One of the best ways of driving practice value is through effective segmentation of your clients. There are plenty of examples out there in the marketplace that some of the best performing advice businesses are highly specialised and undertake strict segmentation of the clients they service.
Segmentation and specialisation ideally go hand-in-hand. Well-segmented businesses are typically more specialised in both their nature and the service or product they provide. There are a number of other professions that clearly demonstrate how effective segmentation can lead to improved results, the most obvious of which lies in the world of professional sport.
In the most recent London Olympics, for example, the specialist sprinter Husain Bolt performed nearly 10 per cent better than the generalist decathlete in the same 100 metre sprint. In the discus event the improvement was even greater with the individual gold medallist performing nearly 40 per cent better than the best decathlete in the same event There is in fact compelling data over many Olympic Games that the specialist consistently outperforms the generalist by on average about 20 per cent.
For advisers, this specialist argument is potentially no different. Specialist advice businesses with well segmented client bases tend to know both their business and their clients better. Such businesses are better able to predict their client’s future needs and, for the owners, they more clearly understand exactly where revenue is coming from and exactly how valuable individual clients are to the practice. As a result, these businesses are not only better positioned to drive greater value for their clients but at the same time are able to create a more valuable business model for themselves.
Segmenting for value
When it comes to segmenting your clients, segmenting by client type should be viewed as the greatest driver of business value. You want to identify like clients who are most likely to have similar needs. This is much more powerful than segmenting by product, which can often be a dangerous strategy because you leave yourself vulnerable to attack from competitors who may be providing other services to your clients that you may have chosen not to deliver
Well segmented businesses will potentially be more specialised and provide niche offerings that lead to greater client engagement due to the more targeted delivery of advice. Not only will the end client be potentially more satisfied with the advice they receive but you will build yourself a potentially more attractive and valuable business.
