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Does Customer Segmentation Work for Banks and Credit Unions?

September 26th, 2019

There are a variety of ways to track and gather quality customer feedback, but there are even more ways to analyze all of that data and produce valuable insights. More data is not always a good thing—it’s the right data that you need to hunt down and leverage in the correct way to improve your customer service strategies. So, where should you be looking, and what should you be doing with the information you find?

Typical tracking studies are meant to create and help attribute accountability, providing motivation for service improvement. They rightfully analyze results from a geography or institutional hierarchy point of view. But to get the most out of your research spend, you should also be looking at things through the lens of customer segmentation. When employed correctly, segmentation can yield significant insight into how specific sets of customers feel about the way they’re treated by your financial institution.

Notice that we said, “when employed correctly.” Here’s where segmentation can go wrong—or where it can prove invaluable for financial institutions looking to prepare their front-line staff members to better identify, meet, and exceed customer needs. 

Basic Segmentation

Let’s start with this: if you’re not already segmenting your customer base, you should be. But you have to be smart with the individual segments you select, or you won’t learn much that you didn’t already know.

Traditional customer segmentation methods rely largely on demographics—physical qualities such as age, education level, income, and geographic location. These categories are still valuable in the banking world; indeed, many financial institutions are still trying to figure out what millennials want in a bank or credit union. But they can also give the false impression of continuity. Not all millennials are alike, and not all college-educated adults at similar income levels have the same needs. Some of your incoming Gen Z customers may actually have more in common with some of your older baby boomer customers—it’s hard to say without identifying additional areas of overlap. The goal is to recognize previously unseen connections within your customer base, and basic segmentation just doesn’t provide that.

Evolving Approaches to Customer Segmentation

Unfortunately, basic segmentation strategies are no longer enough to keep financial institutions ahead of their competition. The solution? Smarter customer segmentation that can actually provide insight into who your customers are, what they want, and how you can give it to them. By tailoring your segmentation processes to focus on more valuable demographics and areas of interest, you can come much closer to getting inside the mind of your customers. Check out these novel approaches to customer segmentation. 

Psychographic Segmentation

While segmenting your customer base by demographics is still valuable, it’s time to take a look at the less tangible characteristics of your customers. Psychographic segmentation focuses on behavioral commonalities like saving patterns, online behavior, and financial skills or goals. 

How many of your customers conduct the majority of their financial business transactions online, for example, and what else do those users have in common? Frequent social media use? A lack of convenient online banking solutions? Analyzing these segments can not only provide insight into who your customers are, but it can also tell you why they’ve chosen your financial institution over others, what products or services they need, and how you can attract and retain more customers like them. To get the most out of your customer service research and make segmentation work for your financial institution, you’ll need to take the time to identify those key traits that you want to study.

Banking Software and Smart Customer Service Surveying

Now that you’ve identified some key segments of your customer base you’d like to investigate, how do you go about amalgamating and analyzing this data? Luckily, banking software has evolved along with customer segmentation methods, and you don’t have to put pencil to paper or crunch numbers on a calculator to visualize the results of your data collection. With the help of carefully targeted customer service surveys, you can access the data you’re interested in studying. And with smart reporting tools, you’ll be able to view that data exactly as you need to see it. At Avannis, we can break down your survey scores in multiple ways, whether you’re interested in brushing up on those traditional demographic groups or investigating the success and sentiment surrounding a particular product. 

For a different look at your customer base, you can create segments from your customer survey results themselves by dividing respondents into Promoters, Detractors, and Passive customers. This segmentation method can be used to identify which customers will be able to help the bank grow.

Generating Actionable Customer Service Insights

Did you know that 86% of customers think it’s very important for their bank to ask their opinion? At Avannis, we make asking easy—by doing it for you! After 20 years of experience measuring and analyzing customer feedback, we’ve assembled quite the arsenal of strategies for strengthening the customer experience. Whether you need help getting your hands on the data or segmenting it in a way that reveals those all-important behavioral insights, we can help. Contact us today to learn more about our measurement methodologies, and don’t forget to keep up with us on Twitter and Facebook!