Sunday, September 24, 2023

From Strategy to Action: Building a Customer Segmentation and Service Model -Dlight News

Do your customers determine what type of business you run, or does your company determine what type of customer you serve?

Early in your career as a consultant, you may have had relatively few criteria for onboarding new clients. The more assets you can collect, the better! However, as your business and service offerings mature, you and your team may need help managing the portfolio you are building. Have you ever thought about who you work with and what resources and time they require of you?

One technique that could help you focus your energy on the right people and activities—and create more room for growth—is to build a customer segmentation and service model. Here’s how.

How is your book structured?

The first step in building a customer segmentation and service model is to understand the people in your current customer base. Think of both quantitative criteria (e.g. assets under management and income generated) and qualitative factors (e.g. level of trust, coaching ability and recommendation history).

Also think about what you do for them. Does everyone currently receive the same benefits, such as a financial plan, an annual review meeting, regular outreach, and invitations to customer events? (Hint: If the answer is yes, prepare for a change!)


By segmenting your customers based on well-defined criteria and specifying the services you offer each one, you can increase capacity and scale.

A customer segmentation strategy

Once you have a better understanding of your current customers, it’s time to start categorizing them. There are many ways consultants can approach customer segmentation. The key is finding the solution that works best for you and your business. That means you have a vision for your business and the ideal clients you want to work with.

You may be familiar with the segmentation approach that categorizes customers as “A”, “B”, “C”, or “D” based on revenue or AUM. While this quantitative approach helps identify your most profitable customers, chances are you already know these customers well. And what about the rest of your book?

Commonwealth’s business consulting team often recommends that our consultants use a more holistic segmentation method called the “ABSLN” method.


With the ABSLN segmentation method, you still identify your top customers as “A+”, “A” or “B” based on the revenue they generate for your business. However, for the lower levels, you use qualitative criteria to classify customers into segments labeled “S”, “L” or “N”.

  • S/Strategic: People at this level have the potential to become ideal customers. Think of young high earners with high savings, entrepreneurs with illiquid assets or HENRYs (high earners, not yet rich).

  • L/Legacy: These customers may have a legacy relationship that justifies the provision of additional services — for example, “A” customers’ children, widows, or personal friends.

  • N/Not ideal: These customers do not fit into any other segments. You could continue to provide services to them, transfer them to a junior consultant, or end your relationship.

This approach provides deeper insights into the types of clients currently in your portfolio and can then use that to determine the types of services you will offer them.

From strategy to action. Recently I was working with a Commonwealth affiliated consultant on some capacity issues. They wondered if they should hire a service advisor to manage the bottom half of their book. Together we used the ABSLN methodology to segment their customers and analyze how much revenue each stage brought them. It quickly became clear that hiring a new advisor would cost far more than the assets under management. Therefore, the consultant decided that hiring help in this area would not make financial sense.

However, through this analysis, the consultant found that many of their existing clients fell into the less-than-ideal category. They decided to scale back the services they were providing to this group and was able to buy some time, which was their original goal.

Couple segmentation with services

Once you’ve completed the customer segmentation exercise, you can move on to building your customer service model, determining which services you will provide for each segment – and how often.

If you’re like many of the consultants I work with, you may already have a plan in mind for your performance. But believe me, they are worth documenting. As with other processes, clear documentation helps ensure that you are consistently providing a quality service.

To help make decisions about service offerings, consider the following questions:

Their goal is to provide customers in each segment with a consistently outstanding experience and minimize exceptions.

The average Commonwealth Advisor derives only 9 percent of its total revenue from the bottom 50 percent of its client base. So, while it sounds obvious, try to spend most of your time on segments that generate significant revenue and less time on those that don’t.

Consider how many hours you will need to devote to the delivery of different services, and be sure to include time for business development and practice management activities.

The right corporate partner can suggest ways of delegating certain tasks. At Commonwealth, we’ve helped advisors optimize their efficiency through a range of outsourced business solutions. For example, some advisors outsource the investment management activities of a single tier while continuing to manage portfolios for other segments.

If you need to free up capacity, identify non-ideal customers and, if possible, refer them to another advisor to ease their transition.

Your results might look something like the following tables, with all of the services—including investment management, financial planning, marketing initiatives, and client events—on the left, and the levels that might be eligible for each service on the right.

If the total number of hours you spend providing services to each customer category doesn’t match the average revenue for that category, you may need to make an adjustment.

client tier
A+ A B S L N
review meetings
Proactive public relations
investment management
financial planning
Special experiences
(e.g. customer events, milestone recognition)
(e.g. 401(k) verification,
collaboration between CPA and attorney)
client tier
review meetings 1 face-to-face meeting per year (focus on topics relevant to younger clients: building wealth, paying off student loans, buying a home, family planning)
Proactive public relations 3 additional text messages and/or Zoom meetings (compared to phone/email)
investment management Outsourcing to a corporate partner’s managed account solution
financial planning Use more turnkey financial planning software and reserve more customizable options for “A+”, “A” or “B” customers
Special experiences
(e.g. customer events, milestone recognition)
Gifts for life events (e.g. new home, vacation, new child)
(e.g. 401(k) verification,
collaboration between CPA and attorney)

401(k) verification

Actively approach accountants/lawyers who are willing to work with younger clients

Match new HENRY clients to the company’s next-generation consultants


Charge standard investment management fees applicable to “A+”, “A” or “B” clients

Charge an annual consulting fee to increase the value of proactive financial planning

Of course, there is no magic number for the number of client meetings per year, and the number of offers varies by consultant. Decide what you can offer your customers while also considering your capacities.

What now? From strategy to action

You have segmented your customers and created a service model. Now it’s time to implement your strategy in your practice. That means you need to systematically assess every aspect of your business to decide where adjustments need to be made.

Here are some questions to consider:

Example: If you’re meeting with “B” customers less often than before, you should adjust your scheduling process.

Example: Make sure everyone understands how to engage customers at different levels.

Example: If you outsource investment management for your “strategic” clients, tell them why you think this is the right move for them.

Example: Perhaps share the name of another consultant who may be a better match.

Example: Depending on your CRM system, you may be able to set up workflows and add other key criteria in each customer’s records.

By aligning each line of business with your new service model, you’ll be better positioned to attract more ideal customers and scale your business.

Ready for a change?

Ultimately, if you don’t have a conscious customer segmentation and service model in place, your customers can dictate how your business runs. Why not try a different approach? After all, providing a great service experience for your customers shouldn’t come at the expense of growing your own business.

Taking the time to do these exercises will allow you to focus your energy where you need it most. The benefit is that you have more time to nurture more relationships—especially with ideal customers. Additionally, you can generate more revenue with fewer resources, which means more revenue goes directly into your company’s bottom line. And that’s a win-win situation.

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