Too many business owners overlook the problem of client conversion rates
Early in our relationship with an adviser, we will ask them to identify firms they admire and those they perceive to be competitors. The answers are almost always identical. When talking about those they admire, the same names trip easily off the tongue.
There is similar consistency for competitors. However, no names are forthcoming; the answer is almost always “none”. This is probably because (anecdotally at least) relatively few clients meet with more than one adviser before engaging. Of course, that does not mean there is no competition, even when considering referrals, it just happens before you have met the potential client. But that is a column for another day.
False sense of security?
The lack of competition (whether perceived or actual) means, for most firms, the conversion rate of prospects met to new clients engaged is high. Often over 90 per cent.
On the face of it, that is great. However, it is potentially dangerous and masking an expensive problem: a much lower overall conversion (all enquiries to engaged clients) rate, leading to a higher-than-necessary marketing spend.
Perhaps because most people they meet become clients, the majority of advisers and planners do not monitor conversion rates in detail. In fact, many do not even collect enough data to allow a meaningful analysis. Where data is available, the picture is usually less rosy. Why focus on conversion rates? Because it will save you time and money.
By monitoring conversion rates at each stage of the client journey, you will understand which parts are working well and those in need of attention. For example:
- A poor enquiry to first meeting conversion rate might signal you have issues in the early stage of your onboarding process. These could include enquiries not being followed up effectively or that your marketing is producing enquiries from the wrong type of person.
- A low first meeting to new client conversion rate might be due to problems with your proposition, the client’s perception of value or (dare I say it?) your first meeting skills. We see these problems when a new proposition is being rolled out; for example, as a business transitions to a financial planning model. The good news is that with the right training, these issues can be fixed and your business will be stronger for the experience.
Diagnosing the problem is only half the job; you then need to prescribe the right remedy. The steps you take will depend on where in the client journey the problem lies. For marketing and sales to be working in harmony, you need the former to produce enquiries and the latter to convert them into clients.
That is why the answer is never to simply step up your marketing to put more enquiries into the funnel.
Yes, you will engage more clients and probably feel you are moving forwards, but you will not solve the underlying problem of low conversion rates.
Creating more enquiries without improving your conversion rate is an inefficient use of your time and marketing budget. Far better to analyse where your process is not working and take appropriate action.
To do that, you need two things: the right data and the right attitude. The first will help you understand where the issues lie, and the second will mean you analyse the data and take action.
It is not always easy; there are times when you will have to ask yourself and your team some tough questions, and recognise when you need to work on your skills.
However, the results are worth it. You will spend less money on people like me and experience a better return on investment.
Phil Bray is director of The Yardstick Agency