Taking Customer Segmentation to the Bank!
Posted by Nancy Porte on Thu, May 05, 2011
My daughter and I are loyal customers of the same bank. I visit my local branch every Saturday morning to complete my banking tasks, including depositing a few checks and withdrawing cash for my weekly spending. My daughter went with me one Saturday morning to open her account – and hasn’t been back since. Not because she is unhappy, but because she does all of her banking online. We are two customers of the same organization – with completely different needs and interactions.
Identifying the different types of customers you have is important as you create your organization’s series of Customer Experience Wheels. The Customer Experience Wheel is a highly visual tool used to present and discuss an organization’s complex customer ecosystem. Each customer segment’s process – and, ultimately, the detail of the wheel – is unique; however, the process of developing the wheel can be applied across various segments, organizations and industries.
Did you think that customer segmentation was only for marketing departments as they build campaigns to attract new customers? As it turns out, understanding the different types of customers already served by an organization is important for many reasons. And it is vital for developing an experience wheel for each of those segments. Different customer groups interact differently with your organization. So if you are serious about looking at the experience from the customer’s viewpoint, the more you know the better. By understanding the motivations and needs of each customer group, effective customer programs and customer retention strategies can be developed, resulting in greater profitability of each segment.
Customer segmentation begins with database analysis. Scrutiny of CRM data will result in defining clusters of customers with similar behavior. Groups can be defined in a number of ways, including geographic (country, state, type of neighborhood), behavioral (product purchased, frequency of purchase) or demographic (age, gender, income, occupation) or psychographic (lifestyle, life cycle, activities, interests).
Once the groups have been defined by the data, you can confirm effective segmentation by performing surveys. By taking a small random sample of each customer group and asking them about who they are you will accomplish two things. First, you will confirm that the behavior is different among the groups you have defined (confirming that you have defined the groups correctly). Second, you will start learning about the behavior of each group. This is classic market research and there is plenty of available literature on the subject. Some may recommend hiring an expert for this step. But that isn’t always necessary. It doesn’t have to be perfect; it just has to be useful. So, looking at CRM data can tell you what they do – survey results can tell you who they are.
Now it gets exciting! You are beginning to learn about the motivations and needs of each customer group. More importantly, you are getting to know your customers. They are moving from segments to personalities. Some organizations (including ours) choose to create personas for each client, giving them names and associating them with particular behavioral traits and demographics. For example, “Colin” could be the type of banking customer who uses the branch in person, has a checking, savings and investment account and does not do any banking online. But “Samantha” could be the type of customer that only has a checking account and does all her transactions online. Each organization will have different segments and personas for their specific business but the concept of segmenting is the same.
Our bank has learned how to provide consistently great experiences for two very different types of customers. Has your business accomplished the same feat?