This case study is based on the situation of a client of the Covenant Group. Names and details have been changed to preserve privacy.



“Doesn’t that amount to discrimination against small clients?” Jill Snider asked, in reaction to comments during one of our workshops about the importance of advisors segmenting their client base for marketing, sales and service initiatives.

“Actually, Jill,” I replied, “I think it accomplishes the opposite. Proper segmentation can assure that all clients get the level of attention they require and deserve — even those who have lower economic value to your business.”

“I don’t see that,” she continued in her challenge. “Why bother to rank clients from A to D if you are not going to treat them differently, so that the As get better service than the Ds?”

“A definitive client segmentation strategy will lead to some clients receiving a higher level of service than others,” I agreed. “However, in most cases, that’s because they demand more from you, intentionally or otherwise. My guess is you already have a different service standard for your better clients. Let’s consider a couple of specific examples among your existing clientele. What is your very best client’s first name?”

“Mary,” Jill offered.

“Now, tell me what happens when Mary calls your office with a request of some kind,” I said. “Does she have fairly ready access to you, even if you are busy with other things? Does the staff ‘perk up’ just a bit in their greetings and conversations with her because they know she is your No. 1 client? Do you assign someone else in the office to deal with Mary or do you do your best to make sure she gets what she wants as soon as possible?”

“Of course, she gets priority treatment,” Jill said. “Someone else may ultimately handle her request, but I always speak to her directly first to let her know that I am aware she called and that I have assigned our most capable person to her needs. If I need to be personally involved, I look for the earliest opportunity to do so.”

“Now,” I continued, “have any clients whom you haven’t heard from in a long time — and whom you would not typically count among your top clients — called you up recently?”

“That happens all the time,” Jill said. “In fact, a fellow to whom I sold a simple tax-sheltered investment more than three years ago called just this week. I hadn’t heard from him since then, despite several letters inviting him in for a review and so on. He’d misplaced his annual statement and wanted another copy.”

“And how was that request handled?” I asked.

“I couldn’t take his call right away because I was in a client meeting, but I called back a few hours later, spoke to him briefly and said we would get something out to him as soon as possible. Then I passed the request along to my assistant and she looked after it,” said Jill.

“Did you confirm that it was done?” I asked.

“No. Sally is very competent, and I am sure she looked after it,” Jill said.

“If it had been Mary making that request,” I asked, “would you have handled it the same way — with a delayed callback, a brief conversation, a redirection to someone else and an assumption it was done?”

“No,” Jill admitted. “I probably would have had more involvement and wanted assurance that we delivered on her request.”

“Do you see where this is going?” I asked.

“I believe I do,” Jill acknowledged. “Intuitively, we already treat some clients better than others, and we should add discipline to that with some sort of formal segmentation exercise. Am I right?”

“You are,” I replied. “Segmenting your client base not only has implications for the service level you provide but can also be very helpful in your marketing — for example, determining who receives an invitation to your client appreciation events, your charity golf tournament, and so on. You can use the same segmentation to point you toward clients to whom you should take your new ideas or products. Doesn’t it make sense to give your best clients the first chance at new opportunities?”

“Of course, it does,” she said. “But I’m still not sold on providing inferior service to some clients…”

@page_break@“I am not suggesting in any way that you give poor service to anyone,” I interrupted. “In fact, one of the hallmarks of a good segmentation strategy is that every client feels as if he or she is getting A-client treatment relative to their needs.

“Take the long-lost client who called about his statement. What if, instead of waiting to speak to you, the person who took the initial call had said, ‘I can look after that for you right away, Mr. Client. I’ll have it in the mail to you this afternoon.’ Would he feel he was getting anything less than A-client service?”

“I doubt it,” Jill said. “So, how do we set this up properly?”

“It will require some effort on the part of everyone in your office, first, to segment clients according to the criteria you establish and, second, to adhere to it on a daily basis,” I explained. “You must decide on the service standard for each client segment and who will be responsible for delivering that standard. It might make sense, for example, for you to be the point of contact for your A clients, your senior administrator for your B clients, and more junior staff for the Cs and Ds. To emphasize the point again, every client should feel he or she is getting the best possible service so, in reality, your C and D clients become A clients to whomever is charged with serving them.

“We also have to accept that it won’t work out perfectly,” I continued. “There will be times when you will end up dealing with your D clients. It is simply the nature of our business and your professional responsibility that you will get involved with clients of every level. There will also be some clients who are intentionally placed in the wrong segment. For example, if one of your criteria is minimum annual revenue, you may have clients who don’t meet that requirement; however, because they are sons or daughters of top clients, you will probably want to accord them the same level of service you do their parents.”

“Speaking of criteria,” Jill interjected, “how do I decide what it takes to be an A client, and so on? Is revenue the appropriate measure?”

“Revenue should be part of it,” I answered, “but not the only qualification. Consider both quantitative and qualitative measures. For example, quantitative criteria could include minimum annual revenue per client, AUM, in-force insurance amount or premium, number of different products owned, and so on.”

“And on the qualitative side?” Jill prompted.

“There,” I offered, “I would consider things such as the depth of your relationship. Is it based solely on the sale of a product, such as the client you described earlier, or is it at a higher level, the result of working out a financial plan together? Or, even better still, are you engaged in ongoing implementation of a long-term investment strategy or, strongest of all, are you the client’s ‘trusted advi-sor’ whom that person consults for every major financial decision?

“You might also evaluate clients on the probability of them contributing to the future success of your practice,” I added. “What additional potential business exists? Are they willing to provide referrals? Can they help you access new markets? Can they mentor you?

“As well, an important consideration is simple ‘likeability.’ Do you enjoy working with this client?

“Many advisors find it useful to assign weightings to each qualification, according to their own priorities. They then ‘score’ every client and determine a ‘cut-off’ for each segment. Finally, they make individual adjustments based on their ‘gut feelings’ about what is right in the real world,” I concluded. “It’s up to you if you want to get that detailed. The important thing is that you have a system and use it.”

“It sounds like I have some work ahead of me,” Jill said, “but I can certainly see the value. I’m going to schedule a session with my team to set our criteria and service standards for each segment. I know they will have some strong opinions about who our most valuable clients are, and why.” IE



George Hartman is a coach and facilitator with the Covenant Group in Toronto. He can be reached at george@covenantgroup.com.