Segmentation Applications in Banking - Data Mining Techniques in CRM: Inside Customer Segmentation - page 265

best suits their characteristics. Nowadays banks offer a large variety of products to
cover these ever-changing demands and needs. The time when banks were places
to simply keep your money safe is long gone. The relationship with the bank is
not limited to just opening a plain savings account. Today the relationship typically
includes many accounts and different products, often spread across different banks.
Apart from deposit and savings accounts, banks also offer investment products,
loans and mortgages, credit/debit cards, insurance products, and so on. All these
options result in different product baskets and portfolios. Certain customers have
a rather conservative profile and only maintain savings accounts. Others are willing
to take a low or high risk and put a substantial share of their money into investment
products, while for others the main relationship with the bank is a form of lending,
a mortgage or a loan for example.
Customers are also diversified according to the number, volume, type, and
preferred channel of the transactions they make. Visiting a branch and interacting
with the bank's teller is no longer the only way to make banking transactions.
Customers also have the option to use alternative channels, including ATMs, the
Internet, phone, SMS, and so on, and to make different types of transactions
such as deposits, withdrawals, payments, and so on. Some customers still insist
on the traditional channels and the ''human interaction'' with bank employees,
while others, appreciating the benefits of automated transactions, take advantage
of alternative channels. Furthermore, certain customers have their salary account
at a bank and therefore may select this bank as the main supplier of financial
services.
In addition to all these behavioral/relationship sources of potential customer
separation, we should not ignore the different life-stage and demographic charac-
teristics of the customers and of course those differences in terms of the profit that
each customer provides to the bank.
The marketing officers of a fictional bank decided to use the available data
to mine their consumer customers and divide them into groups according to their
value and behavioral characteristics. They also intended to:
• Identify the specific characteristics and needs of each segment: The
bank's objective was to identify the segment-specific characteristics and needs
and to address them appropriately through:
- Customized product offerings that would fit the requirements of each
segment.
- Service personalization according to the profile of each segment.
- Offering the appropriate incentives to sustain and develop the relationship
with the customers.