A new study on US consumer banking preferences states that customer segments created as recently as one or two years ago will need to be replaced based on the new market realities.
The BAI Research study The New Dynamics of Consumer Banking Relationships surveyed more than 3,200 US consumer households and had other surprising revelations – for one, customers are eager (yes, eager!) for banks to approach them with additional products and services to address their needs. Yet, they perceive banks as slow to do so.
Why are banks missing potential cross- and up-sell opportunities? Because the aforementioned out-dated segmenting strategy used by most banks is based solely on income, age and other broad demographic factors.
The BAI study, sponsored by SAS, segmented consumers based on personal financial attitudes and age to come up with these five new categories that better fit today’s environment:
- Marginalized Middles (36% of total)
- Struggling Techies (21%)
- Disengaged Skeptics (18%)
- Satisfied Traditionalists (18%)
- Sophisticated Opportunists (7%)
As stated in the executive summary from BAI, there is incredible potential power in represented in these segments. For example, consider that Struggling Techies and Sophisticated Opportunists together represent just over one-quarter of a large bank’s customer franchise. A 4 percent gain in share of loan wallet from Struggling Techies would translate into 46 percent growth in loan portfolio for this segment. A 5 percent gain in share of loan wallet from Sophisticated Opportunists translates into 26 percent growth in loan portfolio for that segment.
“With analytically-driven, granular segmentation, a financial institution can identify customer segments that are most likely to respond to specific campaigns or marketing actions,” says David Wallace, Financial Services Global Industry Marketing Manager at SAS. “This approach along with other predictive modeling and optimization capabilities can help make the most of each individual customer communication, which maximizes the economic outcomes within the financial institution’s resource and budget constraints.”
For more, download a summary of the study, The New Dynamics of Consumer Banking Relationships, and check out these overviews from BAI and Bank Systems and Technology.