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How to Define Value Segments in Your Client Base
Defining value segments in your client base lets you better serve your clients, and identify opportunities for business growth.
I often get asked about good ways to define who your best clients are. The answer to this question isn’t black and white and will depend on your business’s target market. Generally, when we think about our best or preferred clients, we are talking about the ones who we enjoy working with, help us keep a sustainable business, and work closely with us to develop new features.
Once you separate and identify your best customers, it’s easier to find more of them.
The process of separating your target market into different groups is known as segmentation. Segmenting your audiences makes it far easier to create targeted messaging for your ideal clients based on their demographics and behaviour.
Today, I’m looking at why you should consider segmenting your client base and the steps you need to take to identify the value segments within your accounting business.
Why you should segment your client base
Not all clients are created equal. For example, as your accounting firm has grown, you have likely taken on different types of clients. Some are higher paying than others that are, therefore, more valuable than the smaller clients who may have been with you since the start due to loyalty.
These different client groups will have different levels of needs. You will find that one segment offers more potential for business growth over the others.
By segmenting your clients, you can offer a greater level of personalisation of services. For example, you wouldn’t approach a business with a £10 million turnover and 1,000 employees the same way as a small business with five employees. Even if the basic services you offer both companies are the same, they would have a different view of what they are looking for and why they would hire one accounting firm over another.
Targeting your messaging to the different segments is key to winning more clients that create value for your accounting business. Let’s look at some of the key benefits of segmenting your client base.
Understand your clients' needs better
When you start drilling down and segmenting your clients, you’ll have a better view of the following:
- Their needs
- How they operate
- Why they need your services
- How valuable they are to your business model
Not all clients will have the same interests, purchasing power or need for your services. Segmentation allows you to understand the needs and desires of a like-minded group of individuals.
So, instead of targeting the broader market with the same messaging, segmentation allows you to be more strategic and refined in your approach. By getting to know your customer’s behaviours, you can develop marketing messages with a specific segment in mind, increasing your chances of winning new high-value clients while being more efficient.
Provide more personalised services
Mass marketing may have worked well to get your business off the ground. However, working under the presumption that every business is interested in all your services is time-consuming and not an efficient use of time or money.
Segmentation allows you to move away from a one-size-fits-all approach to contacting prospective clients. Instead, it lets you personalise your messaging to different segments and create more relevant communications via the channels that your ideal client is most likely to use. The goal of personalisation is simple: if your content is relevant, your conversion rate is likely to be higher.
Generate greater profit
Value segmentation can give you a competitive edge. It allows you to identify your most profitable clients to create content tailored to meet their needs and prospective businesses that share the same traits as your high-value customers. You instantly create a higher value proposition for them, increasing your odds of winning them over and their business.
4 steps for defining value segments
Now we know that segmenting can be seriously beneficial for your accountancy business, let’s look at the basics of defining value segments in your business:
1. Understand your data
The first step in defining your value segments is to look at the data you hold for your existing client base. Breaking down your clients into groups based on various demographics, such as SIC code, business size, turnover, number of employees, and average fees billed.
This process will help you create segments and identify customers already within your portfolio that share similar traits. Using this information, you can identify the segments that bring the greatest value to your firm.
For example, you could start by segmenting your client base by SIC code or industry, then for each sector, calculate your gross fees, net fees, average hours and number of clients. By building up this information, you can create charts and graphs that visually show which industries you spend the most time on and how much value each segment brings to your business. Analysing your data will also show you the unprofitable clients for your business model, allowing you to avoid them in the future.
2. Client segmentation criteria
I discussed some of the segmentation criteria you could use to identify your high-value customers above. I recommend segmenting your clients based on the following criteria as a starting point. Other measures can be added later depending on how targeted you want to be when marketing your services to new prospects:
- Industry, using the SIC code or broader industry type: For example, the fitness industry, retail customers, tradespeople or legal professionals
- Turnover last year and projected turnover next year: Businesses within different turnover brackets will likely have different accountancy service needs
- Budget: Knowing your customers’ budget for your services can help you group them further and identify those customers who create the most value
- Service level expectations: It’s likely different companies need you for various reasons at different intervals, and you can split your segments by taking this into account. For example, low-touch customers that only require your services once a year, and high-touch customers that need you to take care of their weekly bookkeeping and monthly reporting. You can offer embedded services to the latter, such as a fractional CFO or part-time credit controller
3. Create personas for each segment and assign values
Creating personas for each segment means creating a semi-fictional profile for your ideal, high-value customer. The persona should describe who they are, what their day is like, what challenges they are likely to face, and how they make decisions. Thinking about these points will allow you to understand your customers and their needs better and help you focus your prospecting efforts to connect with your target audience.
By demonstrating to your potential customers that you can address their business problems, they will be more open to exploring what you offer.
4. Create workflows for each segment
For each segment, you’ll be able to create content demonstrating that you understand their business accountancy needs and how you’ll help them meet their financial goals or keep their books in check.
As I’ve mentioned, each client type will need a different level of service for you. Using practice management software, like Pixie, you can create custom workflows for each segment. This cuts down on administrative work and lets you consistently deliver a high level of service to all clients. Plus, for high-touch clients that require repetitive work, you can use templates and automate many of your tasks while retaining quality.
How Pixie can help
Segmenting your client base will allow you to see which customer types create the most value in your business. The segmentation process will give you all the information you need to develop targeted and meaningful content that shows prospective clients that you are offering unparalleled service that truly meets their individual needs.
If you are looking to segment your clients, look no further than Pixie’s practice management software. With easy-to-use reporting tools and the ability to track your client conversations, you can quickly identify which customers use which products and services. It's now easier than ever before to group your customers based on a variety of parameters.