A bank’s success mantra is building a customer-centric banking platform. As simple as it sounds, it is tricky as it involves volatile customer expectations and increasing competition. However, those banks that go an extra mile to make a customer happy will get their reward. Here’s an open secret- bankers have a vast amount of customer data and leveraging it the right way is the key behind building a customer-centric platform.

To leverage customer data, first, it has to be systematically segregated or as what we term ‘Customer Segmentation,’ which simplifies both unstructured and structured data and provides a comprehensive view on customer requirements.

Why Customer Segmentation?

According to the Everest research report, these are the challenges faced by the marketers:

  • Identifying Sales leads
  • Improving the conversion rate of digital sales
  • Grading leads based on the conversion chance
  • Low marketing campaign response
  • Declining conversion rate by Social Media

These issues arise because of the traditional marketing strategy followed by the enterprises which often gets rejected. Most of us have rejected phone calls related to loans from different banks or post-paid broadband connection offers, etc., and it is a repetitive process. This ‘one-size-fits-all’ marketing approach is a long lost, inefficient process, and it applies to the banking industry as well. The modern approach is to target customers accurately like Amazon, which has a category ‘Top picks for you’ that is a curated list of items based on customers’ past purchases. Based on our instincts, we check this category and sometimes make a purchase as well. See the difference?

To target the financial products to the right customers, marketers have to understand consumer requirements completely and the best way is through Customer Segmentation. Customer Segmentation has become marketers’ guardian angel as it defines a group of customers with certain attributes paving way for targeted product campaigns.

Advantages of Customer Segmentation

Here are some advantages of Customer Segmentation:

  • Personalization

When you understand your customer’s need or priority and then promote products, customers feel that you understand them and hence, they build a loyal relationship with your bank. To make this a reality, customer segmentation provides a simplified real-time report of customer information that helps to align your products with their needs accordingly.

Recommended Read: The Ultimate Customer Personalization: ONE Banking Solution for ONE Customer

  • Improved targeted marketing

Customer segmentation divides the customers based on different criteria in advance level, which helps marketers target their products to the right set of customers.

  • Explore new opportunities

As the entire process of marketing simplifies due to strategically segmented customer groups, marketers can spend time to explore different and innovative campaigns to attract customers.

  • Customer Retention Guaranteed

As customer segmentation helps to personalize your products, customers become more loyal to your bank. This also means that you can improve your products based on the feedback provided by these customers.

Recommended Read: From customer experience to customer retention- Aspire’s CX/OX suite

  • Improved ROI

With targeted marketing, you approach customers at the right moment, which solves the customer’s issue or help in financial planning. Such customers will always prefer your bank and recommend your services to others who can be your potential customer, which improves ROI.

  • Increase in cross-selling and up-selling

Only by understanding customer preferences completely, banks can promote cross-selling and up-selling. Thanks to Customer Segmentation, that analyses past purchases of customers and segregates them in certain categories. Based on this, marketers’ cross-selling and up-selling campaigns yield fruitful results.

Customer Segmentation Strategies

These are the most common types of customer segmentation strategies:

  • Demographic

A retired 50-year old woman has different financial requirements than a 25-year old travel blogger. Similarly, a homemaker’s financial requirements differ from that of a businesswoman. It is nearly impossible for a single campaign to cater to all the above different requirements.

Hence, demographic customer segmentation comes into the picture where customers are divided based on general demographic aspects like age, gender, income, education level, etc. Using one or more such factors, a refined group is created which helps marketers to sell their offerings based on the common interest of a particular group.

  • Geographic

As the name suggests, geographic customer segmentation is the division based on location. Generally, this segmentation strategy applies for large-scale marketing, which focuses on products that are essential in a particular location.

One assumption to avoid in this segmentation is to consider one product to be common for everyone in the selected location. Marketers must carefully analyse each product or campaign that can work best based on this segmentation.

  • Lifestyle

Lifestyle-based customer segmentation is created concerning customer’s likes and dislikes. A simple example is the way Netflix or Amazon curates a list of movies/series of multiple genres just for you. These platforms understand your likes based on your previous experiences.

By understanding customer needs based on their previous transactions or purchases per se, marketers in the banking industry can analyse what customers like and promote products accordingly. Although, this segmentation involves a lot of research, it helps bankers understand their customers thoroughly. This way, they can promote student loans for customers interested in higher studies and home loans for customers looking to purchase an apartment.

  • Psychographic

Psychographic customer segmentation is grouping customers based on their interests, sentiments, attitude, behaviour, etc. It is divided based on the customer’s attitude on financial offerings or customer’s loyalty towards a bank. Using this segmentation, bankers can understand how and when to approach their customers.

  • Life Stage

A college student will have different financial interests or requirements than an entrepreneur. One of the advanced customer segmentation is with respect to the phase of life of a customer. Banks considering this segmentation will have the chance to outperform and promote their offerings effectively.

A Takeaway

We agree that understanding your customer’s preferences, likes, dislikes, behaviour, age, and a hundred other aspects is a hard nut to crack. However, with intelligent expertise by your side, even this herculean task can be simplified. With AI, ML, and other cognitive technologies, Aspire Systems’ tech experts have proven their expertise in Customer Segmentation by helping top banking clients worldwide. From providing a master version for each customer to predicting next best action, we stand by your side and help build a customer-centric platform.