Segmenting clients into different groups can improve the way that you allocate your business resources — including your time — where they will be most valuable, says George Hartman, president and CEO of Market Logics Inc. in Toronto.
Successfully dividing clients into functional groups will allow you to focus your resources on your top clients: this should help with your bottom line, protect your most valued relationships from competition, and lead to more referrals from this group.
Follow these tips to properly prioritize services to your clients and make your business more profitable:
1. Look at more than revenue
When you want to segment your clients to improve your services, there are two key areas you need to consider, says Hartman: demographics and psychographics.
In the demographics category, Hartman includes factors such as age, income, occupation and marital status. Psychographics, by comparison, focuses on a client’s attitudes and beliefs.
Consider who your top, or “A level,” clients are based on these criteria. Then, divide the remaining clients into other groups. For example, these groups could be labeled “A level,” “B level,” or “C level” clients.
2. Write out a plan
Act on this new organization by having a written plan of the services that each client group receives. “A lot of advisors have done a segmentation exercise of some sort but they don’t use it,” notes Hartman.
Write out a grid or a matrix, he says, that clearly outlines the frequency of contact, the name of the client’s primary contact on the team, and whether or not they would be invited to client appreciation events based on which level of service they fall into.
3. Make an exception
Don’t be afraid to make an exception about where to place a client in your organizational model — if you feel it’s justified.
Sometimes, you might feel compelled to work with a client even if that creates a loss, says Hartman. You might want to treat a “C level” client as an “A level” because you like them or because they are connected to other clients. For example, you may want to make an exception for the children of your top client.
However, be careful that those relationships are the exception and not the rule. Hartman says that, if too many of your client relationships are not profitable, you cannot have a profitable business.
4. Review your clients
Keep your service categories up to date by doing a complete review once a year.
Think of it like spring training for baseball, says Hartman. Every year, a team’s manager has to go through the entire roster and decide who stays, which of the new players will get to play and who gets moved down to the minors.
An advisor has to go through a similar exercise, he says. This helps decide whether clients still fit in their existing, designated categories or whether they need to be moved to a different level.