All customers are not created equal. As advisors who care about your practice and care about your clients, you may want to believe that they are—and you may want to devote the same amount of time and resources to all of your clients—but to do so will most likely keep you from reaching your full potential. This idea is at the heart of a business strategy called “customer centricity.”
Author Peter Fader introduced customer centricity into the business world with the publication of his book of the same name. For decades, companies and producers have held to a customer-centric business model, but customer centricity takes that strategy to a different level by evaluating and analyzing customers or clients the same way you would analyze an investment.
Evaluating your clients in this way allows you to focus your time and money where it makes the most difference. As the book states, “you can’t be all things to all people, so you need to learn to find out who really matters to your success.” To get there, you first need to identify who are your best clients, and that’s not as simple as rating by their net worth.
Customer Lifetime Value
Customer centricity takes into account the lifetime value of a client. You may recall from our January newsletter, a top advisor we’ve worked with at Beacon who had numerous pro athletes as clients. Financially those athletes were A clients, but they were a drag on the advisor’s overall business because they did not fit his business model; he couldn’t see himself growing a synergistic referral business from these high-net-worth clients long-term.
As you analyze your own clientele, you could create a database based on the following questions and rank each category 1-5 to help you establish your tiers of clients:
- What is their current financial picture?
- What is their potential long-term financial picture? (factoring in salary potential, inheritance or other sources of income the client has discussed)
- What clients do I most enjoy working with?
- What does my ideal client look like, and how closely does this person fit that model?
As you analyze your database, an ideal client—your best client—should begin to emerge. What common traits do the clients ranked highest and lowest share? Do they have an identifiable niche(i.e., widows, federal employees, healthcare professionals?) Could you envision yourself becoming an expert in this niche and serving these clients, and the referrals they would bring, over the coming years and decades?
With your ideal clients clearly identified, you can “begin to increase profits from those best customers, find more like them and avoid over-investing in the rest.” To do so, you will want to implement the three core principles of customer centricity.
1. Focus on Your Best Customers. Some customers, simply put, are more valuable than others. And other customers are—to put it mildly—an absolute drain on your resources (and your patience.) When you strategically focus your energy on your best clients, you will reap the rewards.
2. Commit to Identifying Your Best Customers. You must have an ongoing process in place to discover customer lifetime value. In addition to understanding the traits of these best customers, you will also want to learn what matters most to them to meet and exceed their expectations.
3. A Willingness to Invest in Your Best Customers. It’s not enough to merely identify who your best clients are. You also have to make a commitment to allocate “a disproportionate amount of resources to them.” These clients with provide you with the best return on investment, so you must invest in them.
Remember, contrary to popular belief, the customer is not always right. However, the right customer is always right. To learn more about how you can implement a customer centricity strategy into your practice, contact your wholesaler today!