By Jeff Beaumont, Managing Director of Coaching and Support at Nitrogen
How do clients—and prospects—perceive the value of the services their advisors provide? What criteria do they use? What justifies the price tag of using an advisor?
Pricing involves two components: the cost of an item and the promised benefits.
For example, I spend $2.45 for my Venti brewed coffee at Starbucks. Why pay that when I could buy a similar product for half the price down the street? Better yet, I can get coffee from the office breakroom. Why do I willingly spend more money for Starbucks?
I recently came across a resource on the building blocks of how consumers value service. The September 2016 edition of the Harvard Business Review expanded on Maslow’s hierarchy of needs by consolidating decades of research into what they call The Elements of Value. These elements provide a new perspective on why some businesses have a high perceived value and others… do not.
So, what are these elements and how do they affect us? Let’s look at the four categories:
Providing a basic or utilitarian need.
Reduces Cost: Target’s Red Card program. Save 5% on every purchase.
Saves Time: Starbucks mobile app allows you to buy ahead of time.
Simplifies: Online banking gives me online bill pay and see all my statements in one spot.
Integrates: Your CRM connects with other systems and tools to maintain one database.
Inviting us to feel a particular way.
Reduces Anxiety: A massage therapist helps you relax, recollect your thoughts, and leave less anxious.
Rewards Me: Starbucks gives me discounts and free drinks when I spend money.
Design/Aesthetics: The Walt Disney Concert Hall’s stunning design creates a sensation of sophistication.
Provides Access: Amazon Prime not only gives us free shipping, but movies, music, and more.
Creating a personal transformation.
Provides Hope: Your advisor demonstrating you’re on course to achieve your goals. You’re both relieved and renewed with hope.
Affiliation or Belonging: The Center of the Arts gives me a chance to connect with locals for concerts and other events. For many, this is also a way to give back.
Motivation: Fitbit tracks your steps and encourages you to hit your daily step goal.
4. Social Impact
Delivering value to an audience broader than one.
Self-transcendence: Such as a company partnering with a charity to provide relief or provide food, water, and shelter. For example, Kiva helps us visually see our impact through microloans to individuals in developing countries to help them start their business.
Let’s apply this to your firm with a couple scenarios…
Sadie has been in the advisory business for a few years and is growing her practice. She has a variety of clients, but is focused more on Gen X and Millennial investors. After a number of conversations and thorough market research to better understand the needs of her target audience, she’s found her value propositions often center around five factors:
Saves time: Sadie presents only the most important points in her client meetings—but backs up everything with detailed analysis. Their meetings are focused and timely.
Simplifies: Sets expectations clearly; doesn’t deluge clients with 30 pages of statistics they’ll never read.
Aesthetics: Clean, pleasing and clear designs to guide the client through a report or client meeting.
Provides access: Leverages robo technology to allow clients to see portfolios, make deposits and check on goals.
Self-actualization: The investor feels a sense of liberty to review their portfolio on their time, with full account access and their advisor at an email away.
Sadie has aligned herself to these values by restructuring client meetings, simplifying her meeting agendas, utilizing robo technology, and finding a better approach to investment reporting. Her clients now tell her they can’t wait for their next meeting.
John has been in the business for a number of years and primarily serves retirees and pre-retirees. He’s found the values that really move the needle for him are:
Reduces risk: Investing clients within their risk range (many advisors use the Risk Number).
Organizes: Set out their meeting agenda so they know exactly where they stand and what their targets are.
Reduces anxiety: Demonstrating whether their objectives are on target. If behind, then he highlights that so they can discuss it and work through it.
Provides hope: Consistently meeting on their six month milestones, John demonstrates reliability in their plan and gives hope of achieving their goals.
John has shifted his approach to focus his specific value proposition: giving his clients hope with regard to their future!
The goal isn’t necessarily to attempt to exhibit every value, but to highlight and incorporate the ones that matter most to your clients. Advisors who play to their strengths can empower fearless investing on the part of their clients!