Segmenting bank customers for better profitability and customer satisfaction

Divided between their roles as trusted custodian of people’s money and manager of their wealth for the larger national and organisational growth, banks are placed in a piquant situation. But, then, that’s their job and most of the better managed banks are known to perform this twin role with great aplomb through customer segmentation.

Customer segmentation

At the end of the day, it all boils down to how well a bank has managed its customers to earn their individual trusts and done the spade work for developing it into a durable relationship life-cycle. Like all businesses, customers are the core drivers of growth for banks.

Customer segmentation is an effective way of managing customers and deepening understanding of existing customer base. The exercise is worth it as it helps banks identify their new customer segments that may become the new engines of growth and income for them.

Value segmentation

Though comparable to a market place, banks are not essentially buyers and sellers market when it comes to doing business with customers. Besides, customers are as varied in terms of their individual financial strengths as their different age categories, objectives, etc. This drives home the need for segmenting customers on the basis of their individual values for better management of their wealth and greater satisfaction.

Personalised marketing

As the competition between the private and state-run banks reaches a feverish pitch, to retain customers through a long relationship life cycle, the stress has been on personalised marketing of bank’s products and services. And, segmentation of customers makes this task so much easier for banks to gain larger share of customers’ wallet and hence more profit.

Market value

For the convenience of managing customers, financial gurus divide customers into five broad marketing categories on the basis of their individual market value: 1) Top value customers 2) Middle Value Customers 3) Small Value Customers 4) Former-Customers and 5) Potential Customers.

  • Top value customers of a bank are persons with larger loans and deposit amounts. They form the core of a bank driving its business and earning it continuous profits. The top value customers cost banks a lot in terms of extra customer service and exclusive deals offered to them. But they add to banks’ profitability and hence an attractive lots which banks always try and keep happy and satisfied.
  • Middle value customers include businesses associated with one bank and businesses spread over numerous banks. A section of customers under this category have business with financial institutions. They are the customers with very little potential to turn into top-value customers in future.
  • Small value customers comprise of people with limited income and hence restricted capacity to buy bank’s financial products. The segment is unlikely to be profitable for banks. Another section of customers under this category, however, hold some potential to earn low profits for banks through saving deposits over a period of time.
  • Former customers are considered a very difficult segment to re-engage with because of their past experience with banks. This particular market segment includes customers who are no longer active and use banks.
  • Potential customers include young people who have never opened an account with any particular bank or customers of other banks. Banks keen to expand their customer base try and target this section of customers with the objective of increasing their value over a period of time.

Synthesise customer data

A bank’s marketing team, experts say, should be working on ‘segment of one’ or 1:1 customer data to be able to innovate around customer experiences with synthesised customer data.

Plumb5 Marketing Platform uses an unified stack architecture to deliver 1:1 customer data using data-aware systems that store past data and new data of customers into a single stack, maintaining intelligence of every single individual customer.

This facilitates personalised marketing communication based on individual intelligence where banks can market their services and products through micro-segmentation of customers

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