The 3 Most Common Mistakes Everyone Makes When Prospecting The Ultra Affluent: 1. Outward In vs. Inward Out.
Overview & Background
Over the past decade of working with the top organizations across luxury, financial services, non-profit and higher education, we have observed 3 common mistakes that everyone seems to make when trying to engage the ultra-affluent market.
This is the official launch of the WealthQuotient blog where we will be addressing best practices and providing insights for effectively engaging this challenging and coveted market. We are starting our blog with a 3 month series addressing these 3 most common mistakes organizations make and why these mistakes are the root cause of tremendous inefficiency.
The three mistakes are:
1) Outward In vs. Inward Out
2) Being Reactive and Ad Hoc vs. Proactive and Systematic
3) “Hope Marketing vs. Bespoke Marketing”
In this series, we will diagnose both the problem behind each one of these mistakes as well as illuminate the corresponding antidote. Each topic will be coupled with video interviews from experts discussing their diverse perspectives, experiences and case studies from engaging the ultra affluent across luxury, financial services, non-profit and higher education.
Outward In vs. Inward Out
The first mistake we see can often be one of the most difficult to change. Most organizations fall prey to an Outward In strategy when they should be leveraging an opposite approach that is Inward Out. Engaging the ultra-affluent can be an extremely inefficient process. Why is that and how do you know if you’re strategy is inefficient? If you are asking this question: “How do we get in front this prospect?”, you are most likely operating from an Outward In Strategy and might not even be aware of it as well as the inefficies embedded in it.
All too often prospect identification leads organizations to “prospects” with whom they have no relational connection. With no real path to the prospect, we termed this approach the Outward In approach because you have identified people “out there” and now want to bring them in as clients, donors or investors. This pitfall is what makes growth inefficient for so many.
The Outward In fallacy manifests itself most prominently within the financial arena through the strategy of chasing “money in motion” as well as prospects who have experienced fresh liquidity such as an IPO; for Non Profits it can mean chasing “prospects” with whom there is no existing deep connection but who have made transformational gifts to related causes; for luxury brands it can surface through their acquisition of lists to target the wealthiest people in a specific geographic area of wealth like Dallas, Sao Paolo or Hong Kong.
There is a siren call and gravitational pull to identifying an individual with substantial capacity who is “out there” and trying to figure out how to get to them. But, this turns out to be a deceptive path. The Outward In approach by nature consumes significant time and resources and all too often yeilds minimal results. In the final analysis, the return on investment (ROI) in the context of the return on time (ROT) fails to make sense.
Outward In: Luxury & Financial Services
This tendency is what drives luxury brands and financial firms to place sales team members in cities where there is a high concentration of wealth. It seems logical to do but if the organization doesn’t have any relational connections to wealthy people in that specific market, the sales professionals are left asking how they can get in front of these wealthy prospects. Again, this underscores the inefficiencies of the Outward In approach.
Outward In: Non-Profits/Higher Education
The “Outward In” mistake acutely manifests itself in the non-profit and higher education world through the pervasive use of what are called wealth screens. Often times a wealth screen of the organization’s database has taken place and it surfaces individuals who have donated smaller amounts but have substantial capacity for much larger contributions.
In certain cases when the wealth screen surfaces an individual with greater capacity than previously realized and with whom they also already have an existing relationship, this can be powerful. However, when a screening identifies additional capacity in an individual where a relationship is non-existent (other than a minmal donation), the fundraiser finds themselves “stuck” with no execution strategy and again asking, “How do I get in front of the prospect?”
“How do I get in front of them?”: The Wrong Question and Starting Point
At WealthQuotient we believe that if you are asking the question, “How do I get in front of the prospect?,” you are not only asking the wrong question, you’ve started from the wrong place.
There Are Only Two Ways To Get In Front of the UHNW
So, if Outward In is the wrong strategy, what constitutes a successful Inward Out approach? There are two core convictions about how to successfully get in front of the ultra affluent that lie at the heart of the WealthQuotient Methodology. They form the bedrock for all our strategies, processes and tools. These two core beliefs help to illuminate and support why the Inward Out approach is the most efficient way to optimize time and resources in engaging the ultra affluent. There are only 2 fundamental ways to get in front of this audience: 1) through a referral or 2) through their passions, hobbies and interests.
The Antidote: Inward Out Approach
For this discussion let’s focus on the first conviction around referrals. All the survey data from top luxury brands and private wealth managers point to the fact that referrals are the number one driver of new growth on the high end.
As we survey our nonprofit clients they also confirm most of their ultra-wealthy donors have come through referrals as well. If you accept this assumption, then the most strategic and efficient use of resources for any organization is to focus on accelerating referrals by proactively and systematically mapping out the social and wealth graph of their existing key donors and clients.
Inward Out means starting internally with existing donors and clients and recognizing that their networks will lead you out to your true prospects. Why? Because these are qualified individuals you can actually reach. These prospects are financially qualified and have direct relationships to individuals who value who you are and what you do. This represents your lowest hanging fruit. This approach eliminates the need to burn time and resources figuring out how to approach someone “out there” who you think is a good fit for your cause, product or service but to whom you have no real path.
The reality is that in most cases your existing clients and donors are connected to all the prospects you will ever need. When we map this relational network out for our clients, we essentially define the totality of their target market and create a customized pipeline of warm prospects around each individual sales and fundraising team member. If this represents the most efficient path, why is it that so many organizations still labor under the “Outward In” delusion.
In the WealthQuotient Methodology, we coach our clients on how to implement and execute this process across their organization. Part of that coaching is focused on how to ask for the introduction to the prospects that have been identified without consuming their social capital while simultaneously building a deeper relationship with the existing donor or client in the process.
Inward Out: Case Study
The fruit of this strategy became clear to one of our clients during a recent training session. This is an example from the nonprofit world but the principles here apply to all industries. Their most senior fundraiser had been operating off an outward in approach for his entire career. For the previous two and a half years she had been unsuccessful in her attempts to get in front of a prospect she had identified worth around $700M.
In our training we presented a social map of one of her top donors who was an individual she’d known for years and further, was already a strong source of referrals. She believed that she already had thoroughly exhausted the relational network of her existing donor.
She was amazed when our process surfaced a direct connection between this $700M target prospect and her top donor. During the training session, she texted her donor asking if she actually knew the prospect. The donor did and much to her delight at the end of the training she already had a lunch scheduled with the prospect two weeks later. This is the WealthQuotient way.
The Mark of a WealthQuotient Client
In working with our clients, we see the continuous gravitational pull of the “Outward In” approach because that’s what they’ve always done. We have learned that it can take time for organizations to digest the Inward Out truth and to cross the threshold of what is truly a paradigm shift in strategy and operations. But, for those who have, we have witnessed truly transformational results in their organization.
One of the signs that this inward out approach has saturated an organization and that they have truly made it their own, is that you will never again hear anyone in their organization ask, “How do we get to this prospect?”
If you are tired of asking, “How do we get in front of an UHNW prospect,” visit us at www.mywealthq.com to better understand how we have successfully helped our clients identify and engage thousands of the right ultra high net worth and high net worth prospects resulting in their highest revenue clients and transformative donors.