BAI Banking Strategies published an interesting article yesterday titled, Resolutions for 2011. While I generally agree with the resolutions suggested in the article, there are a few points that deserve special attention as bankers look ahead to 2011. Each of these point to the importance of segmentation:
Embrace segmentation – in both strategy and daily execution. Let’s face facts: not everyone wants to bank with you. But what do those individuals who do bank with you have in common? Take a hard look at the attitudes, behaviors and demographics of your most profitable customers. Work to deliver on what these customers value most. And build tactical segments to drive higher profits and better service to targeted customers (applied to things like exception pricing decisions, online marketing offers, and the like).
We’ve said it before, and we’ll say it again, you can’t be all things to all people. Still, this is an ineffective approach followed by too many financial institutions. At the very least, bankers should acknowledge that some customers are more profitable than others. From a business standpoint, it only makes sense that more profitable or attractive customer segments would be favored over the less profitable or attractive. As segmentation data becomes more readily available, bankers should be embracing segmentation in 2011.
Invest to build better marketing expertise. Mine available data with the goal of creating more constant communications, especially with your best customers today and those customers likely to buy additional services from you. Better customer insights should serve to enable more relevant messaging and proactive customer development strategies. In addition, resolve to view marketing as a strategic function charged with helping to lead the transformation back to a more customer-centric business model.
Marketing needs to be more important, period. And marketing should be driven by good data and information about current customers and the markets served. Some of this data can be collected through the process of segmentation (see the point above). Other data can be collected through a market assessment. Without customer and market data, marketers are left to make a series of guesses. And in today’s marketplace, even “educated guesses” aren’t good enough.
Create a unified delivery channel strategy. Sure, everyone wants to be able to offer the latest alternative technologies to their customers and everyone would love to be able to offload some of the expense associated with traditional branch banking. Nevertheless, it has become clear that alternative channels will not replace more traditional delivery systems in the near future. Work to create a clear picture of how the entire delivery network – branches, ATMs, online, mobile, etc. – is utilized by different segments of the customer base and think about how these channels can best work as a whole to deliver the desired customer experience.
Again, decisions relative to delivery networks become easier to make with a clear picture of the target segments’ needs, values, and preferences. The branch network isn’t going away, but bankers still need to make important decisions about delivery channel resource allocation. An understanding of the target segments will inform where those resources are best spent.
For more about the importance of segmentation, the process involved, and the benefits, check out yesterday’s post: Research, Refine, and Reposition: Three Steps to Taking Advantage of New Opportunities Amidst Changing Consumer Behaviors.