by Kristen Luke
A general rule of thumb states that it costs five times as much to attract a new client as it does to keep an existing one. This makes sense if you take into account all the time and money spent not only on sales and marketing, but also the staff time and paperwork required to on-board a new client. Though we inherently know this rule of thumb to be true, most firms spend significantly more resources on new prospects than on existing clients. With a limited budget available, the marketing priorities are set on new prospects. But this can be a costly mistake if existing clients are slipping out the back door.
A client marketing and communication strategy is an integral part of a comprehensive marketing plan. Successfully executing campaigns targeted to your clients will deepen relationships, increase the percentage of wealth you manage for clients, generate referrals and defend against your competitors' marketing efforts. Client appreciation events are one of the most common campaigns advisers use to market to their clients.
Sales and marketing experts in the financial services industry will express the importance of client appreciation events as a way of deepening the bond with clients and generating client referrals. Advisers, on the other hand, have mixed thoughts on the topic. Some find the events to be expensive and fruitless while others rave about their success. Before you implement a client appreciation event, be aware of the pros and cons.
- Stronger client relationships
- Warm introductions to your clients' guests (referrals)
- Increased share of wallet as your relationship deepens
- Increased word-of-mouth marketing
- Defensive move against competitors
- Can be expensive
- May take significant staff time to plan
- Without a clear purpose and proper follow-up, the event may seem unsuccessful
- Without tying the event to an overall marketing strategy, it may not yield desired results
Types of Events
If you decide to implement a client appreciation event, the next step is to decide what type of event to hold. Events can range from an intimate dinner at your home for a few of your best clients to a lecture for all 300 of your clients.
The type of event you should host depends on your client base, your business model and your own personality. If your practice is comprised of 50 clients with an average account size of $5 million, several small, exclusive events would be appropriate. If your practice is comprised of 500 clients with an average account size of $500,000, one large event such as a barbeque for all of your clients would be appropriate. In these two examples, both firms have $250 million in AUM, but each would approach client appreciation events very differently to meet the needs of its client demographics and business model.
Consider the goal of your event before you begin the planning process. Do you want to touch all of your clients in the most efficient way possible, or are you interested in connecting on a more personal basis? Your answer will direct the size of your event.
Both small and large events can be successful, as Don P. Davidson, a 401(k) investment adviser in Omaha, Neb., has discovered. He now hosts wine tasting events for 30 of his clients after experimenting with larger events.
"We've held much larger group events in the past consisting of hundreds of clients, and while those can be nice since you include everybody at once, it just feels better to be able to get around and connect with all the clients attending," says Davidson.
Experiment with your own events to find the right size for you. Once you have decided on the size, think about what kinds of events your clients would like to attend. Are your clients athletic, and would they like to participate in a tennis or golf tournament? Do they enjoy the arts, and would they be interested in dinner and a backstage tour of the opera? Are they more casual and would appreciate a Hawaiian luau in your backyard? Or are they interested in learning more about the economy and would attend a lecture with guest speakers with a variety of perspectives? If you aren't sure what would be popular, include a question about the types of events your clients would like to attend in your next client survey.
If you are hesitant to spend money on client appreciation events, start on a smaller scale to test out their effectiveness. Host a couple of your clients to a round of golf, or invite a handful of clients to your house for a home-cooked or catered meal. Without investing too much time or money, you will be able to see how your clients respond to a gesture of appreciation and can determine if you should implement it on a larger scale.
When Is the Right Time to Start?
If client appreciation events have been part of your marketing strategy in the past, they are important to continue even in down markets. And if you haven't hosted client appreciation events in the past, now is the time to start. You may be thinking that you want to wait until the economy is better, but what better time than now to tell your clients, "Thank you for sticking with me these last two years during the economic downturn?" That's why Bob Rall, CFP®, of Rall Capital Management, a fee-only RIA firm in Merritt Island, Fla., is hosting his first client appreciation event this fall.
"The main reason I am holding the event is to really show my appreciation to my clients," says Rall. "There were times during the financial crisis of 2008-2009 that I feared what would happen to my business. I worked hard to communicate with every client and to let them know that, even though I didn't know what the outcome of the crisis would be, I strongly felt that it was in their best interest to stay the course with their investment plans. They all did. And I believe that a big part of the reason they did was because of their faith in me. I want to thank them for that."
Waiting to start your first client appreciation event until the economy turns around may mean a missed opportunity to show your appreciation when it means the most to you and your clients.
Keys to Success
There is no perfect formula for a client appreciation event. The success will largely depend on understanding your own objectives and how well you know the preferences of your clients. To ensure that you feel your event is a success, make sure you address these six key areas:
Define your objectives. What do you hope to accomplish (referrals, good will, etc.)?
Select the right event. What event will draw clients?
Invite the right clients. Who should be invited (for smaller events) and how will you get them there?
Pay attention to details. What needs to be planned to execute the event flawlessly?
Convey your appreciation. What do you need to say to make your clients feel truly valued and want to tell their network about your firm?
Follow up. How do you plan on following up with clients who attend?
As you are developing your marketing strategy for 2011, address how you are going to market to your clients. Incorporating client appreciation events into that strategy will deepen your existing relationships and will help build revenue as you generate referrals, increase share of wallet and create positive word-of-mouth marketing. You may find you even enjoy yourself in the process!
Kristen Luke is the principal of Wealth Management Marketing (www.wealthmanagementmarketing.net), a firm dedicated to providing marketing strategies and support for RIA firms. Kristen works with individual advisers and firms to develop effective marketing plans and provides the back-office support required to implement the strategies.