One of the things you might hear in the accounting profession is a call to categorise or segment your clients. Typically this involves finding ways to categorise them as A, B, C or D (or something similar) and then focusing on servicing better the A’s and attracting more of them. Makes sense right? Maybe.
What I have observed in some firms is a categorisation of clients into A, B, C and D or some variation thereof, but then no real differentiation between them in terms of how they are serviced. If you are not going to differentiate between the segments what is the point of segmenting in the first place? Surely there is none. Having said that I do see one benefit of going through the segmentation process. It forces you to understand your client base better. In my experience sometimes accountants don’t have a great understanding of the sorts of clients they have and can be surprised when they do some analysis.
What then are the criteria that you might apply in categorising or segmenting your clients?
- Fees charged.
This is the default in most firms and certainly important but I don’t think it is the whole story.
- Volume and quality of referrals received from the client previously or potentially
A client could be giving you a high volume of referrals but if they are all for I tax returns and that is not what you want then the referrals are of limited value to you. Or they might be giving you lots of referrals to A or B clients which is what you want. A client might also introduce you to other people of interest to you for alliances or joint ventures or to be suppliers to you.
- Do we like them?
Life’s too short to work with people we don’t like.
- Do they take our advice and value our opinion?
It can be very frustrating to provide advice only to find it has been ignored. Clients may not hang on your every word but on the whole you expect them to listen.
- Are they willing and able to pay a fair fee for the work we do for them?
If you are constantly battling with a client to get a fair fee, perhaps you would be better letting them go and replacing them with someone who appreciates your work more.
- Do we provide services to them that we like providing or are strategic in some way?
For example you might be providing monthly performance monitoring meetings with your business client and you just love doing them. Tick! Or perhaps you have only one or two clients where you currently provide a new service which you believe is going to be important to you and the work you do with those existing clients is an important part of developing your offer in that area. Again, you would probably value these clients pretty highly.
So let’s say you have completed a process of deciding what is important to you and categorised your clients as follows:
20% are A grade clients providing 50% of your revenue
40% are B grade clients providing 30% of your revenue
30% are C grade clients providing 10% of your revenue
10% are D grade clients providing 10% of your revenue
What would you do differently? Here are some suggestions:
- Make sure you and your team clearly understand who those A clients are and agree on how they will prioritised for service and any “extras” they may receive. What can you do to deepen and broaden your relationship with them and let them know who much you care about them?
- Review the D clients with a view to moving them on. This will create space to add more better quality clients. The last thing you want to do is ask them for referrals because their friends and contacts are D’s too!
- Look at your B and C clients and consider if there are opportunities to be shifting them up. For example a client might become an A if you are providing more services to them and it might just be that there are opportunities to do that which you have not yet explored. In most firms this is a big opportunity. With 30% of clients providing only 10% of the revenue it would seem the Cs are not great clients. Shift them up or out perhaps? In some instances you may even be able to sell them!
As an accounting firm coach and consultant one question I often ask is can we learn anything from other industries or professions that might help us? If we look to other industries for examples of categorisation or segmenting of clients one obvious one is the airlines.
Through their frequent flyer programs we are each categorised as not a member, bronze, silver, gold or platinum. This is a very public categorisation which is designed to build loyalty and encourage people to fly more to enjoy the “benefits” of higher status. I think it is fair to say that the airlines have a more transactional relationship with their clients than accountants do with theirs, although they try to broaden and deepen that relationship through their loyalty programs and by offering a plethora of other products.
One of the keys for the airlines is that your status is displayed. You have special cards and bag tags each of a different colour, different queues for boarding your flight, and of course restricted access to lounges for different statuses. All of these are very public displays of how important you are to the airline. This begs the question, should an accounting firm tell each client what their “status” is? It works for the airlines so why not for accountants?
I believe one way this can work very well for accountants is where you have different “packages” you promote for clients. We are seeing an increase in the number of firms who do this and actively promote such packages on their websites. A client who signs up for a “gold” package can see on the website that they will receive more services and support than someone who signs up for a “silver” or “bronze” package.
If you do not offer packages in this way is there still merit in telling each client what segment they are in? One school of thought would be that if you do then you are managing each client’s expectations in terms your interaction with them. Perhaps some clients would say something like “what do I need to do to become an A client for you?” Alternatively a client might say “I think I’ll go to another firm where I will be more valued”. Hmm, this could be good news if the client is a D but perhaps not if they are a B.
I can see that telling your A clients they are A’s could work but probably not the B, C and D clients. I think the real value is in you doing the analysis, understanding the make up of your client base better and taking some of the sorts of actions I outlined above, such as making sure you really are caring for your As and looking at moving on the Ds. It seems to me that in the perfect firm all your clients will be As.
My view is that the goal for an accountant will be to provide services you like providing, to clients you like, for a fee you like. What’s not to like?!