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.
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