Customer Segmentation - A Bygone Era
Until recently, reaching out to customers in a personalised way meant using customer segments - grouping people together based on shared demographics or other characteristics.
But in the age of data and information, we’ve come to understand that this traditional way of segmenting customers is too generalised and simply does not work. Therefore, it’s time to evolve from these broad segments.
In order to build a meaningful relationship with customers, banks need to celebrate their diversity. They can do this by harnessing hyper-personalisation.
Imagine your team has been tasked to increase uptake of investment products. They reach out to customers who are likely to be interested in investments and use customer segmentation by demographics to pick an audience:
- Age range: 30-40
- Gender: Male
- Annual Income bracket: €55 - 70K
The campaign is sent out to this segment who then receive this insight in their digital bank. If lucky, this might yield some results.
However, there are a number of customer characteristics that influence a person's ability to invest that your team is not taking into account.
- Do they have erratic spending habits?
- Are they paying off an old debt?
- Are they providing for a large family?
And worst of all, what happens so often with these blanket campaigns is that you find someone who is actually interested in this product recommendation, but after clicking through, they discover that they aren’t actually eligible for this particular product.
Not only has the bank lost the sale, but has also lost the trust of the customer, which is hard to come by.
Now let’s engage using hyper-personalisation
When engaging with your customers, the most important step is to define your audience. The audience should be narrowed down enough so only customers who will truly benefit from the recommendation will receive it.
In addition to any relevant demographic criteria, your team would add that the customer:
- Has a savings account with a balance of at least 6 months of salary
- Makes regular deposits to their savings account (at least for the last 9 months out of 12)
- Has been cashflow positive for 12 months
These criteria should ensure that the customer receiving this message is financially stable enough to be able to engage with an investment opportunity.
Your team could even narrow the audience further, making a greater impact with the customer:
- If the customer has shown interest in sustainability, e.g. engaging with a carbon footprint tracking solution, support the customer on that journey by offering green investment options
- If the customer has invested before, you can offer them “riskier” opportunities that could yield larger returns
By using hyper-personalisation, you can ensure that the product, the message, and the goal are aligned with your customer’s wants and needs. Not only are you maximising the chance of an actual purchase, but you are showing your customer that you are thinking about them all the while fostering a connection that will yield trust, loyalty and future engagement.