Will you marry me?

 by Tony Vidler.

I have no idea what the actual statistics would be, but I am willing to wager that the success rate of popping the question "will you marry me?" onto a prospective partner who you have not yet dated is probably pretty low.  

If you've dated for a bit, the odds get a bit better, though only marginally so.  If you've been engaged for a while and everyone knows what the end game is, then the odds are pretty good that you will get a "yes" to "will you marry me?".

How does this apply to financial advice?  Well...the biggest problem with financial adviser marketing is the tendency to pop the "will you marry me" question to people who haven't decided yet whether they want to spend a Saturday night with you. 

This lies at the heart of dealing with a common adviser question: "How can I make my marketing more effective?"

Before answering this question though it is important to understand a more fundamental question: What is the difference between marketing and selling?

Many advisers seem to think that these are one and the same thing.  Or, if pressed a little further, "marketing" is often confused with "advertising".   Marketing does include advertising... as it also includes having a clear value proposition, understanding the target market, the branding of the individual and the branding of the business entity, and a number of other things.

Thinking bigger picture though; marketing is really about creating opportunities to gain a client or some new business.  Selling is the process of converting that opportunity into an actual piece of business that your accountant can see.

To answer the question posed at the outset then, one has to understand that while there may be many components that go into creating really effective marketing, the underlying question that the adviser is really asking is "how can I create more opportunities to engage with people who would be willing to take the actions I would recommend"?

The part that really matters in this underlying question is "opportunities to engage with people".  THAT is the piece that you must concentrate upon to create "more effective" marketing.  This revelation is the point where advisers often say "aha, I get it" and their marketing efforts lift as they begin to focus upon creating new opportunities to generate future new business.  It makes sense to them that if they are able to attract attention, and engage with people, then they begin to establish a relationship of trust. Surely having done this the prospective client will take my advice and work with me?

It is at this point though that the bulk of such marketing efforts fall down in a heap.

The reason?  Lack of patience and understanding of the engagement process.  It's akin to having a couple of Saturday night dates and then wondering why the dream date doesn't want to marry you yet.  A lot of adviser businesses at this point are creating a lot of Saturday night dates....but there's no follow through.  It's just lifting the initial activity level really.

Engagement (in this business sense) is really about inter-acting with people on a regular basis in a way that they feel comfortable with until they decide they want to be with you.  Your marketing purpose is to get, and then hold, their attention and build their level of interest in what you have to offer in the way of valuable advice and solutions.  At some point in the engagement process you - or more likely some other event unrelated to your marketing and positioning - will trigger "desire" on their part to act.

That is when the marketing process is finished, and selling begins.  Although, if your marketing and engagement process is done well, the reality is that there is very little selling involved. 

The necessary level of trust and credibility in you as the right adviser has already been established.  The rest is process and technical competency being applied to the clients' need.  

The reality for a financial adviser business though is that engagement is forever.  The actual marriage part - your client buying you or your solution at some point - is actually just a moment in time.  It is a purchase. A transaction.  A fait accompli....if the engagement was a fulfilling one.

Engagement with clients, for the successful advice business, is long term.  Once you have them as clients, then the engagement and ongoing interaction becomes even more important, as they can add significant value to your business if you can move them from supporting you to the point where they are advocates for your business.

To make your marketing more effective - to get better results for your business - stop asking the marriage question.  It's not about the big moment and the big "sale".  Build systems and processes to engage people in a way they feel comfortable with, and share information and insights, and help them help themselves.....and they will want to take it further!

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What are your clients REALLY worth to you?

by Tony Vidler.

How much do you really think a good customer is worth to you?

Most financial advisers will easily (I hope!) work through the basic formula of the average fee/sale per customer multiplied by the number of transactions they have with you each year, and then multiplied by the number of years you expect to work with them (see graph below).

That is all simple enough - if you know these averages and key business metrics for your firm.

But is that the total measure of what a good customer is worth to your business?

How many referrals to other great customers could you get from a really happy customer over the expected lifetime of the relationship?  What extra value can be attached to your brand, or business value, from having great advocates in your clientele?

How about a working example for a typical adviser who looks after their clients well and provides great value....

Let's assume that your client pays monitoring and service fees of $500 in fees each year (not all that much really) to you, and on average your customers require (significant) new advice every 3 years or so at about $2,400 per time.  So that's another $800 p.a. on average - meaning that the average annual revenue is about $1,300 p.a. for a happy client valuing your advice.

If you provide good service and advice they will be working with you for the rest of your working life - call that another 15 years for this example.  

So far this happy client that paid $2,400 in initial planning fees and provides ongoing revenue of $500 p.a. has an apparent lifetime value to your business of $19,500 - which in itself is pretty impressive.

However if that happy client refers other good clients to your business then their value to your business exponentially increases.  It is not as simplistic as using the same formula above for each additional referral, because over time (if your expected business time frame remains the same) then each new client in subsequent years has a lower incremental value, and it would be wildly inaccurate to attribute every new customers own "lifetime value" to the referring client .  But the acquisition cost per referral will be lower than most other forms of marketing, so that saving can in fairness be attributed to the lifetime value of the original referring client.

A typical advisory firm might spend (say) $250 in marketing for each new client it brings in each year.  so using the client example from above, there is another $7,500 in "value" in that client providing the referrals.

Not bad really....that $2,400 initial client is now looking like they have a lifetime value of $27,000 to your business over the next 15 years.

But the REALLY big value is within the impact these advocate customers have on your overall business valuation.  To illustrate the point let's continue with some further really simple assumptions.

If an adviser business had 500 clients, averaging $1,300 p.a in revenue (as above), it has a nice little turnover of $650,000 p.a. gross.  Depending on what valuation methodology is used, and what market conditions are prevailing, that business valuation might typically be (say) $975,000.  However, premium value is attached to those businesses where there is strong loyalty, constant referrals, and turnkey business operations.  The valuation on such a business (in comparison to one with little referral business and strong client loyalty) could be expected to be closer to $1,600,000 - a difference of $625,000 in this example.

That can be the difference for a retiring advice firm business owner between having a great boat to play on in their good retirement, or just having a retirement.

The concept of "lifetime customer value" is not just a simple one of how much revenue they generate for your business.  You should also be thinking about how much those engaged and happy customers can SAVE your business.  Get it right though, and it really becomes a matter of how much more your business is worth because you have happy and engaged clients that love dealing with your firm. 

That's where the real value is.

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3 ways to get the low-hanging fruit

 by Tony Vidler.

Everyone wants business to be as easy as possible, yet we so often make it harder than it has to be. What's wrong with living on some low hanging fruit if there is more of it than you can eat?

Nothing is wrong with it - it's smart business.  It's not always simple to recognise where the easy business is, but some very interesting and provocative numbers have caught my attention recently, and provided the answers to where the "easiest" business is to be had.

• 81% of New Zealand consumers get their primary financial information from somewhere other than an adviser
• 60% of advisers describe themselves differently to what they actually do.
• 79% of marketing generated leads never convert to sales/customers

If you think about it, you know instinctively that the more time you spend with people giving them good practical help without pressure, then the more likely they are to turn into good long term customers that trust you and follow your advice. The statistics above merely provide evidence that this is so.

There is strong international evidence showing "nurtured" leads make 47% larger purchases than newly qualified people who are being "sold to" immediately. Those nurtured leads also have higher conversion rates - 50% more result in sales. From a cost per client perspective the research says nurtured leads actually cost about 33% less to acquire in marketing costs, than quick one-off sales.

Several conclusions stand out:

1. There HAS to be a massive opportunity for advisers to engage better with their existing clients. The stats say most of your own clients don't see you as their primary information source. Adviser check: Do you have a content strategy within your marketing to ensure that you are delivering the right sort of information consistently to be THE trusted source? If not, why not? It HAS to be where the easiest wins are - or the "low-hanging fruit" (and lots of it too it seems).

2. There HAS to be a trust-barrier between the consumer and the adviser if what the adviser says they do, is not what the consumer sees in action. That HAS to affect the advisers ability to do the business. Adviser check: is your marketing, information, branding and labeling actually consistent with what you really do? If you have a clever and grand-sounding title is it consistent with what the consumer sees and hears you talking about? If not, change the title. Or do what you say you are.

3. Given the choice between spending limited marketing budget on generating new leads - most of whom you will never get across the line - or spending it on existing customers, which is logically the best allocation of your limited resource? Adviser check: if you dare, work out how much you spent on marketing for new clients, and how many new clients you actually got for it. Compare it to how much you spent on "marketing" to your existing clients - and how much you got from that.
 

The conclusion is a simple one, and so simple it is almost unbelievable for most advisers. But the evidence in the form of pure sales results and client engagement that are being generated by advisers who have tried it are compelling.

Here is their formula:

• Talk to your own clients and networks. 
• Tell them what you do. 
• Try to help them and give them useful information - be there for them. 
• Be the person they trust for reliable and practical financial information. 
• Do your job well, and place their interests first. 
• Do it all constantly.

Simple and consistent content marketing of useful information to build trust and credibility, within your own network and clientele to begin with, is the most effective marketing spend. It is also the most effective way to get the low hanging fruit - and there is a lot more of it ready to be picked than most advisers realise.


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