.6 Strategies

The single objective is to position Ideal as the most efficient support service available, commanding a majority of market share within six years. The marketing strategy will seek to first to create customer awareness regarding the services offered, then develop the customer base, and work finally toward building customer loyalty and referrals.

The message that Ideal seeks to communicate is that it has unprecedented industry knowledge. Ideal will employ several methods to communicate this. The first method will be an advertising campaign. The campaign will utilize different sources, both the Yellow Pages as well as an industry journal. The second method of communication will be networking, based on Sarah's industry relationships. The third method will be participation within the regional tradeshow that attracts most of the local agents and brokers. The last method of communication is a direct mail campaign, targeting local insurance agents and brokers. The mail campaign will provide all of the prospective customers with information regarding Ideal's service offerings.

3.7 Marketing Mix

Ideal's marketing mix is comprised of the following approaches to pricing, distribution, advertising and promotion, and customer service.

• Pricing: The pricing scheme will be competitive relative to other support service providers.

• Distribution: The services will be offered at the customer's place of operation or at Ideal's office, whichever the customer prefers.

• Advertising and Promotion: A multi-tiered marketing campaign will be used to generate visibility and equity.

• Customer Service: Companies such as Siemens and L.L. Bean will be benchmarked for their customer service, and managers will be held responsible for the achievement of these ambitious goals.

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3.8 Marketing Research

The main source of marketing research was generated from a series of focus groups that Sarah engineered and facilitated. The participants were networking contacts from Sarah's insurance industry experience. Each focus group had five to seven participants and was video taped in order to record the entire event. The focus groups had a structured format where all participants were asked specific questions, as well as an unstructured section where there was a free-flow discussion.

The groups provided Ideal with a wealth of information from prospective customers. Some of the information confirmed already held assumptions, other information was things that Ideal was unaware of but very useful. Overall, the focus groups were incredibly useful. Ideal plans to have another focus group within 18 months.

4.0 Financials

This section will offer a financial overview of Ideal, as it relates to the marketing activities. Ideal will address break-even analysis, sales forecasts, expenses forecasts, and how they link to the marketing strategy.

4.1 Break-even Analysis

The break-even analysis indicates that $15,609 will be needed in monthly revenue to reach the break-even point.

($15,000)

($10,000)

($5,000)

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$10,000

$0 $4,800 $9,600 $14,400 $19,200 $24,000

Monthly break-even point

Break-even point = where line intersects with 0

Break-even Analysis

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Table 4.1: Break-even Analysis

Break-even Analysis:Monthly Units Break-even 26Monthly Sales Break-even $15,609

Assumptions:Average Per-Unit Revenue $600.00Average Per-Unit Variable Cost $90.00Estimated Monthly Fixed Cost $13,268

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4.2 Sales Forecast

The first month will be used to set up the office. This will include choosing the site, purchasing the furniture, as well as setting up the computer network. During this first month Sarah will be contacting some of her former colleagues.

The first week of the second month will be used for an intensive training of two of the support staff. The last three weeks of the month will see some sales activity. Sales will steadily increase from this point.

Month five will see the hiring of the final two support staff. They will also be trained during the first week of the month and then will take on a work load.

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$16,000

$18,000

$20,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Exclusive agents

Insurance brokers

Monthly Sales Forecast

Table 4.2: Sales Forecast

Sales ForecastSales 2003 2004 2005Exclusive agents $51,049 $112,548 $121,458Insurance brokers $59,812 $125,745 $134,745Total Sales $110,861 $238,293 $256,203

Direct Cost of Sales 2003 2004 2005Exclusive agents $7,657 $16,882 $18,219Insurance brokers $8,972 $18,862 $20,212Subtotal Cost of Sales $16,629 $35,744 $38,430

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4.3 Expense Forecast

Marketing expenses are to be budgeted so that they are high during the first quarter; a function of the desire to generate visibility for the start-up company. After the first quarter, the expenses will fluctuate depending on what marketing activities are occurring during each month.

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Advertisements

Trade shows

Direct mail

Networking

Monthly Expense Budget

Table 4.3: Marketing Expense Budget

Marketing Expense Budget 2003 2004 2005Advertisements $2,920 $4,000 $5,000Trade shows $2,700 $3,000 $3,500Direct mail $2,025 $2,250 $2,500Networking $1,500 $1,750 $2,000

------------ ------------ ------------Total Sales and Marketing Expenses $9,145 $11,000 $13,000Percent of Sales 8.25% 4.62% 5.07%Contribution Margin $85,087 $191,549 $204,773Contribution Margin / Sales 76.75% 80.38% 79.93%

5.0 Controls

The purpose of Ideal's marketing plan is to serve as a guide for the organization. The following areas will be monitored to gauge performance.

• Repeat business. • Customer satisfaction. • Expenses: monthly and annual.

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5.1 Implementation

The following milestones identify the key marketing programs. It is important to accomplish each one on time on budget.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Marketing plan completion

Trade show #1

Trade show #2

Trade show #3

Milestones

Table 5.1: Milestones

Milestones PlanMilestone Start Date End Date Budget Manager DepartmentMarketing plan completion 1/1/03 2/1/03 $0 SarahTrade show #1 1/1/03 3/30/03 $800 SarahTrade show #2 4/1/03 7/31/03 $1,000 SarahTrade show #3 8/1/03 10/30/03 $900 SarahTotals $2,700

5.2 Marketing Organization

Sarah will be responsible for the marketing activities, but will outsource some of the creative activities such as advertisement generation.

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5.3 Contingency Planning

Difficulties and Risks

• Problems generating visibility. • Regulatory changes in the insurance industry. • Fierce competition from a competitor.

Worst Case Risks May Include

• Determining that the business cannot support itself. • Having to liquidate property to cover liabilities.

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Table 4.2 Sales Forecast

Sales Forecast PlanSales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecExclusive agents $0 $1,001 $1,204 $2,145 $3,454 $3,658 $4,258 $4,987 $6,254 $6,985 $8,125 $8,978Insurance brokers $0 $1,325 $1,545 $2,785 $3,852 $4,141 $4,787 $6,235 $7,458 $8,325 $9,214 $10,145Total Sales $0 $2,326 $2,749 $4,930 $7,306 $7,799 $9,045 $11,222 $13,712 $15,310 $17,339 $19,123

Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecExclusive agents $0 $150 $181 $322 $518 $549 $639 $748 $938 $1,048 $1,219 $1,347Insurance brokers $0 $199 $232 $418 $578 $621 $718 $935 $1,119 $1,249 $1,382 $1,522Subtotal Cost of Sales $0 $349 $412 $740 $1,096 $1,170 $1,357 $1,683 $2,057 $2,297 $2,601 $2,868

Appendix: Ideal Business Support

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Table 4.3 Marketing Expense Budget

Marketing Expense Budget Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecAdvertisements $300 $275 $250 $225 $200 $200 $200 $225 $235 $250 $270 $290Trade shows $0 $0 $800 $0 $0 $0 $1,000 $0 $0 $900 $0 $0Direct mail $125 $125 $200 $175 $130 $130 $145 $145 $175 $200 $225 $250Networking $100 $125 $150 $100 $125 $150 $100 $125 $150 $100 $125 $150

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Sales and Marketing Expenses $525 $525 $1,400 $500 $455 $480 $1,445 $495 $560 $1,450 $620 $690Percent of Sales 0.00% 22.57% 50.93% 10.14% 6.23% 6.15% 15.98% 4.41% 4.08% 9.47% 3.58% 3.61%Contribution Margin ($525) $1,452 $937 $3,691 $5,755 $6,149 $6,243 $9,044 $11,095 $11,564 $14,118 $15,565Contribution Margin / Sales 0.00% 62.43% 34.07% 74.86% 78.77% 78.85% 69.02% 80.59% 80.92% 75.53% 81.42% 81.39%

Appendix: Ideal Business Support

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