Why 'free' is a terrible business model

I recently heard a broker say, “The thing the average public does not know is that brokers are a free service.”

Wow. Really?

This stopped me in my tracks and had me replaying the words again to make sure I heard them correctly. This wasn’t just a casual conversation I overheard. It was a comment made in a very public forum from the perspective of an “industry expert.”

Promoting your business as a free service is not a brilliant marketing strategy. Here’s a few reasons why:

• With this position, you are competing at the most basic, commodity-driven level of the industry. Which means you’ve left no room for changes, like when carriers — the ones paying for you to provide this “free service” — cut commissions.
• Another thing that comes to mind is value. When telling people what you do is “free,” you’re telling them that it’s not worth their own money to spend on what you have to offer.
• And keep in mind that “free” is never actually free. Someone is paying for it in some way. And in the case of individual and small business health insurance, that someone is the buyer himself.
• If a client isn’t paying anything for your service, why should they have any loyalty to you? As soon as they can find another company who offers them a lower price along with the same “free service,” what’s to keep them from moving?
• “Free” does not typically equate well withquality. If you were in need of legal help, would it be your preference to use the court-appointed attorney or hire one who specializes in your area of need? You get what you pay for as a consumer, and as a business you get the clients you attract with your message. Remember, navigators are also a “free service.”
  

I can’t imagine a worse way to set your business up in the eyes of your clients. We all work too hard to earn the respect and trust of clients and prospects to de-value ourselves and our offerings in such a way. I recognize that this has been common messaging over the years, especially when the idea of free services came into vogue, but it is well beyond time to move away from that model.
Also see: "Marketing efforts that send the wrong message."

But who’s going to tell?

Stop hiding behind the carriers premiums, hoping the client won’t notice. People are smart enough to figure out hidden fees.

If clients and prospects don’t find out on their own that you’re not actually free, you can bet that a competitor will find a way to point that out. Would you rather have the “what you’re paying me/what I’m worth” conversation with your client, or would you rather a competitor had that conversation on your behalf? I guarantee they won’t mention the “what you’re worth” part of the conversation though.

Take control of your business. Define your value proposition and promote it with confidence to become the competitor that other brokers fear.

Also see: "Improve employee contributions with a strong connection."

Keneipp is a partner and coach at Q4intelligence, driving agency transformation. Learn more at q4intel.com. Reach her at wendy@q4intel.com, on LinkedIn, or Twitter @WendyKeneipp.