07 Nov How to Select a Target Market
In our experience of speaking with financial advisers, it is surprising how many do not seem to have a clearly-defined target market. Yet dividing your market into discernible, manageable segments is vitally important.
First of all, most IFAs and financial planners are small businesses. This means you tend to have limited money, resources and staff to engage in marketing programmes. As a result, for your marketing to be effective it needs to focus on people who have the highest probability of becoming profitable clients.
Secondly, having a defined target market gives your financial marketing more momentum. After all, word of mouth and recommendations spread much more easily amongst groups of people who are like-minded.
Who are you selling to?
When we ask financial planners this question, they often look at us as though this should be obvious. “Retired people, of course” is a common response. However, this doesn’t really go far enough.
After all, what kind of retired people are you talking about? Where do they live? What problems do they face? How many assets do they have to invest? Do they have a common background (e.g. employment history)? And so on.
Defining your market segment is crucial. Failing to do so can lead to sloppy, inefficient financial marketing down the line. For instance, some IFAs respond to our question with the answer: “business owners”. Yet there millions of businesses in the UK! Even the largest financial planning firms are not going to get close to speaking with all of them in one year, let alone closing business with all of them.
A more appropriate answer to the question “who are you selling to?” would be “a certain type of business owner.” This will be a business owner who understands what it is that your business does. These people will deeply value and appreciate your service offering, and will pay money to get it.
A similar dynamic occurs if your financial planning business is targeting other segments. For instance, perhaps you are mainly looking to target British expatriates, or dental professionals. Whoever they are, you do not want people who do not understand your business, do not value your service or who are unwilling to pay for it.
So, what makes these kinds of people so unique, and how do you choose a good target market?
#1 Find key Characteristics
If you already have a strong client base as a financial adviser, ask yourself: “What are the key traits of clients and prospects who love my business?”
The answers can be very revealing. For instance, one of our clients is an investment firm. They work with angel investors, providing them with investment opportunities in the form of startup business owners who are seeking funding. One of the reasons their angel clients love them is because they provide regular, “high-risk-high-reward” investments which are tremendously exciting. This appeals to a particular kind of person: one with lots of money to invest, often young and entrepreneurial, and who is willing to take a fair level of investment risk.
This kind of client base is very different from one of our financial adviser clients, who primarily provide pension advice to people in the Midlands who are approaching retirement. Typically, these people want a qualified, experienced professional to look after their wealth as they enter “life after work”. Naturally, many of their clients are looking for financial “security” rather than “ROI opportunities”. The reason these particular people love our client is because they provide exactly that.
The point we are driving at is this. Even within the worlds of investment management and financial advice, there are different types of people who will resonate with different business offerings. As a result, it’s vital that you really grapple with your brand. What is it about it that would appeal to particular groups of people within the wider market?
#2 Drill Down on Differentiators
What makes your financial planning firm different from others?
The fact is, we have talked with hundreds of financial advisers over the years to discuss their various projects and marketing campaigns. Many of them look and sound very similar. If this is the case from our perspective (as experienced financial services designers), then the distinctions are likely even more blurred for a potential financial adviser client who is trying to sift through the different firms.
There are lots of IFAs for potential clients to choose from, so what really makes your firm different? For instance, is your brand and website of a noticeably higher quality than your competitors? Are you a Chartered Financial Planner, whilst the majority of your rivals are not? Do you have specialist expertise in areas that set you apart, such as final salary pension transfers? Do you have experience and knowledge in a particularly niche and valuable area, such as expatriate financial advice?
#3 Determine Viability
It is important to ask: “Can I really meet my sales goals by going after this target segment?” Some segments can sound like a great idea, but might not offer enough people within that segment to grow your client base at a sustainable rate. On the other hand, you want to try and avoid a segment which is so large that you cannot really target it.
For instance, one mortgage broker approached us and asked if they should be targeting Chinese residents in the UK, who were looking to purchase a property, remortgage of pursue equity release. On the surface, this seemed like a good idea. However, there was a difficult balance to strike. On the one hand, there were plenty of British Chinese people for her to target – over 250,000 across the UK. This was too many people for a one-woman band to manage! On the other hand, however, targeting British Chinese people in specific cities made her segment too small (e.g. 6000 in Manchester, for instance – one of the biggest Chinese populations in the UK). You may have to work through similar conundrums yourself, when determining your own segment.