Digital User Segmentation Matrix

I recently came across an illuminating matrix that attempted to segment digital users. Based on research by the Wireless Innovation Council and Mobiquity Research, this study spoke about how the digital world requires thinking to tackle the needs of users who bring a unique digital profile and set of behaviors to usage situations.

Called "Bring Your Own Persona" the Matrix is visualized as follows:

Analogs: They are unwilling to and/or incapable of using digital technologies. They may have been capable digital users who decided to “unplug” due to privacy or life-balance concerns. At best, analogs might be willing to dip their toes into the digital waters via easy-to-use touch points like simple kiosks or websites before progressing to more advanced interactions like mobile and social.

Wannabes: Here we have embryonic users of mobile and social who are very eager to learn the basics so they can seem to be experienced. Wannabes are a group that you want to engage going through their peers who have more advanced capabilities. Once Wannabes see their friends doing something cool or valuable, they will educate themselves to at least get by. Think of seniors talking to their grand kids on Facebook. Once they realized this was the place their grand kids hung out, they put in the effort to become basic Facebook users (not many have progressed to be power users).

Mainstreamers: These are people willing to opt in to most digital solutions with a strong possibility of a benefit in the near future. Mainstreamers represent the pregnant middle of the market, ready to be nudged toward behaviors and outcomes that are good for them and others. Show them the value of each interaction, and they can quickly become loyal digital patrons. If the value equation diminishes, you may lose them.

Paranoids: These are cautious users who are very protective of their data and need to be persuaded that there’s a value in sharing their data. Paranoids represent a potentially dangerous group as they will lash out if they believe their personal information is being compromised or misused somehow. Companies that do not respect the privacy needs of this segment risk public scrutiny and bashing.

Chameleons: Here are digital savvy users who will change their digital behaviors and data sharing to suit each situation and personal interests. They are protective of their data when they perceive there is limited benefit or have low trust. Chameleons will educate themselves on the privacy policies of different brands and make sure they share only what they need to. It will take an extremely strong value proposition or clear privacy controls to engage them with highly personalized interactions.

Digital Nomads: People in this segment truly want to port their digital profiles anywhere in any setting. They are willing to share data on the promise of a future benefit for them or a broader group. Digital Nomads fully expect that you will not just collect their data, but use it to deliver an exceptional user experience and significant benefit for them and other users like them. Achieve this and they will be your greatest champions. Fall short, and they will become your biggest critics.

Like everything else, this model too will change over time. The shift is likely to be towards the upper right portion of the Matrix. However, if we continue to see increased privacy legislation, stepping-in of regulators and even individual perceptions regarding the data-for-content value, this could very well move in the reverse direction.

The Digital Capability and Trust Equation

With more than 1.8 billion smartphone users and nearly 2 billion people using social media worldwide, mobile and social are becoming the dominant modes of human interaction. In addition, wearable devices in the form of activity trackers, smart watches and even connected clothing are quickly emerging with more than 150 million users worldwide, tracking everything from steps and calories to heart rate, breathing and even stress.

This new breed of always connected and self-aware end-users is changing the rules for how companies do business and engage their customers. When it comes to segmentation of such technology users, there are two important dimensions to consider. These are:

  

1. Digital Capability

This is the ability of the user to make use of the latest technology features and functions to improve their quality of work and life. The extent of their activities ranges from basic usage of mobile apps and social media to more advanced usage of video chat, location based services, mobile payment services and wearable devices.

2. Trust

Trust on the other hand is the willingness of users to share their personal data. Users are pretty evolved nowadays and inherently realize that their data is valuable. In some cases they are willing to relinquish their privacy to get hold of personalized information (think fitness trackers, local search, wearables etc.) In other cases (contact-less payment services) less willing.

These two dimensions are not directly related. Digital capability by itself is not a predictor of how comfortable the user is with sharing information. Similarly, trust is no definitive indicator of the technology savviness of the user. However, when viewed as the two axes of a graph, they allow us to segment the present day digital users in an interesting way.

We will explore this further in another post.

Life-stage segmentation for the BFSI Industry | Part 3

In a previous post, we looked at two specific life-stage segments for the BFSI Industry. Today we will look at the rest of the segments.

First Home Buyers

The audience profile: These are consumers who are usually in a serious relationship or married. They typically have one or more young children. They are financially getting better-off and may enjoy a dual income with consequent asset ownership.

The Marketing Opportunity: The financial needs of such customers change significantly. A family with young kids is usually more motivated to purchase a home. From the perspective of the bank or financial institution, this customer moves from being a low-value customer to a medium or high-value customer through one large loan transaction.

Established Families

The audience profile: This segment typically has older children and usually both parents continue working, either full or part-time. The audience members are starting to build some wealth or significantly pay off their loads and liabilities.

The Marketing Opportunity: The financial needs typically shift from loans to savings and investment accounts. This may possibly include business loans and retirement planning products and services. The upper age spectrum of this audience may be on the look-out for educational loans to fund the further studies of their children.

Retirees

The audience profile: These are consumers whose children have left home and they have typically stopped working and are enjoying their golden years. They no longer derive an income from employment but may derive income from assets acquired in their earlier years (Eg. Rental income etc)

The Marketing Opportunity: Such a segment presents a key target for long-term and loyal business. Their financial needs shift from loans towards retirement accounts, investment products and savings products. Pension products and annuities will surely be required. Depending on the quantum of wealth or assets held, some higher-order products like estate planning and trust funds may also be required.

It should be quite obvious by now how using life-stage marketing can help the savvy BFSI marketer derive more ‘bang’ for their marketing bucks. Not only does this type of segmenting ensure that the right audience is being marketed the right product at the right stage of life; it also ensures that they are at their most receptive when said products or services are being presented to them. This will ensure better conversions and more satisfied customers. 

When customers realize that their banks understand their specific needs, it strengthens the emotional bond. Such customers remain with the bank longer and ensure ongoing profitability. 

Life-stage segmentation for the BFSI Industry | Part 2

As consumers go through various life-stages, their needs, wants, preferences and requirements change. Especially when it comes to financial products and services! Just think about it from the perspective of your own life.

When you were a fresh graduate or looking for your first job, would you have been in search of a housing loan or investment advice? Or would you have appreciated a starter bank account that set you up with a debit card and a no-nonsense savings account?

Similarly when you were well-settled in your job and reaching for personal and professional excellence, would you appreciate a banker trying to interest you in wealth creation and future-planning products or would you resonate more with someone who was hard-selling you a no-frills basic savings account?

The answer is obvious, right? As customers go through life stages, not only do their needs and preferences change. Their ability to earn and therefore spend at higher levels also changes. As they mature, they become less sensitive to price and are willing to pay more for preferential service. As they age, they are more interested in products which will ensure that their hard-earned wealth makes its way to the next generation.

For the sake of convenience, I have segmented all the life-stages we discussed in a previous post into five main buckets. Please note that these are by no means conclusive or authoritative. Different BFSI Institutions segment customers (or even sub-segment them) depending on how they classify their own product mix. Like with everything else, there is no one-size-fits-all approach!

The five segments I would like to define are:

• ·         Starting Out
• ·         Double Income, No Kids
• ·         First Home Buyers
• ·         Established Families
• ·         Retirees

Let us deal with them one at a time.

Starting Out

The audience profile: This consists of consumers who are typically older teenagers or young adults who are starting out on their career. At this point in their lives, they only have a need for relatively simple financial products, such as the transaction account and perhaps a credit card.

The Marketing Opportunity: Considering that they are just starting out, they are not likely to have the need for sophisticated financial products From time to time, may need a small loan (similar to the survival 'payday loan') or will have a small amount of money to invest. Being relatively younger, their ability to take risks is higher. A very small segment may choose to dabble in the stock market.

Double Income, No Kids

The audience profile: This is the life-stage when the audience forms a serious relationship or perhaps gets married. At this time, there are typically no children in the relationship (which may never happen). As there are no immediate financial commitments, such couples can continue to rent without the emotional pressure to purchase.

The Marketing Opportunity: DINK couple usually attempt to start saving more money. This may take the shape of some Systematic Investment Plans or basic Mutual Funds. Typically they are looking for short-term investments - ranging from a year to two years. They may be the right audience to tap in terms of large borrowings in the shape of vehicle loans or personal loans for holidays/vacations and the like.

We will take a look at the remaining segments in another post. Stay tuned for more!

Introduction to Life-stage segmentation for the BFSI Industry

Before we dive deeper into life-stage segmentation, here are a few questions for you to ponder:

• ·         Do you remember the day you graduated? How did you feel right then?
• ·         How about when you bought your first car? What did you do to celebrate?
• ·         Now when you moved into that first home of your own, how did that make you feel?
• ·         The birth of your first child; what emotions did that event unleash?

You get the picture. All of these events are important milestones in your customer’s lives; just as they are in yours! Most people go through some or all of these “life-stages” during their time on this earth and each stage has its own requirements and specific triggers.

Marketing to your customers without taking into consideration their current life-stage (and hence financial requirements) is like trying to sell with a blindfold on. You have no idea who you are targeting! Most people go through typical life-stages. These could include:

• ·         Moving out of home for higher studies; Graduation
• ·         The first job; probably a move to a different city
• ·         First vehicle purchase
• ·         Marriage – the typical ‘settling down’ phase
• ·         The first home purchase
• ·         Birth of a child; consequent change in priorities
• ·         Established families; life goes on
• ·         Children move away for further education/jobs
• ·         Second home purchase; wealth creation and consolidation
• ·         Retirement
• ·         Death

This is not supposed to be morbid or to remind you of your mortality! It is just an attempt to show the stages that most of us go through and the consequent impact it has on our financial needs. Marketers who are cognizant of these life-stages have the ability to reach out to audiences with just the right products they need at the right time when they need them. Those who operate with a one-size-fits-all approach are more likely to spend more and convert a lot less.

You decide which category you want to belong to! In another post we will examine just how you can reach out to and target specific life-stages.

A step-by-step guide to segmenting for the BFSI Industry

Banks and Financial Institutions are probably the best placed entities to benefit from segmentation. No other vertical is so intrinsically involved in your purchase decisions. While other online e-commerce players may know about your activities and spending patterns on their specific websites/ portals, banks are privy to both your online and offline monetary transactions. They know what you earn, what you spend on, where, when how frequently. Even when you transact on other websites, your bank knows what you bought or subscribed to! Talk about big brother watching you!!

Ironically, they are the laggards when it comes to adoption of intelligent segmenting. This is primarily because their IT infrastructure is often mired in legacy and bureaucracy and the various product and service databases are unable to communicate with each other. While privacy and security concerns may power some of these issues, there’s a lot more that they can do if only the mined their data effectively.

In a previous post, we looked at understanding the segmentation of banking customers from an overview perspective. The five broad buckets into which the various types of customers fall were defined as:

• Non-customers
• Low-value customers
• Medium-value customers
• High-value customers and
• Ex-Customers

Today, we will endeavor to take a look at the specific sub-categories that customers fall into.

Non-Customer sub categories

These are people who either don't bank with you or are the 'unbanked'. The unbanked could be those who have never had a banking account or those who are too young to have started a banking relationship at all.

For those who don’t bank with you, offers or deals could make them consider a relationship with you. This could be an industry differentiator (like the 6 is more offer from a Private Bank in India) or a fees and charges waiver offer to convert a fence-sitting prospect.

Those who are too young to have a banking relationship could be effectively targeted through school-linked savings plan accounts. It is a known fact that people have emotional bonds with the ‘firsts’ in their lives. Get them young and you can benefit from their business for life.

Low-value customer sub categories

Low-value customers also fall into two specific sub-categories. First are those with limited income and hence limited needs for financial products and services. These customers are usually not among the profitable accounts for a bank to hold. They are more often than not the hygiene factor for banks and help up the number (volume) of accounts for reporting purposes.

The other sub-category is those people who have diversified their holdings across a number of banks. There may be several reasons why they choose to do so. The challenge with such customers is that they tend to be very risk-averse and in order to convince or attract them to consider making you their primary bank you need to be able to convince them of the safety/stability of their holdings with you. In such cases, offers could often help convert customers.

Medium-value Customers

Medium-value customers are also divisible into two sub-categories. The first are those who conduct a majority of their dealings with our bank. While this means we are their preferred bank, there is the possibility to help secure ALL of their business, potentially making them a higher-value customer for us. Considering that we are already top-of-mind with them, this should not be difficult and can be easily achieved through consistent direct marketing.

The second sub-category includes those customers who conduct a majority of their dealings with our competitors. These customers are a bit trickier to handle. One way to convert them into potentially higher-value customers is to indulge in a relationship-building exercise. By consistently offering them better product and customer service and by being mindful of their changing needs, it is possible to nurture relationships with these customers, eventually converting them to being higher-value customers.

High-value Customers

These are the set of customers who ensure the ongoing profitability of most banks. They are the ones who have higher-order products and services from our bank and service things like housing loans, vehicle loans etc. Given the nature of their relationship, they have continuous interaction with us and expect preferential treatment. Retention is the best strategy to service such customers. Remember that if they are high-value customers for us, then they are probably a target customer for our competitors. Hence, ensuring that they remain satisfied and delighted with our service standards will go a long-way in ensuring their loyalty. A Relationship Manager, Loyalty Program and Reward Points go a long way towards ensuring their continued relationship with us.

Non-Customers

These ‘customers’ can be further sub-divided into two groups. Those who have never had a relationship with us, and those who were once our customers but chose to part ways with us. Frankly, the former still hold a glimmer of hope for us. If they bank with our competitors, we could attract them with offers, discounts and promotions. The latter are probably a lost cause. They tried a relationship and it didn’t work out. Still, they could serve as a listening post for us to refine the quality of our services. They may offer insights into how we can enhance our services. Done right, maybe our willingness to change for the better may bring some of them back to our fold?

So there. That's a pretty practical guide to segmentation for banks. Of course this is still rather generic in nature. But you must admit - it is a far cry from the demographic pitfall! Till the next time.

Understanding the segmentation of banking customers

All of us have a range of relationships with banks. Let us take a moment to examine the nature of our relationships; metaphorically speaking.

The long-term sweetheart

This was probably the first bank account you opened or the account you have maintained for the longest period of time. While you may or may not treat this as your primary account, the timeline of your association makes your relationship emotional.

The casual fling

If you are like most people, the sole purpose of this account is transactional. You primarily use it to access your salary. You may or may not use other products and services offered by this bank but at the very least, you interact with them on a fairly regular basis. You may do your online shopping or impulse spending through this account.

The dependable partner

This is the bank where you have your high-value relationships. Through research and/or shopping around you have chosen them to be your personal, vehicle or home loan provider. They have multiple products-line relationships with you. You in turn have a long-term ongoing relationship with them.

The glamorous colleague

Again, if you are like most people, you probably have an account exclusively for your savings and investment needs. This may be linked to your trading/Demat account and may also have a median portion of your investment instruments like fixed or recurring deposits. This may or may not be the bank with whom; you have your high-value relationship.

The new kid on the block

This may be the flashy new bank whose interest rates, convenience or new-age-ness prompted you to engage with them. You may not be emotionally invested in this relationship and are still at that juncture where you are getting to know them better and they; you.

The dreaded Ex

You’ve probably had a run-in with such banks. Terrible service, lethargic staff, dated infrastructure, unhelpful customer service… the litany of deficiencies was so long that you to have nothing to do with them anymore. Your emotional involvement with them probably borders on hatred. Or worse; apathy!

Now take a moment to flip these observations on their head and view them from the perspective of the banks. Viola! You’ve arrived at the logic of the perfect way to segment bank audiences by usage patterns. The relationship you have with your bank falls into one of the following buckets:
Non-Customer
Low-value Customer
Medium-value Customer
High-value Customer
Ex-Customer

More on the sub-categories another time.

Why Psychographics are way more important than demographics in your marketing mix

While segmentation as a concept has been around for a while, most marketers continue to use the lowest common denominator – demographics. Unfortunately, your reliance on simple demographics probably means that you just aren’t able to attract (let alone engage with or grow) your intended target audience.

What demographics aren’t telling you?

Let’s be honest here: Demographics are convenient. They attempt to distribute your audience into neat little groups on the basis of age, gender, education levels, and occupational criteria. The system used in India comprises 12 grades ranging from A1 to E3 (unskilled, illiterate). This worked for the longest time. It had to. There was nothing else available that even attempted to look at data on the Indian population from this perspective. But like most statistics, demographics conceal much more than they reveal! And in some cases are absolutely useless in helping you predict the actions of your customers.

Consider this:

Two men might be demographic twins. Meaning: Age = Age, Gender = Gender, Urban = Urban, Unmarried = Unmarried, No Kids = No Kids… you see where I’m going with this! However no number of similarities will tell you anything about their activities online. They could be from vastly different social strata, be comfortable in very different languages, have entirely different opinions on things, might be passionate about different causes and use media very differently from each other. The mere fact that they have similar demographic footprints is no reason to club them together.

How else then?

“Who you are talking to?” is a lot more relevant than what demographic they represent. Even if you have all the demographic data, you are never going to know anything about the person in terms of what their beliefs are, what opinions they hold dear, their feelings towards various topics or things, their attitude towards life and even the thoughts they share with the world. When you understand these things about your audience you will have taken the first step towards communicating with them rather than at them!

Welcome to the world of Psychographics!

This is no new buzzword. Truth be told, psychographics have been around for a long time as well. Just that marketing folk never realized how they could really harness this data. You see, until social media exploded on the scene, the only way for marketers to gather such data was through good old surveys and questionnaires. And what people tell you they do is in reality very different from what they actually do.

That's right folks! Especially when they think you're not looking.

But that’s just the thing! 

Today, you have the ability not only to look at what your audience is doing, but to gather meaningful information about the what, where, why, how often and when as well. This can tell you a whole lot more about their attitudes, interests, opinions, thoughts and feelings. 

This information is rich enough for you to harness its power and communicate with your audience, using things that they relate to and are passionate about! This will ensure that you are communicating the right thing, with the right people at the right time when they are most likely to act on that information! Never before in the history of marketing have we been able to achieve this level of personalization or customization.

How to plan out the ideal communication process is something we will discuss in another post.

5 reasons why typical surveys don’t work

As an information gathering exercise, surveys are absolutely unreliable. Here’s a list of my top 5 peeves with them.

1.   Flawed design

Most surveys invariable contain a section that uses demographic data to pigeonhole respondents. Since people rarely fit into watertight compartments or categories, any ‘insight’ that emerges from such data is highly suspect. (Related: See a post on why psychographicsare a better way to segment here)

2.   Ratings on a scale of 1 to 10

Some things are easy to measure. In fact, we have dedicated an entire branch of science to it. Other things are much more difficult to measure. Take the all-too-human pain, for instance. While I can tell you in Scovilles how pungent the chili I had for lunch was, I’m still asked by my dentist to rate my pain on a scale of 1 to 10 as he gently probes my horribly aching tooth. Can anyone decipher “Aargh” for me please?

3.   Self-awareness

How good are you at recognizing your own strengths and weaknesses? Seriously! If I put you on the spot and ask you to rate yourself, how truthful would you be? Now how about rating others while you are at it? How much of a ‘good guesser’ are you? Now try doing that on a 10-point scale and let me know how scientifically it goes. I’ll be waiting to hear from you. I promise!

4.   Compiler bias

All too often, survey compilers are looking to reverse-engineer a finding to conveniently suit there assumptions. No matter how many trick and placebo questions are included, the tone, comprehension and response method allows compiler bias to creep in. When the question, blatantly assume you do something a certain way, how vehemently would you disagree? Or agree?

5.   Open-ended questions

If you thought 10-point scales were bad, wait till you get the dreaded open-ended question. This is around where the survey designer officially gave up and said, “What the heck! It doesn’t matter anyway.” For those struggling to interpret statistically-significant insights from the data, sorry! You should have included the helpful follow-up question right there. Now guess away.

So there! That’s my list for not trusting surveys. Let me know what your objections are. Even if you don’t agree! Especially if you don’t!