an online conversation
about design management


Which clients drive profits

Apart from doing great design and having high profile happy clients, a studio needs profitable clients.

To see who your profitable clients are you should segment them by profitability and then concentrate the right amount of attention to those that are more profitable. This also means reducing effort on the less profitable clients. This exercise will also help free up resources for finding more of the profitable clients.

But to grow revenues, a studio should understand what makes its best clients as profitable as they are, and then find new clients who share at least a couple of those characteristics. The studio should also look at how to introduce premium pricing to their top clients.

To understand how this might work it's worth looking at how other businesses segment their market. Take the example of a leading bank with a large wealth management business. The bank had become concerned that its overall business was suffering from low rates of growth and a stagnant market share. Its existing segmentation sorted customers according to the level of employee that served them—relationship manager, senior branch personnel, or junior branch personnel — which mostly depended on customer assets and income. Relationship managers had the most profitable customers, and so forth. However, the bank knew next to nothing about what might distinguish one relationship-manager customer from another so they undertook three types of research.

Demographic (age, occupation, assets, and so on).

Behavioral (which services customers already used, how many institutions they did business with, how many transactions they made in a month).

Attitudinal (financial sophistication, time spent on investments, risk tolerance).

The segmentation that resulted was vastly different from the segmentation shown by their previous research. For instance the new segments identified, ie. Young Families, revealed high variations in profitability even in the existing high-profit segment. Equipped with this information, the bank was more willing to embark on the expensive task of tailoring offerings to potential clients, since it had greater confidence that the effort would turn out to be economically worthwhile.

Three segments it discovered—On Their Way, Established Families, and Retirement Planners—contributed almost no profit, even though they accounted for half the customer base. Yet many of the individuals who fell into these segments had been assigned to relationship managers. The bank acted quickly to reduce the cost of servicing those people by reassigning them to more junior branch personnel, to call centers, or to the Web.

Take home point

Look at your existing clients and segment them according to their profitability and give them the right amount of attention with your best design resources committed to them.

Check your pricing policy to see that you are charging a premium for those clients who get the higher level of service. They may be profitable but are they as profitable as they could be.

Analyse what it is that makes these clients profitable and try to find similar new clients.

The Job Pricing E-course shows how to segment clients and develop premium pricing with your top tier clients.

 

Greg Branson

Greg’s passion is the research and development of methods that improve design management and the role of design in business.

Greg has developed a series of business tools to help designers manage their business better along with a series of workshops that show designers how to use these tools.