Most advisers would like to dramatically increase the number of ‘A’ clients in their business. But be prepared…you might not like what you have to do.
A recent paper by Frederick F Reicheld in theHarvard Business Reviewquestions the usefulness and value of client surveys, in particular, the link between survey responses and company growth.
An interesting assertion was that customer loyalty was an important driver for growth. That in itself sounds quite logical. Their definition of customer loyalty, however, was not simply about repeat purchases. The thinking was repeat purchasers “may not necessarily be loyal to that company, but may instead be trapped by inertia, indifference or exit barriers erected by the company or by circumstance”.
The growth indicator was not aligned to clients staying with the service, but with clients buying more over time and referring new clients.
Ask yourself the question — how many of your clients would refer your business?
But really you should ask your clients the question. This does not mean ask them for a referral necessarily, it means finding out what your clients really think of your service and if they want to refer you.
I say, ‘you may not like this’ because our research on Australian and US advisers tells us less than one-third of all advisory businesses formally ask their clients what they think of the services they are receiving.
What about those who do?
Some good news from the BusinessHealth CATScan client survey to start with.
Of more than 10,000 clients surveyed, 93 per cent expect to have an ongoing relationship with their adviser, while 87 per cent of client responses indicate they would refer their financial adviser. Fifty-six per cent of client responses indicate they have referred their financial adviser.
What about the bad news?
How many advisers can put their hand on their heart and say they actually knew with certainty how many clients actually did refer them last year?
The answer to this question is not very positive. Many advisers do not physically track where their new clients come from. Many of those who do track this only record that it was a ‘client referral’, not if the client was an ‘A’ or ‘B’ class client.
Why don’t clients refer?
1. They think you are too busy.
Unless your clients are educated to the contrary, many will see how busy you are and assume you do not need any new work. In fact, they may think they are doing you a favour by not referring more clients and burdening you even further.
2. They don’t know how to refer.
Many clients think they are already doing the right thing and referring business to you.
One of your clients telling a friend at a dinner party “my adviser is really great, you should go and see him” is unlikely to be of real benefit.
Successful advisers are now training their clients on how to give referrals. Business cards, phone numbers, web sites, and even what to say, are some of the things that can help you realise the benefit of your good work.
3. They don’t know who to refer.
Clients don’t want to embarrass either themselves, their adviser or their friends by introducing the wrong kind of person. Rather than take the bet, they simply do nothing.
4. They don’t like the service enough to refer.
Many clients can be apathetic and remain a client, even though they are not happy with the service. Again, referrals are a true test of a successful business.
And why don’t advisers want to know what their clients think?
Four myths of feedback
1. My reality is reality.
This, as we all know, is not necessarily the case. In business, as in our personal lives, what we think is happening is not what our family, friends or even our customers may think.
2. Negative feedback is bad.
If all we got was good feedback, how could we improve our service? Constructive criticism is where we make improvements.
3. The problem has nothing to do with me.
It’s your business. It has everything to do with you.
4. Mistakes are crimes to be covered up or punished.
For a mistake to be fixed it has to be recognised. For mistakes to be recognised your staff must have the confidence to admit to the mistake and do something to ensure it does not happen again. If there is a culture of fear, the mistakes will be covered up and will no doubt happen again.
Communication seems to be a critical component in getting clients to want to refer your business. Where advisers scored highly in the communication section of the CATScan, almost 95 per cent of their clients indicated they would be willing to refer their adviser to someone they knew.
The research clearly shows that the clients of the most effective communicators have actually referred their adviser over 30 per cent more often than the clients of the least effective communicators.
Based on these findings, you should review the effectiveness of your client communication programs — there is indeed a very real business benefit in getting this right.
How to increase the odds of getting referrals
1. Communicate better with your clients.
n Do it regularly
n Use different methods
n Communicate in plain English
n Make it personalised to the client
n Be different — don’t just offer ‘the same’ as everybody else
2. Make sure your clients know you want referrals.
n Thank your clients for referrals in your newsletters
n Include ‘referrals’ on your review meeting agenda
3. Make sure your clients know who you want to be referred to.
n Understand what your target market(s) are
n Ask your ‘A’ clients — and ask for ‘people like them’
4. Make sure your clients know how they should refer.
n Tell your clients if they want to refer to tell the prospect you will call them
n Make sure you keep your clients (who did refer) informed about the progress and outcome of the referral
5. Ask your clients what they really think.
n Use a formal method that suits your business and client base.
Remember, the only clients whose opinions matter are your clients. Don’t take our word for it — ask your clients.
Tony Stephens is a partner with Business Health.
www.businesshealth.com.au
