In the third part of his series on adviser business strategies, John Joe McGinley says successful advisers will have a greater focus on segmenting clients.
If our profession is clever and learns from other sectors, the successful and profitable adviser propositions of the future will have a greater focus on farming the needs of existing clients who have been identified by effective segmentation and life stage marketing.
This closer understanding ensures a more in-depth dialogue with the client, which builds the trust and relationship that is needed to be the adviser of choice, who can guide a client through their life. This also allows greater access to assets aiding a consolidation process.
Profitability is enhanced as you're promoting the right message to the right people at the right time. You are also cutting out unnecessary engagement with clients who do not want, desire our meet the requirements of your chosen client proposition.
You may be bored to death with hearing about segmentation but it works. It is built on the concept that we all make purchases or decisions on our future for one of three reasons:
• We either need or satisfy a need, impulse or desire
• Solve a problem, or
• Make ourselves feel better
The first step for any business is identifying what elements of their existing proposition or any future developments push people's buttons. Then it's a matter of marketing their proposition and service according to each group of client's wants and needs.
Segmentation is not a legislative requirement but a powerful business technique that can add real value.
If done correctly, it can:
- Actually make money- Why waste valuable time and resources on ineffective and poorly targeted Sales and Marketing exercises? Successful segmentation allows a business to deliver the right message to the right people at the right time. It also ensures resources are allocated towards the clients who can provide the greatest opportunity and revenue earning potential.
- Support a proposition- The ideal situation for any business is to deal with clients who understand and desire the proposition they are delivering and who appreciate the value they are receiving. Building a customer centric proposition is a lot easier if developed from the bottom up centered on the needs, wants and desires of existing clients and future customers.
- Make existing infrastructure work harder and smarter - With client records, administration systems, and business networks the building blocks of an effective segmentation system are already in place. With the right focus, structure and perhaps with additional client research, segmentation can make a business more effective using the tools they already own and pay for. The only real cost is time, with the rewards far outweighing the initial investment.
- Help retain clients and increase revenue - The Pareto principle states that 80% of revenue comes from just 20% of customers. This may ring a bell with many businesses.
It costs around five times as much to acquire new customers as it does to sell to existing ones. So it really does make sense to know who the most profitable customers are and to provide them with an excellent service proposition that they value and desire.
This will ensure that they remain loyal with the added bonus of helping maximise profitability. Satisfied customers are also great advocates; they are more likely to recommend services to others who can be key clients of the future.
Segmentation can easily identify profitability but it should also identify why people value service and what they will pay for. Then it can help break from the Pareto principle and maximise revenue potential.
It's important to remember that there's no one segmentation model set in stone. It can and should differ from one business to another.
John Joe McGinley is head of Glassagh Consulting
