Data & Analytics

08:45 AM
David M. Wallace, SAS
David M. Wallace, SAS

Segmentation Can Help Banks Find Tomorrow's High-Value Customers Today

Banks must retain their current high-value customers while also trying to attract the high-value customers of tomorrow, notes David M. Wallace, SAS. A BAI study, he says, suggests how to do so via the latest segmentation strategies.

How do you find — and keep — tomorrow's high-value customers? That's an important question for banks faced with a slow-growth environment. For some institutions, investing heavily in the latest technologies to woo young, technologically savvy customers would seem a strong bet. And it might be — but only if banks have done their homework.

Financial institutions understand that they need to keep their high-value customers, while also trying to figure out how to lure the high-value customers of tomorrow. Segmenting customers only along rigid age and income lines does not accomplish this.

A recent study by BAI Research helps explain how careful, detailed customer segmentation can make a difference both in choosing new platforms on which to deliver services, and in marketing them in the most cost-effective manner possible. In addition, the BAI report notes something that financial institutions will find reassuring: If you aim the right pitch at the right group of consumers, they'll welcome it.

Asking the Right Questions

Financial institutions know a customer with a loyal streak is more valuable over his or her lifetime than one who hops from bank to bank. But how do you figure out who these customers are now — and in the future? And what will it take to bring them in and make them happy? Which services matter, and why?

[A New Customer Experience Leader: Q&A With USAA's Jeff Easley.]

In its report, "The New Dynamics of Consumer Banking Relationships," BAI has identified an interesting segment that it calls the "struggling techies." They are young and have the lowest income of the middle-class customer group that BAI surveyed and analyzed. These individuals have the lowest deposits and fewest loans — and are the biggest users of mobile banking and mobile bill pay.

It's easy to think, "Interesting category, let me slap a 'Do not market' sticker on this group." In addition, given this group's heavy use of mobile banking and mobile bill pay, institutions that haven't invested in these areas might wonder if they are worth it. Think again. Struggling techies — a category that didn't exist the last time BAI researched consumer trends in 2003 — have great growth potential and a loyal streak and are quite receptive to well-calibrated pitches. Drawing them into your institution early can turn them into a very profitable segment later on.

While struggling techies are the youngest group with the lowest income, according to the report, they are active in managing their finances and are very receptive to financial institutions proactively pursuing their business with tempting offers. A large percentage use online, mobile and debit services frequently. Although they have the lowest deposit balances of any group segmented, they have the highest share of wallet at their primary financial institution.

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