Personalisation has never been more important for banks. Or anyone, really: customer expectations have skyrocketed in virtually every industry, 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?

For the most part, yes. Gone are the days when financial institutions could bring results using old-school marketing tools and traditional ways of targeting customers. Mass marketing campaigns today generate lacklustre returns and conversions because customers will simply ignore anything they deem irrelevant. The message this sends to financial services providers is loud and clear: it’s time to get timely, folks. And relevant. And most importantly, personal.

Having surveyed 47,000 banking and insurance customers across 28 markets in Asia-Pacific, Europe, Latin America, North America and Middle East and Africa, Accenture has found that  “around half of consumers expect financial providers to offer propositions addressing core needs, and not only traditional financial services”. Meaning that instead of home loans they want all-round property-buying solutions that include mortgage, home insurance coverage and an additional loan for furnishings.

The other thing they want is personal attention. One in two respondents in the global financial services consumer survey would welcome personalised financial advice from banks tailored to their personal circumstances, such as analysis of spending habits and guidance on how to manage money. What’s more, almost two-thirds of them would like to see insurance models linked to lifestyle and behaviour, such as car insurance linked to driving habits. 

Too bad that 94% of financial institutions are still unable to deliver on the personalisation promise, The Financial Brand reports. No wonder: most banks still 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 points 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 at 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 information overload. A bank that knows its customers well can help make the right choices that best match a personal situation.

Let’s not forget the key role technology plays in all this. Personalisation is mostly an automated process based on collecting and analysing customer data. Banks are definitely in pole position here, holding vast amounts of precious data that can be meaningfully translated into individual and personal experiences. “This insight, if deployed at the right time, with emotional intelligence, can enhance the customer relationship,” Deloitte explains, adding that “using predictive analytics and what is already known from transaction data can be made relevant and useful.” 

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.

Hyper-personalisation and the segments of one

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

Wondering 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. In fact, as BCG’s recent research shows, the majority of people who are either open to or actively looking into changing banks would switch to banking with a tech company, such as Amazon, Facebook, or Google, in a heartbeat. 

What’s big tech’s big secret? A non-secret: they’ve simply spurred a desire for more customised interactions and a willingness to trade data for a better experience, BCG reveals. And if you think that the issue of privacy and the use of personal data will put a halt to this trend, think again. In its 2019 Global Financial Services Consumer Study, Accenture has also found that more than three-quarters of customers are willing to share the data required for tailored offers, more efficient and intuitive services and more competitive pricing. 

This post was originally published on 24 August 2018 and has been updated to include recent developments.

Segments of one: Customer insights in digital banking

Segments of one: Customer insights in digital banking

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