In my prior life I led a group of consultants and service professionals that served over 1,500 financial institutions throughout the United States as well as the Pacific-rim. We provided software, technology and best practices around small business lending for commercial banks. Out of all the products and services we delivered there were a few things that were lightning-rods for most of our clients. The first was risk-based pricing. The second was credit scoring and the third was client segmentation & contact management. Management vociferously defended their current programs and rejected change. One of the most hard-fought, lively debates was always around client segmentation. When I walked into a bank, no matter where I was in the country, I could almost lip-synch what the leadership would say, "We differentiate ourselves by our service. And most importantly all our clients get our very best service." Let me ask you something......is this any different than your client segmentation strategy?
Let's toggle over to the real world. We treat our clients differently for a variety of reasons. The majority of us have not formalized our approach. My recommendation for all organizations is to develop a formal strategy around client segmentation. Here are the three reasons why:
- Retention of profitable clients
- Growth through effective, target marketing
- Time management and success
Retention of Profitable Clients
Do you know who your most profitable clients are today? They may not be who you think they are. Here is what I mean. My prior experience indicates banks perceive their most valuable clients to be their customers with the largest loans. Our experience and research told us the contrary - the most profitable clients had large deposits (not loans) or they had a healthy balance of loans and deposits. Many times the large-dollar loans were priced thin for competitive reasons and carried no fees so the margins were extra skinny. If you add in the credit risk the loan carried - - - well they were under water so to speak. My guess is that 80% of my prior clients made that false assumption. How about you? Do you really know your most profitable clients? Your most important clients may not be the ones with the big smile or the low handicap!
Effective Target Marketing
Successful business organizations know where the money is and what industry is the most lucrative. How about you? Have you ever created a realistic profile of who your most profitable clients are and why? Creating profiles can be painful, frustrating, enlightening and time consuming. Not understanding profitable client characteristics is one of the biggest contributors to business mediocrity or failure. I can almost guarantee you will find some commonalities around the make-up of your most profitable client relationships. It might be their industry, a point in their business life-cycle, or their appetite for what your organization provides. Understanding these characteristics will allow you to build a prospect model for target marketing.
Time Management and Success
Who are you and your Sales team calling on right now? Who are you spending your most valuable resource (time) on today? I suggest the following from a time management and success vantage point:
- Define who your most valuable clients are from a dollars and cents vantage point.
- Create a realistic profile of what they look like for target marketing purposes. Develop a marketing strategy for that profile.
- All clients deserve respect and good service. With that stated there are some prospects and clients that deserve more time & service than others. It just means that "some of your existing clients" may make great clients for your competitors! Ask yourself and your team if they are spending their time on the best opportunities.
Next month I'll provide specific strategic and tactical approaches for tackling each of the three items noted above.
As always, your feedback and comments are welcome. I can be reached at
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