What type of clients do you relate to?

Identifying and making the transition to a chosen target market is a confronting experience, principally because it requires the admission that business could be better.

While the end result of the process may be nirvana in terms of business efficiency and productivity, the initial stimulus for the quest is either a dissatisfaction with the current state of play or the ambition to grow the business.

According to Perpetual Personal Financial Services group executive Rohan Mead, those businesses that are looking to work through the business strategy and marketing issues involved in a discussion on target markets, are not new business ventures. Those companies that take on this sort of analysis have usually been around for quite some time and have come to the realisation that there is a better way to operate.

“It is people who have had some experience in the industry and have made some success and are now confronted by career choices,” he says.

While the discussion of target markets is sometimes put down to commonsense, it is one of those strategies that can sound easier in theory than perhaps it is in reality to implement well.

“A lot of it is commonsense, but it’s also about time management and objectivity. While financial planners have as much commonsense as any group of people, sometimes it’s hard to get the other two elements in a busy practice,” Mead says.

The first part of the process in identifying target markets requires some serious head scratching by the planners of a business.

Mead has identified seven questions (see below) planners need to consider to help them paint profiles of their clients.

Industry marketing consultant Stewart Paul says once questions such as these have been answered, a practice needs to decide whether it is already operating in its target market, but not as efficiently as it could, or in fact it needs to make a transition to a new business model that caters to the newly identified target market.

“Often planners are in the right target market, they just need to be more efficient,” he says.

According to Paul, one of the simplest ways of making a business more cost-effective is to increase fees.

He says he often finds in offering advice to planning offices and large financial institutions that an increase in fees does not create any problems for the business. This is especially so if the fee increase is communicated to clients in a way that they can see the extra benefits they will be getting from paying the higher fee.

However, if a business decides it needs to undergo a complete transition, accessing the resources to do this is the key.

“Often the planners know what to do, but they often don’t have the resources,” Paul says.

If a planner is aligned with a major dealer group, the marketing department of that parent company may be able to offer some advice because it is in its best interests to make the business as profitable as possible.

Further, Paul suggests that fund managers may also be keen to help in devising a strategy to grow the business, particularly if a planning business writes a lot of business for them. Again, it would be mutually beneficial for the two businesses to get together.

“There is a whole raft of things planners need to do to change the practice around, but a lot of it is not about having the tools. It is about building relationships with centres of influence,” he says.

This means that if a planning office decides its target market is investors that are particularly concerned with tax-effective strategies, then aligning itself with accounting firms and solicitors may be helpful.

“Planners can make most of the transition happen, focusing on their clients, prospects and centres of influence,” he says.

If a planning office decides it requires some transition strategy to move to its desired target market, marketing and promotional material will be a key, so that all brochures, newsletters and referral forms are streamlined to reflect the new focus.

Customer Acquisition and Retention Management (CARM) managing director Matthew Lock says communicating with the clients of the planning business is fundamental to the whole process of identifying the business’ clients and satisfying their needs.

He says putting in a strategy that delivers systematic and ongoing dialogue with clients is essential, and using this as a starting point, will in turn highlight what are the themes of its client base.

Over the next year, CARM will be making partial roll outs every quarter of a Web-based system, which aims to provide process assistance to planners. This will include a research module as well as data collection, and will enable planners to focus on feeding new funds inflow into their business.

“There has to be a system and process that planners can delegate to keep open the dialogue. Planners can’t rely on themselves to do this,” Lock says.

He estimates that the cost of a communication strategy with clients will involve some consulting time with the research house to devise a survey, purchasing the marketing resource tools designed to capture and report on the data, employee training, instrument design for software and the training of administration people to be familiar with the process.

Lock estimates survey design may cost anywhere between $10,000 to $20,000 for two to three surveys, and these can be reused every quarter to survey at least one-third of a planning business’ client base.

“If businesses do these surveys one off, they are missing the whole point of systematic and ongoing dialogue with clients,” he says.