Marketing segments or segmentation – you might have heard of the terms and you might have even tried to segment your own client base. But what is it and how can it better to benefit you and your advice business?
What is marketing segmentation?
Marketing segmentation is the process of breaking down a market or a client base into smaller groups to get a greater understanding of your markets or clients.
The mistakes some will make
Some advisers simply break down their client base into categories like ‘bronze, silver, gold and platinum’ and they only use funds under advice or fees to determine the segments. While this approach does show you how your business looks from a fee or fund perspective, there are several problems with this approach.
It doesn’t tell you the full story about:
- What similar clients look like
- The kind of advice and services and if they are being delivered to similar clients.
- How to get better marketing outcomes for your business.
How to do it better
Instead of focusing on your fees or FUA, broaden what you look at. Typically, advice clients have similar needs at similar ages. Some useful segment variables include:
- Age
- Income
- Gender
- Marital Status
- Children
- Employment category (employee or business owner)
- Location
You might find your business has a lot of wealth accumulators or perhaps a lot of retirees.
Why is this useful?
There are many reasons market segmentation is useful to an advice business.
- You would expect that people who have similar needs, should receive a similar advice offer, service offer and fee structure. This ultimately impacts your client value proposition and your profitability.
- With a stronger focus on a specific segment, you can create stronger marketing messages and attract the right kind of client segment(s) you’re seeking.
- By knowing your segments really well, you can deliver advice and service better than your competitors. You might also develop and be the expert in more niche markets.
- You will be more focused and can get better response rates and lower client acquisition costs.
- It stops clients ever learning that you think they’re a bronze client because you no longer segment that way.
So how well do you segment your clients?
Is it all about what you get from your clients? Or is it time to extend your thinking and create some segment variables to help you drive your advice business success?
