I was working last weekend and browsing the web when I had a Zenefits Ad pop-up on the page that I was on. I know how that works, if you have searched Zenefits in the past then the system remembers you and pushes their ad onto the page. Had I not searched Zenefits the ad most likely would not have popped-up. I would imagine this would also happen to the thousands of employers getting calls and email from Zenefits. They may check out who they are on the web and then sometime in their future browsing they get the same ad. I also saw a commercial on TV the other day from Namely, another technology vendor getting into the benefits brokerage business, so Zenefits is not the only such firm advertising on TV and the web.
Recently my organization was the target of a Zenefits marketing campaign. Within a two week period of time my HR person (I don’t know where they got her name and email address) received 3 phone calls and 4 emails. She did give them the opportunity to present to her and their pitch was pretty compelling. However we are a little more educated in the technology area and have a solution much more advanced than Zenefits.
To compete with Zenefits many brokers sign up with some technology company so that they can say they have a Zenefits-like solution. What they don’t realize is one of the reasons Zenefits is successful is because of their marketing. Most brokers don’t have the marketing system in place where they can find the right person in a company across the country and make 3 phone calls and send 4 emails in two weeks. In fact most have not even thought through what to say on a call or write in the email. What you say and how you say it matters.
When I start working with a benefits firm one of the first questions I ask is whether they have a marketing person on staff and an operations manager. It is amazing how few firms staff these type of people. Many will say they have a marketing person but that person is often not trained or skilled as a marketing person. The employee may have been the best PowerPoint person and became the head of marketing. Few majored in marketing in college. The ones that do have thriving businesses.
The same goes with operations. I rarely see benefits firms with operations managers on staff. Once again, they may have someone that may have the title of Operations Manager but that person often was someone who was promoted from some administrative role or the Office Manager position. It is amazing when you see a company that is operating with a great operations manager.
The lack of staffing and vision around these two functions may become very critical to a benefits firm in the near future. These are the areas where firms like Zenefits will shine. I believe Zenefits will eventually become the most efficient small group broker in the country. Much like Digital Insurance they will put the systems, people, and processes in place where they can become more and more efficient operationally. This efficiency will enable them to operate their business at a lower unit cost yielding higher profits than the average benefits firm. And if benefits commission changes significantly they will be able to charge fees for their services because of the systems they built to provide better service at lower costs.
Most benefits firms have no vision for operational efficiency. This is an area where I have a great deal of experience having discussed and viewed how hundreds of brokers are operating internally. Many have a database that can store information but few have thought through every process in their organization and develop automated workflows to make those process better. It is amazing how many times I hear from a business owner that “their staff won’t use it” when referring to their internal system. Since when should that be an option?
Many benefits brokerage firms are structured to be successful in what I think may be a dying business model. They are designed to protect the status quo. I have written numerous articles in this blog including one about the coming end to commissions and the rise of price competition. ( Fee for Services for Benefits Brokers – It Changes Everything and It’s Coming ) Another article I talked about the future of health care where health insurance may be all individual purchases and the future insurance companies may be the hospital systems. ( The Coming End to the Benefits Business As We Know It ) If commissions get reduced then those organizations with operational efficiency can have an advantage. With solid marketing they can grow rapidly as others struggle to adjust their business models. Also, if the health insurance purchase moves from the employer to employees then those organizations that can service individuals will also have an advantage.
Many brokers think firms like Zenefits will perpetually be bad and others hope they go away. What they are not seeing is that Zenefits is building a business to thrive in a new benefits world. By leveraging technology and building organizational efficiency they will have lower costs and higher profit margins. And if they don’t someone else will.