Geographic location influences behavior, so asset managers are now comparing regional differences in client behavior.
This is enabling them to optimise the alignment between their internal structures and geographic differences in their behavioral results.
Welcome back to our blog series on what you (the asset manager) can do with the new Behavioral Benchmark.
Across five articles, we explore how you can now dollarize asset management business intelligence, cater for regional differences in behavior, make science-based improvements to your client journeys, connect your distribution strategies, and alleviate clients’ survey fatigue.
A client’s region will influence their behavior
Human behaviors are responses to stimuli. These stimuli may be internal, such as an individual’s independent thoughts and desires, or they may be external, like environmental events, norms, constraints, precedents, and consequences.
While an individual’s activities may be harder to predict, historic data enables us to make reasonable assumptions about how multiple people are likely to respond to the same stimulus in their shared external environment.
Similarly, if the environment changes, then so too may people’s behavioral responses – they may do more or less of an activity, or they may stop doing one thing and start doing another.
For example, if I was to promote this article on LinkedIn [stimulus] I could assume that more people would read it [behavior] than if I was to use Facebook. This is because, on LinkedIn, I am known for publishing articles about asset management client behavior and the people who follow me have a shared interest in the topic. On Facebook, however, my family and friends follow me for updates on the things I do in my non-working time.
So, environment matters to behavior and this is important to international investment firms for two reasons:
- Theoretically, according to Cooper et al (2020), the most conceptually sound and empirically complete definition of behavior comes from Johnston and Pennypacker (2009): “behavior is that portion of an organism’s response to its environment that involves movement.”
- Practically, asset managers are now comparing their effect on their clients’ behavior across the different regions of the global market. This is a milestone for the asset management behavioral benchmark because those regions are a major part of the environments that stimulate clients’ responses.
Asset managers are now comparing regional differences in client behavior
In a recent analysis of behavioral benchmarking data, we found material regional differences in client behavior across their end-to-end journeys.
We also know that not all behaviors are equal. So, it is notable that the material differences relate to both ‘input’ and ‘output’ behaviors. Inputs happen in the ‘here and now’, e.g. clicking on a link, or turning up to an event. They contribute to outputs, which are fewer in number, highly commercial, strategic, and slow-moving, e.g. awarding you an investment mandate. Indeed, we found that four of five output behaviors displayed material regional differences.
If you provide investment services across multiple jurisdictions (with different precedents and regulatory consequences) this new information will affect you because firms with access to it will be able to optimize their regional activities for both the variable client behaviors and the homogenous ones.
As a result, this previously unavailable business intelligence has the potential to create winners and losers because, without it, an international business that comprises regional structures risks being sub-optimally organised and/or misaligned with its clients’ local needs.
It is, however, early days for this innovative dataset, so to increase the confidence interval, the firms involved have a plan to lengthen the time series.
Previously unavailable business intelligence
|What you could do for your firm||Why it would matter|
|1. Base your distribution targets on known client behaviors in different regions.||The regional investment markets have different levels of maturity and growth potential, and you will want to grow in some geographies while simply retaining business might be a good outcome in another market. Knowing how rates of sales conversion, relationship depth, and client tenure differ geographically will enable you to set competitive regional targets.|
|2. Align your service offerings with geographic variations in clients’ needs.||Your alignment with what your clients want will drive their impression of your value (Christensen, 2005).|
|3. Standardise and centralise the aspects of your business that support homogenous client needs.||Standardising and centralising the most appropriate activities will maintain alignment (above) while securing firm-wide cost efficiencies.|
Let’s explore some examples
The data indicates that twice as many clients in the Americas say ‘yes’ to a pitch than in EMEA (an ‘output’ behavior), and it also highlights that event attendance (an ‘input’), is similarly outsized in the Americas. Could US sales teams just be better? Or could it be that to win pitches you just need to increase event attendance? We believe there is more to it than this and we have developed hypotheses and practical response plans that we will prove/disprove as more data arrives.
It is also clear that firms manage significantly more products per client in EMEA than in Apac (output), while at the same time clients in EMEA are almost twice as likely to open corporate e-mails about thought leadership (input). Do e-mail open rates stimulate relationship depth? Possibly, but our theory is that multiple environmental factors and additional input behaviors are creating this effect.
Lastly, web visitors in Apac appear to spend almost twice as long on thought leadership pages than their counterparts in the Americas. They are also more likely to return to the general site and spend more time there too. Are Americans just good at skim reading? It will not surprise you that we have disregarded this option and will be monitoring other potential relationships in the dataset to explain this phenomenon.
On a separate note, as we look forward to the findings of our current industry-wide research project it will be interesting to discover the facts behind the anecdotes about regional differences in ESG-related client behaviors.
The full blog series
In our opinion, not all asset management business intelligence is equal, so we hope you enjoyed this article and that it got you thinking about the commercial importance of regional differences in client behavior.
If you would like to learn about other things you can achieve for your firm with the behavioral benchmark, here is the full blog series:
- Your effect on client behavior is now dollarizable.
- Regional differences in client behavior.
- Science-based decision-making.
- Connect your distribution strategies.
- Alleviate clients’ survey fatigue.