The power of customer segmentation insights

By Pamela Reich

Strategies for bank customer acquisition vary, as bank marketers know all too well..

Recent segmentation studies of bank customers and prospects provide insights into factors that influence bank selection. Acknowledging that there may be significant differences among your defined customer segments, these insights can help bank marketers fine-tune marketing planning in support of customer acquisition goals.

The consumer market

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In two nationwide surveys of U.S. consumer banking customers from Deloitte and KPMG, individuals ranked seven drivers in selecting a new bank.

1. Simplicity. Consumers want the option and flexibility to bank based on their comfort, removing friction and complexity from the process—especially when it comes to account opening and day-to-day account management. The ease of doing business equates to a positive customer experience. It is also measured by the ability to bank when and how customers choose.

2. Product/service variety. Although most banks offer the same basic products, consumers are motivated to choose a new bank based on the availability of a range of accounts and services to meet current and future needs, especially personalized products relevant to their lifestyles. Consumers may be more likely to choose and stay with just one bank if that bank can meet all their lifestyle needs.

3. Value for money. Perceived and actual value is an important driver for many consumers. They want to know the monthly and miscellaneous fees that may affect them—and ways the fees can be waived. Being transparent about fees up front will help build trust and influence purchasing decisions.

4. Personal relationship. A positive experience with a banker, whether on the phone or in person—even before a relationship is established—motivates many customer segments to do business with your bank. Having confidence that a banker will be there to provide advice and guidance is important to customers who are just starting out, as well as to those with more robust and sophisticated financial needs..

5. Specific product/service. Consumers often seek accounts with innovative features that are not universally available. Digital innovations, including those built on data intelligence and personalization, are increasingly important as consumers often measure customer experience by the technology they rely on for everyday banking.

6. Brand. Trust in a bank’s brand is built over time. Consumers often choose banks based on reputation and perceived value of the brand. More than ever, consumers are motivated by confidence that the bank is a strong ally with integrity to serve their best interests.

7. Personal safety. Data and fraud protection are increasingly important to American consumers as they are more reliant on technology to manage their money than ever before. Consumers want to feel their money is safe and their identity is protected, that their bank is doing everything possible to prevent the kinds of data breaches that are all too prevalent today.

But all consumers are not alike. A 2021 survey of personal banking customers of a midsize community bank helped define distinct segments to better understand their behaviors, attitudes and preferences, looking to identify some important differences in the reasons they would choose a new bank. Perhaps not surprisingly, given that particular bank’s high concentration of older, middle-income homeowners, the same four factors influenced bank selection across all segments identified:

  • Smaller bank, local feel
  • Convenient location/flexible hours
  • Bank’s reputation
  • High-touch human connection

While digital innovations did not rank high among existing customers of the surveyed bank, general market studies strongly support a focus on technology and convenience to attract younger customers to the bank.

Business and commercial banking

Analysis of overall dynamics of the B2B market, from small businesses to companies with revenue over $100 million, as well as segmentation research of current and prospective commercial clients of a small community bank, sought to identify the most important reasons for selecting a bank as a financial partner. Across the board, five key factors emerged:

1. Reputation. Companies care about a bank’s reputation within the community, demanding it operates from a place of empathy and values. A bank’s customer service reputation is the most important factor for long-established businesses.

2. Cost. All businesses value fair pricing, competitive rates and a low cost of banking. However, high fees and transaction costs are more of a churn cause than a bank selection factor.

3. Convenience. Branch locations and hours of operation are important in addition to the flexibility offered by digital services. Businesses want to have a mix of communication options with their bank.

4. Customized products. Companies want banks to cater to their business with products that meet specific industry needs at each stage of growth. They want relevant solutions for their business, and they want these solutions when they are appropriate for their needs.

5. Industry expertise. Working with bankers who understand the nuances of individual industries and can provide tangible solutions is important, especially to larger firms.

Additional factors influencing bank selection include having a relationship manager; availability of financing; and recommendations and advertising. Companies want to have a single point of contact, and they expect the RM to provide customized ideas, tools and solutions for their business, as well as offer responsive and flexible communication. Meanwhile, speed, ease and flexibility in securing financing is the most important factor in selecting a bank for companies in business fewer than five years. In fact, this factor ranked high for more established and larger companies as well. And finally, larger companies value learning about positive experiences from other business owners, and are more often influenced by advertising.

What should bankers do?

A one-size-fits-all approach to new customer acquisition strategies is not likely to be optimally effective. Segmentation analysis of your customers—and understanding what matters most to them—will allow you to develop targeted products, services and sales strategies.

Prioritize the segments that are most profitable for you today. Use your segmentation insights to fine-tune messaging, customer experience and marketing strategies. The more you learn about your customers and what motivates them, the better equipped you will be to grow your base with loyal, profitable and satisfied customers.

Pamela Reich is director of communication strategy at MKP communications, a New-York based marketing communications agency specializing in strategies and program implementation for the financial services industry.