It is widely accepted that firms in the strongest place before this crisis that continue to support their clients during this time will be best placed to get through this, writes Tim Sargisson, who says the important message to keep in touch with clients has been a constant theme during the Covid-19 crisis...
Clearly the message of keeping in touch with clients is still to get through to some advisers in our profession. Research consultancy Boring Money polled 316 of its readers in April and found one-in-four clients have not heard from their financial adviser during the virus crisis. Keeping in touch with clients is critical to your success as a trusted adviser.
According to Marketing Metrics, the success rate of selling to an existing customer is 60-70%, while the success rate of selling to a new customer is only 5-20%. Plus, the 80:20 rule tells us that 20% of your clients will be loyal and contribute 80% to your sales and profits. A 5% increase in customer retention can translate to a 25-50% jump in profits.
However, too often the trend with financial advisers is to invest in customer acquisition rather than invest in customer retention. Customer referrals and client mailing lists still dominate the thinking of many advisers. Yet it is considerably cheaper - six to seven times cheaper, in fact - to secure a £1 of additional revenue from an existing customer, compared to £1 of additional revenue from a new customer.
The difference between companies that grow and those that do not is customer retention. The need to keep in constant contact with clients is reinforced by the simple fact that retaining loyal customers is critical to growing your business.
The more customers that you can keep and continue to help achieve their financial goals then the more likely you are to achieve your business goals. Clients will stay loyal to you if they believe you care.
Two-thirds (68%) of customers leave a firm precisely because they believe the people there don't care. This is comparable to 14% who leave because they are dissatisfied with the service and just 9% who are persuaded to move to a competitor.
Milton Friedman's philosophy, "the social responsibility of business is to increase its profits", still holds true and for a company to make money it must have a product and/or service for which people will trade their money. Customers who engage generate more business and more revenue. If a firm is truly customer centric and conforms to everything the FCA expects to see from a well-run regulated business.
There is no doubt that every business needs new customers. Yet, currently the easiest and most predictable source of new revenue is right under your nose: it comes from the existing clients who already know you and trust you. Marketing specialist Toma Kulbytė highlights four reasons why advisers need to work on customer retention:
- Better conversion rates
Existing customers trust you, so unless they had a disappointing experience over the last few weeks, they will continue to trust you. As well as trust, you've inspired confidence through your service, and you know something about them, which makes it easier to identify their needs.
- Less marketing
You'll spend less time and effort finding new customers and convincing them that you are the one they can rely on. Which means less expenses during these cost-conscious times. To build a long-term business relationship with a new customer costs 16 times more, than to maintain an existing customer.
- Higher profits
Selling to existing customers is less focused on price, as opposed to selling to new customers. And since your existing customers trust you already, it gets easier to convince them to become interested in even more of your products or services through up-selling and cross-selling. In fact, Gartner Group statistics tell us that 80% of your future revenue will come from just 20% of your existing customers.
- It's going to save you a lot of money!
According to Bain and Company, attracting new customers will cost you 5 to 25 times more than keeping an existing customer, while a mere 5% increase in customer retention can increase profitability by 75%.
Client-centric firms will attract new business, and the opportunities to deliver higher turnover, better margin, and improved profits. The opportunities are out there. People want advice. Needs are ever more complex. But people want a little bit more for their money and clients are looking for first class service.
If you can articulate what you do and justify fees, this is where the opportunity lies. These last few weeks will only help to reinforce this view.
Tim Sargisson is chief executive at Sandringham Financial Partners
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