Source/Contribution by : NJ Publications
Client Segmentation is widely acknowledged as a successful marketing and business strategy and is implemented across business lines.
When an advisor starts his business, the client acquisition and service approach is random. We want to get maximum clients on board, get as many investments as we can, and within minimum possible time. In the initial stages, when the number of clients are less, we have enough time to dedicate to each client. But as the business expands, you grow into a big firm with a number of employees, the same nine working hours a day needs to be divided between a number of activities, like employee management, business management and development, client relationship management, etc. Now all your clients are not the same, there is the creamy layer, which is behind a major portion of your total AUA, you have got big ticket investments from these clients, or there may be clients who have not been profitable but are eating up a lot of your time, and there may also be clients who may not have played a critical role in building your AUA, but have the potential to invest and may need your assistance in their overall financial planning. In light of this situation, the service standards and time given to each client cannot be the same. Also in this highly competitive world, all your clients would expect superior personalized services. The creamy layer demands more but at the same time the others cannot be left unattended. So, how do you go about managing your time and your clients? The solution to the dilemma is Client Segmentation.
What is Client Segmentation?
Client Segmentation means segregating the total client base into different categories, so that people falling under a particular category share certain similar characteristics with respect to the marketing & servicing strategy that you should adopt for that group.
How do you Segment your Clients?
Profitability Based: It goes unsaid, that the people who deserve the most of your time are the ones who give you the maximum business. These people have trusted your skills and have given you humungous money to manage, and hence the expectations are also high, thus the need to provide unparalleled service remains paramount.
There are various services standards on the basis of which you can differentiate your service standards, like
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Frequency of contact: The frequency of meeting or calling your larger clients shall certainly be more than the smaller clients.
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Personalization of Services: While you may have your staff at work for managing birthday and anniversary greetings, sending mails or Whatsapp messages. You can personalize the service for the elite clientele, by calling them yourself or sending a bouquet or a cake, etc.
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Novelties: Sending personalized calenders, diwali gifts and other goodies, exclusively for the top 10% clients is a good idea.
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Quality of contact point: As a point of contact for handling clients, you can differentiate by assigning an experienced employee to a big client or maybe offer some of your own time in some cases, and assign a relatively newer employee in your organization to smaller clients.
The above are some, but not all methods of differentiating your service moneywise, these techniques will help in creating a unique service experience for your eminent clients and thus help you in retaining them.
The client base should be segmented on the basis of profitability, but it shouldn't be the only criteria. Segmenting on the basis of Profitability is the quantitative approach to segmentation. The current scenario demands more, you need to look beyond numbers and customize your delivery standards on the basis of Qualitative factors as well. There may be clients who do not account for a significant portion of your revenue, but they may need your attention. The landscape view of the entire client base shows clusters of clients sharing similar revenue generating capabilities. But when you have a closer look, not all clients are same within a cluster, these are people belonging to different age groups, demographics, risk profiles, different investment needs, etc. And these variations demand a different approach for handling these clients.
For Example, clients who are approaching their retirement can be exposed to information and material which concentrates on deployment of Retirement Corpus to generate maximum benefit. You can also have Post Retirement Planning seminars for them.
Or you may have some clients with a high risk appetite while others with a low risk appetite. So, the former set of clients can be the target set for Equity investment options and the latter set for Debt Investment Options.
Some clients may not be investing today, but they may have a strong future business potential, like people who are in the initial stages of their career, as they grow they'll have more disposable incomes to invest.
Further, there may be some among your top notch clients, who prefer limited communication, so the service factors discussed may have limited application here.
So the bottomline is, there are different types of clients, having different needs, preferences, potential to invest, risk profiles, along with different revenue contributions. One client may fall into different categories also.
It's important that we have a holistic approach, analyse the profile and potential of each client and then segment him/her into categories. The segmentation practice should not be limited to one, but a combination of quantitative and qualitative approaches. Implementation of Client Segmentation will help you save time and take you a long way ahead in improving your service quality and create efficiency in client management.
