25 Apr Market Segments: How Can Financial Planners Choose One?
Most financial planners know that they should be targeting a specific audience with their marketing, rather than everybody. But how does this work? Which audience should you choose?
The process of dividing a larger audience into smaller, more meaningful groups is called “segmentation”, and it’s a vital pillar within any successful financial marketing strategy.
To be truly meaningful, your segment(s) should have, at minimum, the following traits:
- Easy to measure
- They should hold out a high-profit potential
- Easy to identify
- Distinct from other groups (non-superficial differences)
Ways to segment your audience
There is no set, universal way for financial planners to divide a larger audience into segments. However, here are some popular approaches which you might want to consider:
- Specific demographics (e.g. your audience’s gender or age).
- Geographic features (e.g. local, regional or national).
- Economic (e.g. job title, disposable income and wealth).
- Behaviour (e.g. attitudes towards financial planners and financial advice, buying behaviour).
- Psychographic profile (e.g. social class, what their typical day looks like, lifestyle).
- Desires & needs (i.e. what problems are they wanting to solve, and how severe is the need?).
You might be tempted to just choose one of the categories above, and base your target segment on that. However, it’s usually far more effective to combine various categories to piece together a distinct “buyer persona”, which you can then target with your marketing and messaging.
As an example, here is a buyer persona called “John” which draws on different categories from above:
- Name: John Smith
- Demographics: male and aged 55-65
- Geographics: Lives in Essex
- Economic: Company director; income of £60,000-£80,000 pa; a pension of £250,000+
- Behaviour: Like to educate himself before making big buying decisions (e.g. online research), such as committing to a financial planner.
- Psychographic features: Spends most of his day on the phone with clients, stakeholders and suppliers, and answering emails. Middle-upper class. Semi-luxurious lifestyle – has a nice car and house. Goes at least once a year on long-haul holidays with family.
- Desires & needs: Is approaching retirement but does not have the knowledge, time or confidence to sort through is complex finances alone. Needs an experienced helping hand. Is looking for peace of mind, reassurance and clarity over his pension, mortgage and business succession.
The segmentation process
Segmentation is not a quick process and it should not be rushed by financial planners who are keen to simply crack on with their marketing. Laying this essential foundation is crucial for the long-term success of your financial marketing strategy, so it’s important that you take time to get it right.
A good place to start is to look at your existing client base and analyse their defining characteristics. Are there any common traits which can give you an idea of how to group them together, for segmentation purposes? You might find that you have one main segment, or you could have two or three.
Don’t stop there, however. Take a look at some other segments where you do not currently possess clients (e.g. doctors or lawyers) and ask yourself why this is the case. Is this deliberate or unintentional? This consideration will be especially important if you are thinking about expanding your marketing and client base to focus on a new segment.
Here are five steps which you might find helpful as you start your own segmentation process:
- Define your market and use the best data you have to estimate its size, and how it operates.
- Detail the items and services which are bought in your industry including where, how and when.
- Specify who buys them according to categories such as those defined above,
- Note why they purchase these items or services (e.g. benefits, consumer needs etc.).
- Look around for similar segments or groups of people who have similar pain points.
Tips for segmentation success
How can you ensure that your efforts to segment your audience into meaningful groups are not wasted? Try these useful tips below:
- Determine what your specific internal business strengths are, and focus your attention on these. If you are unsure what these are, then a good place to start is to ask your clients!
- Find out what the needs, wants and pain points of your prospects and clients are and try to discern how your wider market tends to group/segment itself.
- Don’t try to make everyone happy or serve all of their needs and wants. Prioritise which segments you are going to focus on.
- Make use of relevant, up-to-date information to base your decisions on – but don’t rely on data too much. Data can only get you so far.
- Your prospects and clients might have needs and wants which they are presently not aware of. Try and figure out what these could be, as it presents a huge opportunity to differentiate your brand from competitors in your audience’s minds.
This will hopefully get your financial planning business more focused with its marketing, targeting more specific groups of potential clients with your messaging rather than taking a “scattergun” approach.
A hugely important step throughout all of this, of course, is to determine why your target market buys your specific financial services. Think about it – people aren’t really buying “tax advice” from you. They’re buying clarity, peace of mind and confidence.
They’re buying reassurance and alleviation from financial anxiety. In other words, they buy because you’re solving a problem – not because you’re selling something.
Once you have an idea of the problems your service is solving, it can often open up new ideas for product/service innovation. If nothing else, it will help you better articulate your benefit/value proposition to clients and potential clients, thereby honing your marketing messaging.
After you have ascertained the “why” because your segment’s buying decisions, you can then focus your attention on how their buying journey tends to unfold. Here, you can map out this process using a tailored “buyer’s journey” to outline the different stages your customer travels through when they buy from you (e.g. AIDA – Awareness, Interest, Desire, Action).