With confidence in the financial system taking a hard knock, few things are more important to banks at the moment than keeping customers happy. Talk about customer-specificity has been doing the rounds for a while; now it is time for action.

Customer-specificity is that state of mind when every customer is considered a “segment of one”; by definition, it is clear that the current laws of segmentation don’t apply. Broad groupings based on parameters such as net relationship value or average balance do not provide an intimate understanding of each customer.  That calls for a more rounded segmentation strategy.

Factors such as demography, profession, ethnicity and geography are all worthwhile parameters for segmentation, as are aspiration, attitude and transaction behaviour.  People of the same ethnic origin might speak a common language, hold similar values and perhaps have the same financial goals. Bracketing them together might bring new insights to light.   For instance, the strong savings culture among Asian immigrants makes them prime candidates for deposit products. A bank that segments customers along these lines will see the opportunity; those that don’t will not.

Of course, some banks have been quite innovative with their approach to segmentation. A bank down under segmented customers by track record, and offered to pay utility bills on behalf of those having trouble keeping up with their payments. They packaged the service as a loan and earned interest from their customers and commission from the service providers!

By segmenting in innovative fashion and breaking down the groupings further and further, a bank can get closer to its target “segment of one”. If it leverages that insight to the fullest to offer products and services tailored to individual identities, it will not only retain customers but snatch them from its rivals.

You can also read my earlier blogs:

Competitive Advantage from Innovative Management Strategies

 Strategy 1: Incremental Innovation, big bang advantage!

Strategy No. 2: Channel innovation - your hidden weapon.

Strategy No. 3: Keep customers, beat competitors!

 Strategy No. 4: Agility for the long running bank.

Strategy No. 5: Stand out for your online experience.