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Checklist Item 4: Get KYC started with segmentation.

I think one cannot overstate the importance of customer segmentation. Unfortunately, banking segmentation has remained largely unimaginative, with customers being grouped together based on the size of their accounts. While numbers are important, they do not paint a complete or nuanced picture of the customer. True customer understanding comes from knowing who your customers really are, and that includes knowing where and how they live, what they do and what they like, think and feel.

It’s time banking segmentation became more creative. Intuitively, we know that people linked by culture or profession will have at least something in common, regardless of how much money they have in the bank. Thus, geography, demographics, language, ethnicity, gender and profession must all influence segmentation strategy.

When banks look at customers in this new light, they will spot hidden needs that they can go on to fulfil through targeted offerings. And by that I don’t mean just products and services. As they drill-down segments and get to know their customers intimately, banks can propose an optimal product-service-channel bundle at a “best price” to each customer, based on their preferences. For instance, Gen Y customers, who are mainly “transactors” could be offered savings accounts products and related services over online channels free of cost, but charged a fee for in-branch service.

Using multi-channel, real-time marketing campaigns at the level of one, would be a great example of how to achieve true customer-specificity. Isn’t that the ultimate goal of any segmentation strategy?

Also read:
Checklist Item 1: Let customer interest drive innovation
Checklist Item 2: Focus innovatively on each customer

Checklist Item 3: Hold on to your customers!

 

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Comments: (2)

Fareed Jawad
Fareed Jawad - Amazon.in - Bangalore 23 March, 2010, 04:28Be the first to give this comment the thumbs up 0 likes

Absolutely agree on this - historically this segmentation did exist at various levels of retail and lending but these days, we hardly see "Academician" / "Engineer" / "Doctor" or other segmentation. Probably a case of taking equal opportunity too far in one sense but this was dropped in favor of "you are composed of your accounts and assets" approach - more discriminatory in my opinion and may have partly responsible for some of the meltdown crises...Strangely though, this professional segmentation is still used for lead generation but it stops there :-) Great blog - Keep them coming.

A Finextra member
A Finextra member 23 March, 2010, 06:42Be the first to give this comment the thumbs up 0 likes

@Fareed: Thank you for the comment