By effectively segmenting our client base, we can offer personalised services, improve communication and build stronger relationships. In turn, this leads to better outcomes for clients and a more profitable, efficient business for us. So, why is client segmentation so powerful, and how can it help you and your business thrive?
What is client segmentation?
Simply put, client segmentation is the process of dividing your client base into different groups or “segments” based on a well-thought-out client segmentation philosophy. Such philosophy must be applied consistently. The idea is to tailor your services, communication and engagement strategies to meet the unique needs of each group.
Without segmentation, you might find yourself trying to speak to all your clients in the same way, much like shouting in a noisy stadium, where your message gets lost in the crowd. Segmentation allows you to direct your message clearly and effectively, ensuring your clients feel seen, understood and valued.
Linking segmentation with your value proposition
Your value proposition is the cornerstone of your financial planning business. It’s what sets you apart and tells clients why they should choose you over someone else. But the value you offer may not resonate with every client in the same way. This is where segmentation comes in.
For example, the value you offer to high-net-worth clients, who may need complex estate planning, differs from the value young professionals need, who are more focused on building wealth. When you segment your clients, you can refine your value proposition for each group, ensuring your services are aligned with their specific needs and goals.
Does segmentation take time?
Yes, but the benefits are well worth it. The idea of going back to the drawing board and segmenting your client base may seem daunting, especially if you’ve been in the profession for many years. But breaking it down into small, manageable steps can make the process more achievable. Start by working on it an hour a day, and before you know it, you’ll have a clear understanding of your client segments. Remember, it’s an ongoing process – your segments will evolve as your business and clients grow.
The role of technology
When it comes to segmenting your clients, technology can be your best friend. While tools like Excel are a great starting point for small businesses, there are more advanced tools available today, such as Customer Relationship Management (CRM) systems and even AI-based solutions.
Using technology not only helps you organise your client data but also allows you to gather insights that can lead to more effective segmentation. AI, for example, can help you predict client needs based on past behaviour, enabling you to offer more personalised services and communication.
Behavioural segmentation: looking beyond the numbers
Most of us tend to focus on quantitative measures like income or assets under management (AUM) when segmenting our clients. While these metrics are important, they don’t tell the whole story. Behavioural segmentation is just as crucial. Understanding how clients make decisions, how they prefer to communicate and what their personal values are can make all the difference in delivering a tailored, impactful service.
Think about it: some clients may drain your energy and always push back on your advice, while others trust your judgement and act quickly. Segmenting based on these behavioural traits can help you identify the clients you work best with and who will benefit most from your services.
Hyper-personalisation: the future of client engagement
Personalisation in communication is no longer just a nice-to-have; it has become a necessity. Today’s clients expect personalised, relevant information and those who fail to deliver it risk losing engagement. With the help of technology, businesses can now engage in hyper-personalisation, where communication and services are tailored to the unique needs and preferences of each client. For example, you might send educational content on retirement planning to a client nearing retirement, while a younger client receives information on saving for their first home. The right message at the right time can make a significant difference in client engagement.
Reducing business risk with segmentation
When you segment your client base, you not only improve efficiency but also reduce business risk. By focusing on clients who are a good fit for your services and share your values, you minimise the chances of conflicts or dissatisfaction down the road.
For instance, a client who doesn’t value your advice or constantly questions your fees may cause headaches and complaints. Through effective segmentation, you can filter out these clients early on, leaving you with a client base that appreciates your services and contributes to your business’ success.
Proof that segmentation works
The numbers don’t lie. Research shows that businesses with a well-structured client segmentation strategy perform better in terms of AUM and client retention. Firms with segmentation strategies tend to attract more high-net-worth clients and experience greater growth over time. In essence, segmentation is a key driver of profitability and long-term success.
Final thoughts: segmentation as a journey
Client segmentation isn’t just a one-off project; it’s a journey. Your client base will evolve and so will your segmentation strategy. The key is to revisit and refine your segmentation approach regularly, ensuring that you’re always aligned with your clients’ needs.
It’s also worth noting that segmentation isn’t just a business strategy – it’s also a personal development process. By understanding who you want to work with and who you don’t, you’ll build a business that not only grows but also aligns with your values and goals.
In conclusion, client segmentation is a powerful tool that can help you deliver more value to your clients, improve your efficiency and grow your financial planning practice. By taking the time to understand your clients better, you can build stronger relationships, reduce business risk and set yourself up for long-term success.
