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. Existing clients are also the first to be sold new offerings. A client base can be identified or defined in many ways depending on the type of industry.

Client Bases Explained

Developing, maintaining, and expanding its 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.

Key Takeaways

  • A client base is a company's primary source of business and revenue, which consists of current customers paying for the products or services.
  • Developing, maintaining, and expanding its client base is a major initiative for any business.
  • Companies use their existing client base as a model to determine the potential success of a new product.

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 on prospecting new clients while ignoring their existing clients runs the risk of losing their 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.

Companies use their existing client base as a model to determine the potential success of a new product. For example, using the data from the company's client base demographics such as age, location, income, or gender, the company can determine the level of success of existing products within each demographic. From there, companies can target new demographics that have similar makeup when expanding into new markets or offering a new product. Also, an existing client base can act as a focus group, in which the company can receive valuable feedback regarding a new product before offering to the market.

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 the prospective clients that have historical spending patterns or are most likely to spend on those products.

Advertising and marketing to expand a client base could include television and radio advertising as well as social media marketing campaigns. An auto company might engage in movie advertising, for example, targeting fans of race-car movies if that client base is most likely to buy a sports car.

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:

  • Consumers or retail clients
  • Small businesses that need loans and business credit cards
  • Wealth Management through Merrill Wealth Management
  • Corporate or commercial banking, which is for larger companies where they provide investment and cash management services.

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.