If you’re relying on demographic and behavioral data to segment your clients you may be missing the mark. Making general assumptions about a group based on general information may steer you in the wrong direction.
For example, a common assumption is that pre-retirement clients want to be more conservative. However, some people in that group want to leave a lasting legacy. Those clients may actually want to take a risk on investments that could lead to an enduring social impact.
If a firm’s message to all pre-retirement clients (and prospects) is about pulling back then the firm may be alienating a certain segment of valuable clients. By adopting a need-based approach, firms can get to the heart of their clients’ motivations.
What is Need-Based Segmentation?
Need-based segmentation is a way of grouping clients who share similar motives, values, and pain points. This is in contrast to other common types of segmentation like demographic segmentation based on age, gender, race, profession, etc, and behavioral segmentation based on how clients interact with a firm’s services or digital platforms.
Essentially, need-based segmentation attempts to get personal and dig deep into the psyche of clients to understand what drives them. A need-based approach goes beyond the “What” and the “How” but answers the question “Why” a client engages with a firm’s advisors or services.
Collecting Need-Based Data
Obtaining need-based data is kind of like the holy grail of segmentation. It can be more difficult to acquire but it doesn’t necessarily have to be elusive even if there isn’t a huge research budget.
Most firms probably already have data collecting practices that can be tweaked to get the right need-based information such as conducting surveys and testimonial interviews. Open-ended questions are helpful when collecting this kind of information as well as offering comparisons that can be rated by the client.
Once the data is collected, segments can be created based on repeating patterns of needs. Need-based segments are best used in conjunction with other types of segmentation like demographic and behavioral.
Benefits of Need-Based Segmentation
Getting the right need-based information may take some effort but the benefits are clear. Resource management becomes more efficient. Time management improves. Services are being targeted and tailored to each client more appropriately. Clients can even be paired with advisors that match their sensibilities. Marketing efforts improve by sending the right message to the right people at the right time.
Need-based data can also identify overlooked needs and opportunities in the industry that a firm can capitalize on. Most importantly clients are getting the attention they need which fosters a sense of loyalty. Loyalty means retention and referrals which is good for everyone’s bottom line.
Adopting a need-based approach to client segmentation can help companies be more specific about serving and attracting clients. Not all clients have the same goals, dreams, fears, and values. By taking a need-based approach, companies can make much more personalized appeals to their clients that speak to their specific needs and foster an environment of loyalty.