Client segmentation is becoming increasingly sophisticated with advances in digital analytics and behavioural segmentation techniques. We have all heard about “big data” and there is no getting away from it: there is an endless supply of information about your clients. You can find yourself lost for days and tied in knots with algorithms and approaches in an endless exercise of slicing and dicing. It is something of a minefield.
But there are some quick ways to find your most attractive and profitable niche if you start to identify a few key characteristics.
Client segments can be as broadly or narrowly defined as you wish. Males are a segment but so too are blonde, left-handed females aged under 30 who live in Guildford and drive Volvos.
Most mature adviser businesses have grown to where they are today by working with as many different clients as possible. As with many businesses, the scattergun approach has been adopted to get clients on the books rather than focusing on attracting the right clients. The result is businesses with too many unprofitable clients.
The segmentation work we do with clients indicates that the most valuable clients of any business share many common characteristics. It is almost as if adviser businesses have established a niche – they just have not realised it. So how do you find yours?
Create a simple spreadsheet and analyse your top 20 clients by recurring revenue to your business, capturing the following information:
- Client name and age
- Where they live
- Occupation (if retired, their occupation before they retired)
- Assets with your firm
- Estimated net worth (if known)
- Annual income
- How did they become a client (referral, website, networking, professional introducer)?
- What products and services have they bought from you?
Armed with this information, you can start to analyse some characteristics that your top-end clients have in common. For example, it may emerge that 70 per cent of your most valuable clients are business owners or senior executives over age 50; they may even own or work in businesses in the same profession or sector.
Whether this was your focus at the outset does not matter; it has just become your target market. Now you can start to think about how to attract more clients like them and make sure you target your marketing efforts for maximum results.
Using the Pareto principle, it is a scary thought that potentially only 20 per cent of clients provide 80 per cent of profit. Similarly, it is hardly news that advisers have wrestled with identifying their most profitable client segments in the past few years – a challenge that is unlikely to go away soon with the pace of change in the industry.
But would it not be massively rewarding to realise the fruits of your labour more quickly by directing time and effort to developing outstanding experiences for your most profitable clients? Clients who may in turn start to do some of your marketing for free by way of recommendation? In a nutshell, client segmentation provides the framework to start doing just that.
Too many companies continue to take a broadbrush approach to their marketing efforts.
As Theodore Levitt, the renowned author and professor at Harvard Business School, once said: “If you’re not thinking segments, you’re not thinking.”
Understandably, many smaller companies have neither the time nor the expertise to deliver a targeted marketing approach to a specific niche. But what a pot of gold they could be missing.
Jane Cuthbertson is an associate consultant with Steve Billingham Consulting, focused on delivering results-driven business development solutions for the financial services sector