An agency Cinderella story about pay for performance compensation

CinderellaAs I have already stated in one of my previous posts, pay for performance compensation has been discussed for a long time. While it can be a frightening prospect for many, it can also have a silver lining too.

Over 14 years ago, while running my agency in South Africa, I found myself in a very challenging situation. One of my clients was a large insurance company who pursued a strategy of endorsed direct mail insurance mailings. We would approach various companies or organizations on their behalf, and negotiate an insurance product mailing to their customer base. Endorsed of course by the list owner in order to increase response rates.

Another of our clients was the largest clothing retail chain in Southern Africa, with over a million customers on their database. We put the two clients together and negotiated an insurance mailing to the retailer’s customer list. Our insurance clients would pay for the mailing costs and in return our retail client would endorse the mailing package. Thus providing added value products to their retail customer base.

 It was all but a done deal when our insurance client got cold feet due to the size of the mailing and the associated costs to produce and mail the packages. It was in fact the largest single mailing they had ever contemplated doing without an initial test pilot.

It was too late to turn back, and in our agencies opinion too good an opportunity to miss. My partner and I took the decision to fund the mailing costs ourselves, on the basis that we would receive the broker commission built into the monthly premium. The commission on this particular product is paid monthly for as long as the policy is in force.

The mailing went very well. Response to the offer was way over expectation. Persistency (expected length of time that the policyholder continues to pay the monthly premium) has been exceptional. We made all our hard costs back in less than 6 months, and both still continue to receive monthly commission checks to this day. Over 14 years later. Our ROI has been exceptional to say the least!

We offered to do the follow up mailing shortly afterwards on the same financial basis but surprise, surprise, our insurance declined the offer and paid for it themselves. What a pity.

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