In a strategy workshop with a financial planning business recently, I asked a few questions about their target markets:
Q: How many clients do you have on your database now?
A: About 800 with a range of products — mainly super and risk.
Q: What is the average number of products per client?
A: Most of them have one or two products with us.
Q: What would you define as your main target market focus?
A: Corporate super is our main focus and we are actively promoting that to get new clients in the door.
There are three main problems with this scenario:
1. They have defined their target market by product, not client type;
2. The opportunity within their own client base is being ignored; and
3. There is no focus on the client and their needs, just on selling product to new markets.
As the industry is fast moving towards ‘advice’ and ‘fee for service’, with relationships under management (RUM) not funds under management (FUM) becoming the new measure of success, being clear about your target market is more critical than ever.
But how do you work out what your target markets are? This is not easy for many planners as it can be more of an art than a science — but it will pay off in the long run.
Tip 1: Think differently about target markets
Don’t define your target markets by product or FUM. Think about them in terms of age and occupation, stage in life, lifestyle or even buying behaviour (for example, conservative investor) and potential for growth.
The optimal way for most planning practices is to undertake a combination of them all. Get specific — for example, if you were a planner working in the Sydney CBD, a target market of executive professional men working in the CBD earning $150K plus and over 40 years of age might be worth considering.
Tip 2: Focus on your existing client base first
We all know it costs five times as much to acquire a new client than to retain a client. It therefore makes sense to determine the opportunities within your existing client base first.
A good database is essential to do this. It allows you to cut and dice the figures so you can determine where the most profitable clients are.
Again think differently on how to define them. Make sure there are adequate numbers of these types of clients in your database to make them a realistic target market. Also remember that it is just as important to determine which clients you won’t focus on or will consider exiting.
Tip 3: Ask yourself some serious questions
It is important to also ask yourself some questions in order to help finally determine your target markets.
What are my areas of expertise and which types of clients need this?
What types of clients do I relate to best?
Which clients will pay my fees and how do they prefer to pay?
Where am I naturally socialising, networking and building business opportunities?
What types of clients do I enjoy working with?
Which ones don’t I like working with?
What types of clients can I realistically attract?
Are there adequate current clients in my database?
Are new target markets accessible?
Who are my competitors focusing on? Can I realistically compete with them?
Tip 4: Get all your staff focused
Once you have done some deep analysis and thinking on the above, get your team engaged and together plot your target markets on a dartboard. The centre of the dartboard is the market you will focus on first, the second ring the second market and so on. Don’t forget to plot those markets that you currently have in your database that you won’t focus on — put them outside the dartboard. Once you have this, you can then develop a targeted marketing plan and a calendar of activities that will help keep the whole team focused.
Now let’s get back to the planner mentioned earlier. After going through the tips outlined and a marketing planning session, they were able to redefine their target markets and set some objectives:
1. To retain 150 existing pre-retirees (aged 50-65) living in the local area already holding a minimum super investment of $50K.
2. To retain 10 existing and acquire 10 established small businesses (with 20+ employees) within a radius of 100 kilometres.
3. To acquire 10 new professional services small business clients, for example, accountants, lawyers, or architects operating in the local area.
Being clear about your target markets helps focus your marketing efforts and resources and turns sales activities into a highly targeted approach. You can then develop a clear value proposition for your business and build a simple, practical and effective marketing plan that achieves results.
Carolyn Stafford is strategic director of Highway 101 Financial, an advertising agency specialising in financial services and the planning industry.
