Unleashing The Power Of Segmentation – Igniting Interest to Drive Deposits
When it comes to driving deposit growth, segmentation is an important tool for financial institutions and banks. Banks can target marketing campaigns by dividing their customers into segments according to factors like age, income and financial needs. A bank might identify a group of young customers who have just begun to save for retirement. The bank can encourage deposits by offering attractive interest rates and cash rewards to customers who open a savings account. The bank can also identify another segment of wealthy individuals looking for investment options. The bank can also capture deposits by offering personalized investment solutions and services for wealth management to this segment. In both cases segmentation helps the bank understand the needs and preferences of the different segments, and tailor its marketing and offerings accordingly.
Segmentation, in addition to targeted marketing can also drive deposits. It allows banks to optimize the product and service offerings. Banks can determine the most popular deposit services and products by analyzing the preferences and behavior of each segment. The banks can then allocate their resources to the most lucrative segments and prioritize marketing efforts. If a bank finds out that a certain segment of its customers prefers high yield savings accounts, it can improve and promote these accounts in order to increase deposits. Banks can better serve their customers by continuously monitoring and analysing the performance of different segments.
Overall, segmentation is a key factor in driving deposits. It allows banks to better understand their customers’ needs and preferences and tailor services to them. Segmentation allows banks to capture deposits more effectively through targeted marketing and improved product offerings. Banks can leverage segmentation strategies to not only boost their deposit growth but also strengthen customer relationships and build loyalty over time.
Mac Thompson is the founder of White Clay.
Financial services are still trying to catch-up as the economy adjusts to the effects of the pandemic. Most economic indicators still indicate a recession. For example, inflation is still high, prompting an unprecedented reaction from the Federal Reserve, and consumer debt increases, impacting the financial institutions’ capital, earnings and liquidity.
Consumer behavior is also changing. More consumers are expecting personalized experiences on digital channels, much like those in traditional branches. Financial institutions need to find ways to increase revenues and deposits while not losing sight of the financial needs of their customers during these challenging economic times. All of these things can be achieved with data.
Credit unions and banks have a mountainous amount of raw data on transactions. This data is variable and doesn’t provide useful insights. By creating a clean environment for data, institutions can analyze the banking activities of clients and gain a better understanding of their specific needs.
By leveraging machine learning tools and trend analysis algorithms to ‘smarten up’ the raw data and categorize it by bank channel, vendor, product (e.g., insurance, utilities, payroll, loan payment, merchant sales etc.) Financial institutions can create a coherent, easily digestible version the truth by leveraging machine learning tools and trend analysis algorithms to’smarten up’ raw data and categorize it according to bank channel, vendor, product (e.g. insurances utilities payroll loan payment merchant sales etc.).
The financial institution can now segment customers based on their household (e.g., a married couple), personal attributes like demographics and income. Customers can be segmented by household (e.g. a married couple), demographics such as age, gender and ethnicity. They can also be grouped according to income, occupation or other personal attributes.They can segment customers by households (e.g., a married couple), personal attributes like demographics (i.e. age, gender, ethnicity, occupation, income etc.), geographical boundaries defined (e.g., region or state, zip code, etc.), and lifestyles.), lifestyles (i.e., personality, interests etc.) And profitability characteristics (i.e. deposit balances and loan balances; estimated revenue and profit, cost, and cost);
Using behavioral segmentation, institutions can group clients who behave in a similar way (e.g., data on transactions, products, and services). Clients’ behaviors – such as high debit or credit card use, increasing ATM use, low branch deposits, etc. – indicate how they derive value from their banking relationship.
The segmentation process will help financial institutions identify who their clients are, and calculate the Customer Value Lifetime. This includes calculating the contribution of each account holder to the bottom-line and identifying revenue drivers. The institutions will be able to identify which deposits are at the highest risk and where they are located. This is important, especially in today’s economic climate.
Banks and credit unions can also find out what accounts are in primary, secondary, or unengaged relationship with the institution. All of this information can help institutions to determine the impact their banking relationship has on shareholder value, and how it may lead to new financial opportunities.
The institutions will be able then to use these insights in order to design, execute, and manage playbooks to optimize bank behaviors for each segment. This would lead to an increase in shareholder and customer value, increasing revenue, and profitability.
To increase engagement, credit unions and banks could offer temporary discounts. This would turn secondary and unengaged customers into primary relationships. White Clay’s research revealed that primary operating relationships generated 3.2x more revenue and an 8x increase in lifetime value. The institutions could also increase interest rates on deposits to ensure that clients do not leave for better deals elsewhere. Banks and credit unions can also use smart data to help with regulatory reporting, marketing, planning and targeting, and banker education and coaching.
By cleaning, segmenting, and analyzing the customer data that they already possess, financial institutions are able to take informed decisions, optimize capital, and make strategic investments. They will be able to navigate through the turbulent waters of the future, and come out on top when the economy settles. This will also lead to more meaningful discussions with their customers, leading them towards increased customer satisfaction and retention.