Personalisation has never been more important for banks. Customer expectations have skyrocketed thanks to the extremely customised services of digital disruptors. But does this mean that segmenting customers for marketing campaigns is already a thing of the past?

Gone are the days when financial institutions could bring results using old-school marketing campaigns and traditional ways of targeting customers. Mass marketing campaigns keep generating lacklustre returns and conversions because customers simply ignore messages they deem irrelevant. For banks, it’s time to get timely. And relevant. And most importantly, personal.

NGDATA’s survey has found that less than 30% of customers think their bank’s offers are customised for their individual needs. They don’t believe that financial institutions treat them as individual beings and wish their banks understood them better. Young customers are a prime example. They’re used to personalised pampering from big tech companies and expect the same from their banks.

Most banks traditionally put customers into different target groups based on geographic location and demographic factors, including gender, age, occupation and financial parameters, like asset levels, credit rating or liabilities. This “gold standard” of segmentation has been widely used across industries, including banking, for several decades.

But geographic and demographic segmentation does not do the trick anymore. How come? It doesn’t offer detailed insights for better understanding customers, according to EY. More often than not, this basic information has a weak correlation with the actual needs of customers, who “are much more than the sum of their banking deposits and loans, and do not align neatly to basic or broad demographic characteristics”.

Marketing strategies based on standardised assumptions instead of deeper insights about the life stages, behaviours, attitudes, interests or lifestyles of customers are destined to fall short. “While nearly all banks claim to be customer-centric, very few are genuinely able to segment clientele based on a nuanced understanding of their needs and behaviors,” EY has pointed out.

What makes clients happy, makes banks happy too

Before they change their ways in marketing to individualise customer experience, financial institutions must first understand why people want personalisation, The Financial Brand’s Jim Marous writes. Consumers are attracted to personalised experiences because they make them feel special and unique. In other words, personalisation gives them the impression they matter to banks on an individual level.

Small surprise that 93% of companies have more success in converting prospects into customers when they personalise their marketing, according to the 2017 Conversion Rate Optimization Report by Econsultancy. There are two factors behind this:

  • Giving consumers the impression that they aren’t receiving something generic makes them feel in control, which, in turn, makes them happier. Banks can create this impression by sending offers based on past behaviours that help predict future activity.
  • Most people hate digesting floods of information. Personalisation makes consumers think they are receiving less of an overload. A bank that knows its customers well can help make the right choices that best match a personal situation.

Customers also like it better if messages or offers from their banks are relevant. In fact, about 33% of people who abandon business relationships do so because of the lack of personalisation, according to Accenture. Personalisation is the most important factor in several banking decisions, including joining a new bank or deepening a relationship with an existing financial institution, The Financial Brand says.

Let’s not forget the key role technology plays here. Personalisation is mostly an automated process, which is based on collecting and analysing customer data. Artificial intelligence tools and advanced analytics allow banks to go one step further in personalising marketing campaigns by looking at behavioural information and micro-segmentation.

Behavioural segmentation lets banks further differentiate customers, who would otherwise be categorised into the same segment based on demographic or other traditional aspects. Combining behavioural marketing with micro-segments, the smallest groups of customers with the same demographics and social behaviours, works wonders in many cases.

In an example of how overlaying financial behaviours results in a sharply differentiated segmentation, McKinsey has developed five distinct customer groups in the credit card market. They’ve found, for example, that selling credit cards to individuals in the Prosperous and content group should involve offering rewards, while acquiring and keeping Deal chasers calls for a balancing act, as they see themselves as pitted against issuers in a win-or-lose game.

Hyper-personalisation and the segments of one

Beyond enhancing segmentation strategies, marketing strategies are increasingly moving towards hyper-personalisation. Capgemini has defined it as the advanced and real-time customisation of offerings, content and customer experience at an individual level. Many industry experts even believe the ultimate goal here should be building a segment of one for each individual customer.

Wonder what benefits the segments of one could bring? Look no further than big tech, e-commerce and social media giants, aka the true pioneers in one-to-one marketing. Amazon, for example, monitors what a customer is buying or viewing in real-time and dynamically changes the page to feature relevant items based on the customer’s behaviour.

But hyper-personalisation has limitations too. One of the most important factors limiting the power of hyper-personalisation is the issue of privacy and the use of personal data. Customers are reluctant to share personal information they consider sensitive. To help overcome fear about personal data, companies should first be transparent about how they use customer data.

Capgemini has also warned that hyper-personalisation will not replace traditional segmentation as “it is just not about obtaining segments made up of single individuals, which would essentially tantamount to only focusing on the pixels and not being able to see a consistent picture on the whole”.

Segments of one: Customer insights in digital banking

Segments of one: Customer insights in digital banking

Download W.UP’s white paper to find out how you can benefit from data-driven customer insights, how to target your potential customers in the era of the segments of one, and how to boost digital sales with highly personalised marketing campaigns. We show you some of the most innovative customer insights, along with easy-to-implement use cases to inspire your next sales strategies.

Download white paper now

Let’s keep in touch

Stay in the loop about the latest digital banking news and expert analysis.