Fear sells. This month we'll look at the power of selling fear to generate more AORs for brokers and fees for consultants. It is crazy what innovative selling techniques have come to, but this is the reality of today. While we were not looking, the federal and state governments have ratcheted up fines for noncompliance for just about everything associated with employee benefits, human resource management and compensation administration. Take advantage of these downers and watch your differentiated sales presentation catch the eye of potential buyers. Selling fear will result in more AORs, especially at this critical point where many brokers and consultants are losing financial ground because of the reduced headcount seen in these waning days of the recession.

Primal instinct

Fear is one of the primary motivators for selling - benefits in particular. Many buyers do not know what they do not know. Prospective buyers will turn on to a presentation that threatens their businesses' financial health if you weave fear into your sales presentation.

Selling fear means educating prospects about the fines and penalties they may have to pay for missing just one of a myriad of rules found in statutes and regulations.

Noncompliance for many employers, if they get caught, can result in fines that can bankrupt their organization. I can personally attest to situations where companies went out of business because of the fines they piled up for noncompliance. All it took was one disgruntled employee who contacted the Dewey Cheatem and Howe law firm, who knew all the legal tricks for causing the company no small measure of financial pain.

For some matters it's even easier. I know of companies where a terminated employee, bent on revenge, contacted the federal Equal Employment Opportunity Commission or the DOL, where they are always interested in employers breaking the rules. It's easy for the employee to contact a federal agency and complain. Once a valid claim has been documented, the employee steps aside and the feds, with their deep pockets and legions of attorneys, will pursue the noncompliant employer with vigor.

Compliance is important but not very exciting in a sales presentation. Many sellers and consultants shy away from rules and regulations for that reason. Compliance is, however, the mother lode for selling fear. Here are a few compliance concepts that are true and can be turned into sales gold.

True tales of terror

COBRA always amazes me. The fear motivator lays in the many things an employer with 20 or more employees and a health plan has to do to comply with this nearly 25-year-old law.

You want to talk about the fines for noncompliance with any part of COBRA. Here they are: $110 per day, per violation, per person with single coverage and $200 per day, per violation, per person for family coverage. The most common violation, by far, is a plan sponsor's failure to provide newly eligible employees on the health plan with a notice of their COBRA rights. Let's assume that the employer does not do this, because many don't.

Assume a 100-employee group with average turnover, use the fines listed above, and do the math.

A couple of years ago one of the brokers in our sales network knew how to make this story fearful for a group when he stumbled upon some low-hanging fruit. The employer was with another broker. The employer had 96 employees and one of the employees knew of this initial COBRA notice requirement. He had worked for the company more than three years when he got mad and quit. He never received his initial notice of COBRA rights when he first became eligible for benefits under the plan. To make matters worse, the other 95 employees never received their initial COBRA rights letter either. He promptly called the DOL and the DOL took up the claim.

Take our disgruntled employee for a minute. Let's assume he had single coverage for the more than three years he worked there. Now do the math just on him (($110 x 365) x 3+)). Then think of all the other single and family contracts, and the tenure of those employees. It really added up.

The producer in our network sniffed out this opportunity and although the problem was essentially water over the dam, he used the opportunity to scare the employer with other frightening compliance facts. He won the AOR with a compliance pitch and looked real good to the employer for doing so.

This story represents a probing question you can ask an employer about their COBRA compliance. You'll look on top of your game by asking these questions and outlining the potential fines for noncompliance.

Proper papers

Immigration rules and regulations present another golden opportunity for selling fear. Last year the Obama administration upped the ante for immigration compliance by announcing stiff fines and more frequent inspections on employers. The I-9 compliance police are readying for a road trip as we speak.

Is your client in compliance with current immigration laws? My company does I-9 audits for employers of brokers in our network, so I've seen one or two. This is a fear story you want to tell prospective employers, particularly those who might hire immigrants, but it applies to everyone.

Completing an I-9 form is not tricky, but many employers do not do it right, or do not do it at all, thus risking substantial fines. For instance, an employer with 25% of its I-9s containing paperwork violations and no previously fined violations would be fined $440 per violation, which would be adjusted up 5% for being a large employer, and down 10% if showing good faith with a good history, for a net of $418 per violation.

A small employer with 5% of its I-9s reflecting knowing employment of unauthorized workers (including "constructive knowledge"), might only be fined about $300 per violation. Either way, that should scare the employer into action. You should also be able to take the fear away by having someone who can help the employer get into compliance with the current immigration rules.

Health problems

HIPAA is another golden fear story to use with prospects and customers right now. On Sept. 23, 2009, new HHS regulations went into effect for employers with 10 or more employees. The regulations require that affected employers keep logs of any breaches of unsecured protected health information and various notification hoops to jump through if a breach is committed and discovered. The notification requirements go into effect on Feb. 17, 2010, but the keeping of logs is required retroactive to Sept. 23, 2009.

Do your prospects and customers know about these requirements? You can learn all about the new HIPAA breach and notification rules by watching one of our Smartcasts on davidsonmarketing.com.

Are your prospects and customers complying with the requirements? If not, the fines are stiff if they get caught. (See chart on page 48.)

HIPAA is a frightening concept for employers if they do not know all the rules. Master the HIPAA rules, use the fear motivator and score by being a differentiated seller with knowledge on a complicated issue facing most groups.

Fear is a powerful motivator. Use it to gain an AOR. You may use these stories or a gazillion other stories rooted in compliance that your customer needs to heed. Unfortunately for most potential customers, they do not know the minutia of the rules. Fortunately for you, you can bone up on the rules and use compliance as a very effective tool.

Need more ideas on this? Drop me an e-mail.

You have to be different

Selling fear, while objectionable to some, is an effective tool that appeals directly to the buyer's basic needs. Savvy sellers will use this technique to gain an advantage over sellers who choose not to employ it. You have to be different in today's competitive marketplace. You cannot afford to leave one tactic unused, especially one that has garnered so many AORs for others. Try this technique, but make sure you understand all the facts first.

I'll close with this true story. Back in the 1990s, I called on a major university whose name you would recognize instantly if I mentioned it. On our first sales call, I employed the compliance set or probing question to their full complement of HR staff.

To my surprise, I uncovered the fact that this large university was not sending out initial COBRA notifications for newly eligible health plan participants. The HR staff said that was not required under COBRA. I pointed out the chapter and verse in the rules and noted the substantial fines that this group faced if caught. This turned the sale in our favor. We won the AOR. Sounds simple, but it works.

Next month, we'll cover the second primary motivator in sales - greed.