Michael Bartoo, SVP, Marketing Client Relationships, was featured
in the ABA Bank Marketing article, Small Banks, Big Data and the Personal Touch.
He describes the attitude toward data at many of the banks he works with. “We
get overwhelmed with big data,” he says. “The term ‘big data’ frightens us. And
it should—because it can be incredibly overwhelming.”
The ability to reach current
customers is often cluttered and complicated from a marketing perspective. In
order to match the right offer and product to the right customer, various
segmentation methods can be deployed. Interestingly, the process of
segmentation is decades old, but this discipline still holds merit and has
advanced dramatically with today’s analytical tools. These tools give marketing
teams the ability to divide a client base into many micro-segments based on a
variety of data elements. From a practical perspective, a firm can deploy
multiple segmentation methods (geographic, demographic, psychographic or
behavioral) depending on the strategy to be executed.
Geographic Segmentation
Geographic segmentation is beneficial for a large-scale
campaign execution when the product to be promoted is largely understood and
needed by a wide and diverse group of consumers. Segmentation of this type
generally focuses on locating a center point, for example a branch, and
radiating from that center point in terms of miles, census tract, ZIP Code, or
a predetermined radius. This approach is also beneficial when the socioeconomic
status of the individuals within the geographic segment is similar. The
negative aspect of geographic segmentation is the assumption that everyone with
the geographic footprint is identical, displaying the same predictors of
behavior. Exceptions to this rule are the banks which use geography as part of
their SEO/SEM strategy and highly target based on radius plus the appropriate
demographics. This strategy can focus on the collection of email addresses in
exchange for email offers where the direct response can be tied specifically to
the marketing channel.
Demographic Segmentation
Demographic and socioeconomic division are perhaps the most
widely used forms of marketing segmentation; however, these methodologies focus
on the descriptive nature of an individual as opposed to making a prediction regarding
the desire to purchase a specific product. One of the largest benefits of
demographic segmentation is its simplicity and cost. It can easily be explained
to frontline staff and tends to be relatively inexpensive to acquire. The
downside of this methodology is the assumption that everyone within the same
demographic behaves identically. In other words, there is little understanding
of customer differences if one views demographics only. Recognizing that demographic
and socioeconomic segmentation play an important role in purchase patterns of
financial assets, one must also recognize the importance of psychographic
attributes to increase a firm’s knowledge of the consumer.
Psychographic Segmentation
Psychographics build a mental model of consumer
buying patterns in the context of the consumer’s life cycle. This form of
segmentation allows marketers to gain deeper insight into the desires of the
consumer beyond simple facts such as age or income. In other words,
psychographic data defines why consumers do what they do. This is important
particularly from a financial marketing perspective as the use of
psychographics, combined with demographic data, provide the organization with
the ability to develop the appropriate products and marketing strategies to
gain trust with the customer. If an organization is to adapt psychographics as
part of their overall segmentation strategy, they must be aware that elements
such as lifestyle, interest, attitudes and personality are fluid over time and
may not be practical for a small- to medium-size institution lacking the
in-house analytical power to constantly monitor and validate psychographic
model assumptions.
Behavior Segmentation
Banking is a mature market. In large part,
there are only two ways to significantly increase market share. One, acquire a
competitor, or, two, take business from one’s competitors through aggressive
marketing strategies. From a marketing perspective, the use of behavioral data
is a superior tool both in its ability to increase sales as well as its ability
to do so at far less cost than broad-based communication approaches. No longer
can a financial institution simply target by socioeconomic factors,
demographics or psychographics; it must use behavioral cues to further differentiate
between consumers within a demographic. Practically speaking, behavioral
segmentation for banks focuses on tactical analysis of credit data, propensity
models and data gleaned from ACH, online banking or credit card transactions.
Armed with this knowledge, financial institutions can create specific marketing
communications based on recent transaction data. The nature of behavioral
segmentation provides the opportunity for real-time communication across a wide
range of marketing channels, including direct mail, email, point-of-sale devices
and mobile channels, as well as personal contact at the branch or call center
level. The downside of using behavioral data as a marketing driver is that it
does require detailed, in-depth data sets, models and market testing. The
importance of action when using behavioral data is critical. In order for the
use of behavioral data – and its considerable expense –
to make financial sense, an organization must act immediately on the triggers
that are produced with this type of analysis. This means near real-time
marketing reaction to behavior events that will drive product purchase.
Once the optimal segmentation strategy has been agreed to,
and the expectations of performance have been defined, the marketer must turn
attention to the next most critical piece in the communication equation: the
message.
One of the most pivotal roles organizations play is connecting
with customers on a social and emotional level. By using customer analytics and behavioral
modeling, organizations can create relevant offerings that their customers want
and need.
Your job is to create the right set of experiences for the
purchase and use of your products and then integrate those customer experiences
into your organization’s processes. This idea of process integration can be
reframed into the focus of what matters most to your customer, or – better
stated – what the customer values.
In retail banking, the five elements that are considered the
most important are:
Quality
Providing Access
Wealth Transference
Avoiding Hassles
Reducing Anxiety
These values can be a combination of emotional, functional,
life-changing and social factors. So, when a customer says, “I bank with you
because of convenience,” the value of this statement means you are saving them
time (functional), making it simple to transact (functional) and you are
reducing the effort it takes for them to conduct business (emotional).
Connect with your customer regarding what matters most to
them at the time it matters most. Automate your marketing and respond to
customer behavior quickly to maximize the impact of your communications.
For example, through research you have determined you have a
segment of millennials who are consistently overdrawing their accounts at the
point of sale. Rather than attribute this behavior to the irresponsibility of
youth, you instead opt to send an email the next day that provides them with a
convenience, hassle-free way to sign up for overdraft protection.
In another segment you find customers who have savings
balances that average 3X the normal amount and you note which of these
households have children, then every 90 days you send them an investment letter
talking about heirloom investing.
Your ability to define a need based on real-time behavior,
and then link that behavior to a service or sales opportunity, will be what
sets your organization apart as a premier provider of quality.