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Segmentation Silos

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by Price
October 24, 2016

By Cassandra Giovanni

As a millennial, I’m front and center for many bank financial marketing targets. But honestly, their campaigns often fail to resonate with me. While millennials are the hot topic to many financial marketers, I’ve found the common approach to targeting millennials to be slightly offensive.

Why? The age range for millennials is generally stated to be between the ages of 18-34. By focusing on age at the expense of other more relevant characteristics, marketers have created a siloed system of segmentation. When we reduce an entire age group to monolithic object to obtain, useless stereotypes become inevitable, and opportunities are lost.

Who are you trying to reach…and why?

We’ve all seen the endless cycle of articles that regurgitate the clichéd description of the supposed millennial character: economically disaffected, uninterested in traditional financial services, and obsessed with apps, social media, and selfies. About 99% of the articles I’ve seen written on my generation miss the mark altogether.

Not only that, as a financial marketer, I step back and wonder why I would want that person as a customer. True, eventually, even the youngest of the millennials will be profitable. Here’s the thing, though: some millennials already are, and we’re hurting ourselves by lumping together the older sections of the generation with the younger. Further, we’re missing out completely by concentrating on the section of the generation that will eventually be profitable and ignoring those that currently are—and will continue to be profitable for some time.

This segmentation silo doesn’t just affect the millennial generation. In each generation, there are people who fit characteristics of a younger or older portion of the population. The key word here is characteristics. That is what financial marketers should be concentrating on.

Imagine what would happen if we got rid of the self-created boundaries of demographic segmentation and stopped thinking of millennials as those who will eventually be profitable. Financial marketers could start focusing more on psychographic and behavior segmentation to target customers who are at a stage that shows a turning point for profit—or who are already are profitable.

There’s a better way to approach your target market.

Psychographic segmentation is based on values, opinions, attitudes, interests and lifestyles. Behavioral segmentation, on the other hand, looks into a consumer’s specific activities, such as usage of mobile banking, number of visits to branch locations, benefits sought, and loyalty.

A variety of prebuilt models, such as Neilson’s PRIZM, can help you identify those segments. Even these, however, can stymie progress by merging too many characteristics into one description—such as ‘Striving Selfies’ or ‘Connected Bohemians.’ While quite creative, such names aren’t truly necessary for a proper assessment of profitable characteristics. Advanced solutions like PRIZM indeed hold their merit for certain institutions. That said, smaller financial providers may find it easier to break down the segmentation into a simple view of what characteristics they’d like their customers to exhibit.

Compare the three forms of segmentation:

  1. Demographic – Millennials love technology and use cards as a primary form of payment. This approach makes general assumptions about an entire age group, and worse, it leaves out other age groups that share these traits.
  2. Psychographic – Interested in technology and looking for convenient ways to bank. This approach allows you to address consumers of all ages who have demonstrated specific attitudes or needs with the service they desire.
  3. Behavior – Card usage. This approach makes it possible to offer the right product to the right consumer.

Interchange revenue, while strangled with Dodd-Frank-Durban regulations, is still a primary provider for fee income. By targeting psychographic and behavioral segments like those listed above—and not trapping yourself within the millennial silo—you can create a mechanism that identifies the specific customers you’re looking for, rather than chasing down some vague (not to mention flawed) notion of an entire generation.

Where do you start?

One of the reasons demographic segmentation is so commonly used is simply because it’s the easiest data to capture, and we’ve been using it for years. It’s just not working any more. With the progression of technology, customers of all ages and backgrounds expect more relevant interactions with every single brand that reaches out to them. And with the robust amounts of data collected when accounts are opened, along with the information archived within your Core each time a customer uses their account, there’s no reason you can’t deliver a more meaningful marketing message to both existing and potential customers. The question becomes where to start.

  1. Know the customers that currently fit into the psychographic and behavioral models you’re looking for. Outline exactly what a profitable customer looks like by thinking of the characteristics you want to reinforce.
  2. Find someone with central access to Core reports. At a recent conference I attended, one of the top reasons for not being data driven was that no one knew where to get reports. Another problem was that Marketing often has to juggle communications with multiple departments about the different reports each received. In many organizations, there is someone central who develops reports. In my financial institution it’s Information Technology. If there are certain reports you’re struggling to develop with IT, such as those about debit card usage, reach out further—perhaps to your servicer. If logic dictates someone has access to the data, find out who does and think outside the box on how to obtain it.
  3. Look at the information. Many profitable behaviors go hand in hand. If a customer uses online banking, they may be interested in what other technology-driven options they have available to them. Start to form a path to conversion of behaviors and then identify ways to target existing customers. What about non-customers? Use the existing customer data to create a look-alike model for what potential customers look for.
  4. Don’t forget the unprofitable. You have the data on your customers who are profitable, and along the way you identified the behaviors that make them that way. Now’s the time to start focusing on shaping existing customers who may not be profitable into ones that are. For example, a recent evaluation of our data identified customers who weren’t using their debit card at a profitable level. With a simple targeted mailing we reminded these customers how easy debit cards were to use, and over a 3-month period increased usage by nearly eight times original usage.

Overall, it’s most important to have a conversation with your customers. Then, focus on the traits you’re looking for instead of trying to be hip and cool. Millennials can be and are profitable now. Case in point, I’m a millennial with a mortgage, life insurance, retirement plan, career, and a family.  But, unlike what the demographic silo dictates, I hate social media, the word ‘selfie’ makes me physically cringe, and apps are useless to me unless they make my life easier. I do love anything Apple—but refuse to use Apple Pay—and I live and die by my debit card and rewards for loyalty. How to market to me? Show me how your banking app will make my life easier, and how my debit card can be better for my finances than the perks I get with my Amazon card.

Oh, and for what it’s worth, my mom, a boomer, also loves Amazon rewards and apps that make her life easier.

Get rid of the demographic segmentation barrier you’ve created, and you’ll be able to obtain and keep customers with profitable behaviors, like my mom and me, at the same time.

Cassandra Giovanni is Marketing Manager at Savings Institute Bank & Trust based out of Willimantic, CT. Her passion for brand originates from her years of experience in marketing as the author of several Amazon Best Selling fiction novels, combined with a decade of experience in banking as a front end employee, assistant branch administrator and financial marketer.