Segmentation: Why not have everyone as “A” Clients?
Advice Processes & Best Practice Advice & Practice Management & Professional Services

Segmentation: Why not have everyone as "A" Clients?

May 15, 2023

by Tony Vidler  CFP logo   CLU logo  ChFC logo

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Segmentation of clients in your database is sensible, and some sort of labelling to differentiate them is necessary.

The idea behind segmenting clients into different categories is  to introduce efficiency into a practice while recognising that not all clients are of equal commercial value to the firm.  It is also a way of recognising that not all clients provide the same opportunity, or potential, to grow with the firm and being able to identify those who are future growth, though not perhaps highest current value, and deliver different service levels accordingly.

The concept is sound but the execution often risks damaging client relationships. Think about it from a clients’ perspective…and remember we live in a world where clients are entitled to see their files, and our notes…so our labelling of clients is potentially subject to the scrutiny of the clients themselves.

Who wants be known as a “C” client?

Nobody….

Do they feel better if you called them a “Silver” client?  Not especially…

So why not have all customers called “A” level clients?

Why would we want them to see that we rank them as pretty low value to our firm?  Imagine if the lowest value client in the firm was still labelled an “A” – how would they feel if (or when!) they saw their file?  A heck of a lot better than the “C” client I imagine.

Consider using all A’s for client categories – and you can still segment and differentiate service levels. It could look like this:

  • AAAA – the very best clients in terms of current business and loyalty/future business/referrals
  • AAA – very good clients, with good/high levels of their business with you, and growth potential
  • AA – good clients with a range of products, but future growth uncertain – may go up or down a category.
  • A – poor quality/low volume clients, time intensive, low/no growth or loyalty.  Essentially the transactional customers, rather than clients.  Whether the firm should keep them or not is another article…

I would consider introducing a fifth category which is absolutely not an “A”, and that is the category of clients where the relationship has ceased but where we wish to keep records.  The Dead Files….scan everything and store it electronically in the CRM, and then archive any paper versions.  Just in case.

  • D – Dead Files.  These are ex-clients who have cancelled all business with you, or who are deceased, or who have been fired by the firm.

It is not a massive shift to re-think the client segmentation labelling, and it can make a huge difference to how the clients perceive their relationship with the firm, and the publicity they give your firm.  It just might also have an impact on how the staff of the practice perceive the value of clients too – perhaps no more “oh my god it is a C client wanting some time”…after all, everyone who is a client of the firm deserves to feel like, and be treated like, they are in fact an “A client”.

Labelling does matter to clients, even if it is just a trivial thing to you.

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