Client segmentation: a four-step process

By segmenting your clients into a maximum of three levels (often known as “A,” “B” and “C” clients), you can specify how much value you want to provide to each group and still have time to grow your business.

Organizing your book in this way helps ensure you are giving the appropriate level of service to each of your clients.

Segmenting your clients is a four-step process that is as much about you as it is about your clients:

Step 1: Ask yourself some “big picture” questions
Start by identifying some important details about yourself and your client base. Who are your favourite clients, and what are their most notable characteristics? At this stage, you’re not looking at assets or revenue. You simply want to understand why you enjoy working with certain people.

Do you and your favourite clients have similar personalities that allow you to get along? Do these clients fit into a niche, such as “young families” or “business owners,” that you enjoy working with? Are they cooperative and receptive to your recommendations?

Involve your team members in this discovery process, especially if they work closely with your clients. Your staff may see a side of your clients that is not always evident to you.

For example, you might enjoy working with Mrs. Smith because she pays attention during review meetings, asks relevant questions and doesn’t take up too much of your time. However, you may be unaware that Mrs. Smith calls your office frequently with frivolous requests and occupies much of your assistant’s time.

Step 2: Make a list of clients
Print out a document that includes every client and, in order from most to least, the amount of assets each client has invested through your practice and the revenue that client generates.

Step 3: Prioritize your categories
Create a list of the qualities you feel your clients should have. Start off with the more personal elements that you discovered through your “big picture” questions, Smyth says. Then, include assets, referrals, growth potential and recurring revenue.

Designate which qualities are most important and how many of those traits a client would have to possess in order to fit a certain level.

For example, you might list 15 characteristics. You decide that your “A” level clients will possess at least 12 of those traits; your “B” clients will have eight; and your “C” clients would have five or fewer.

While revenue will play a part in a client’s position in this process, don’t make it the ultimate determining factor.

If money were your only criterion, Smyth says, “you could still have people in the top tier that you don’t like working with, and they’re not necessarily your top clients.”

Step 4: Review regularly
“If you’re growing and you have new clients every year,” Smyth says, “you need to figure out where everyone goes and whether you can maintain service.”

Make sure each client is still in the appropriate category to ensure everyone is receiving the level of service that is right for them.

Reviewing your segments periodically is a good way to make sure that one level does not contain a disproportionally large number of clients. It also allows you to better understand where you are spending money and other resources.

This is the first part in a two-part series on client segmentation. Next: Specifying service levels for each segment.