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More than 230,000 independent insurance agents serve virtually every American town with 5,000 or more residents.18 They typically are entrepreneurial and sales-oriented, with their key goal being to establish long-term relationships with customers, one at a time, at the retail level. They meet multiple needs of customers, offering a full line of insurance products such as life, automobile, and disability coverage. Their operations are usually "lean and mean," some with as few as a single employee, such as a receptionist/administrator, serving their office. They rely on the insurance companies that they represent to service claims and provide adjunct services such as underwriting. Outside firms also provide convenient payment plans.
In summary, the fundamental characteristics of insurance agents are that they:
We believe that the insurance agent model can fill the critical gap in the SWH industry.
Successfully selling SWH systems is a time-intensive effort that requires a direct approach. As indicated earlier, SWHs are an invisible part of the water heater market. The new home market is dominated by builders who are unlikely to install these systems, given the significantly higher construction cost and lack of perceived consumer demand. Trade contractors that do not install SWH dominate the replacement market.
Consumers do not buy SWH systems. They must be sold them, one at a time. Thus a successful SWH initiative can only be based on an intensive direct sales effort that includes telemarketing and personal visits to homeowners.
Successfully selling SWH systems will not be easy. There is no momentum to tap, no customer list to use, and no repeat customers to approach. There is little perceived demand by homeowners, and the first cost of SWH systems is higher than electric and gas systems. This is a daunting list of challenges.
Only a committed entrepreneur with significant sales ability and perseverance can succeed. And only an individual whose financial success depends on sales results will have the motivation to persevere. For this reason, the SWH industry should not simply "hire" sales professionals; it should help individuals start their own small businesses. In addition, the entrepreneurs should be required to commit their own financial resources, both to help fund the initiative and to tie personal success to results.
Insurance agents do not sell just one type of insurance. Having recognized that the most difficult challenge for an agent is to find a customer, the insurance industry is structured so that the agent can sell multiple products to that customer -- life, automobile, disability, and other policies. This greatly expands the revenue generated by each customer.
The sales approach adopted by a SWH entrepreneur might, in fact, downplay solar water heating. One successful sales team in Florida positions their offerings as services that increase the overall efficiency of a home. (See Box Three.) His bundle of products and services includes:
A similar approach might include a different bundle of services, such as duct testing, cleaning and sealing; insulation; and other home comfort and home energy services.
As a front-line sales-oriented operation, overhead should be minimized. Although the US H2O business opportunity envisions four front-office employees (general manager, engineering/operations manager, administrative aide, and sales manager) to support three full-time salespeople, in a leaner structure a single entrepreneur can be supported by a part-time telemarketing staff who pre-qualify leads and schedule sales appointments. The SWH agent opportunity is probably suitable for a home-based office, which further minimizes overhead costs.
Products and Installation Provided by Others
The typical independent insurance agent focuses on sales. Non-sales activities such as underwriting and policy servicing are provided by others. Similarly, in this model, technical support, administration, and installation should be provided by others. The SWH industry should develop a set of resources, such as collateral sales material, accounting systems, standard contracts, and financing guides, that can be adopted by the sales entrepreneur in a "franchise-like" approach.
One barrier identified by sales professionals in the SWH industry is the lack of convenient, low-cost financing for homeowners. The sales agent approach will require development of an "instant credit" system that provides one-hour qualification and simple procedures, comparable to those used in a car dealership, with competitive interest rates.
To illustrate the operation and economics of the independent agent concept, we have developed and modeled the financial implications of one scenario, in which an agent offers homeowners a bundle of energy services, such as:
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Although greater research will be needed to determine the "optimal bundle" of options to be included on the menu, the analysis demonstrates that selling a range of related products that extends beyond SWH systems will be key to the success of a SWH entrepreneur. (See Figure Four for the operational plan and Table Two for the end-of year financial scenario.)
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