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Table 6.12
The derived value-based segments.
Tiles
Profitability curve
Number of
Marginal
Cumulative
Cumulative
customers (%)
revenue
number of
marginal
sum (%)
customers (%)
revenue sum (%)
1
10.00
60.40
10.00
60.40
2
10.00
20.50
20.00
80.90
3
10.00
10.80
30.00
91.70
4
10.00
5.80
40.00
97.50
5
10.00
3.10
50.00
100.60
6
10.00
1.40
60.00
102.00
7
10.00
0.50
70.00
102.50
8
10.00
0.10
80.00
102.60
9
15.70
0.00
95.70
102.60
10
4.30
−
2.70
100.00
99.90
The characteristics of the top-value customers also indicate the profile of the
right, potentially profitable, prospects that should be the acquisition target of the
bank.
The profitability curve in Figure 6.17 depicts the derived segments and
their cumulative sum of marginal revenue. The large revenue differences among
segments are evident. By tile 4, the line has almost reached 100% of total revenue,
denoting the trivial contribution of the subsequent tiles.
USING BUSINESS RULES TO DEFINE THE CORE SEGMENTS
The customer base was initially divided into five core segments according to
their general behavior. The scope was to implement a basic separation into self-
evident and clearly differentiated groups, before applyingmore advanced clustering
techniques in search of refined sub-segments within the core segments.
The final segments were defined and built by applying business rules that
employed general segmentation criteria, commonly used in the banking industry,
but specifically adapted to match the situation of this particular bank. Those
business rules incorporated the business knowledge and experience of the bank's
marketers and also reflected the findings of an initial exploratory analysis of the
characteristics of the customer base. Hence, customers were partitioned in terms
of their assets (six-month average balances of savings and investments), product
ownership, and total number of transactions during the last six months, into the
five core segments presented in Table 6.13.
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