Client Base

What Is a Client Base?

A client base is a company's primary source of business and revenue. A client base consists of the current customers paying for the products, or services. A client base can be identified or defined in many ways depending on the type of industry. Existing clients may also be the first to be sold new offerings.

Understanding a Client Base

Finding new customers and maintaining the existing client base is a major initiative for any business since, without clients, the business cannot earn revenue. Strategies companies use to increase this base include networking, word-of-mouth marketing, and referrals, developing a specialty or area of expertise, staying in touch with existing clients, showing appreciation for clients, and consistently meeting or exceeding expectations.

Businesses that primarily provide professional services such as financial planning tend to use the term "client base," while businesses that primarily provide products tend to use the term "customers." For example, a financial planner's client base would consist of all the people who have signed up to have their money managed. A CPA's client base would include all of the people and businesses that pay to have their tax returns prepared.

How Businesses Approach Their Client Base

An existing client base is the means of generating the majority of revenue for a company and as a result, attracts a significant amount of attention from management. A business that spends too much time prospecting for new clients while ignoring its existing clients runs the risk of losing its client base.

It's far more expensive to bring in a new client than it is to keep a current client happy. It's also far more profitable to maintain and grow a company's client base. In a study from the Harvard Business Review, consulting firm Bain & Company found that "Increasing customer retention rates by 5% increases profits by 25% to 95%."

A client base can also refer to a targeted prospect list that a company wishes to attract. As a company researches, develops, and plans to bring a product or service to market, attracting the attention of a potential client base is of paramount importance. The new product needs to answer, help, or resolve a pain point or need for the target client base.

The potential of success for a service or product is often based on the size and the makeup of the intended client base that the company is prospecting or targeting. Luxury items, for example, are mostly targeted at a client base with the financial resources and willingness to pay a premium for a high-quality product or service. A company offering a high-end product, such as a watch or a limited edition car, may target its marketing initiatives to reach prospective clients that have historical spending patterns or are most likely to spend on those products.

Example of a Client Base

Bank of America Corporation (NYSE: BAC) is one of the largest banks in the U.S. and services various types of clients and demographics. For a company of such size, one might think that they don't have a targeted client base. However, the bank has a client base that includes both consumers and businesses.

According to the bank's website, its client base includes:

All of the above types of clients make up the client base for the bank. Each division might have a separate strategy for maintaining their existing client base and targeting new ones based on their current clients' behaviors, financial situation, goals, and needs.