Is it time to change the way we segment our customers?

Retail Financial Services

Retail Financial Services

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Moderator: Andy Follows - Aquilae

Expert: Ingrid Sierra - Affinion

Ingrid began the session by inviting participants to share what had brought them along to discuss this session on customer segmentation. Group members’ situations included:

- wanting to find out what’s new in the field

- the challenge of transition to new ownership with conflicting customer sets

- a desire to break current focus on SME down further

- curiosity about segmentation viewed through a behavioural economics paradigm

- selling a significantly different product type to a huge database of existing customers

- helping members to better understand the consumers coming into their businesses

- branching into new product markets

- wanting to do better

- managing conflict in new markets

Ingrid used the example of the recently introduced new segment of Xennials, those people born between 1977-1983 to illustrate how traditional segmentation no longer works, the rationale being that, if you have to go back and alter the framework to reclassify people, clearly the framework is broken. Other examples of flaws in the current methodology included being targeted according to a perceived life stage, e.g. as the mother of a 10 year old and addressed by PayPal as a “heavy spender” who would probably like a loan when she is simply using the service for convenience and is actually quite credit averse.

Customers accept the trade of giving data in return for appropriate offers. But, if the offer is wrong, it results in a negative experience. It’s time we took segmentation to the next level in our journey towards what Affinion likes to call the “segment of one”.

The question of the potential impact of open banking was raised. Banks claim to have invested a lot of effort in understanding their customer data in order to make relevant offers that are valuable to their customers. They are concerned that with many new third party providers able to enter the market customers will be served up offers from aggregators that will be wide of the mark resulting in negative feedback about the industry with banks and insurance providers getting the blame. GDPR helps customers to understand the information that is being used and gives them the opportunity to opt in once again, which is positive. “The fundamentals have not changed,” says Ingrid. Get clear on the information that you need to help you answer the age old questions:

  • What shall I offer?
  • How (i.e. through which channel) shall I offer it?
  • When shall I offer it?

This last question of timing can now mean, “At what time of day should I send the email?”

“With multiple channels and more data, is there a risk of confusing the customer?” voiced one participant. The advice was to take a testing approach. Test, learn and repeat.

The group touched on the topic of banking systems and the banks’ gradual acquisition of other banks over the years resulting in them having multiple legacy systems and no single view of the customer. Mapping the customer journey step by step enables providers to identify pain points and moments of truth. Interfacing with legacy systems through APIs and a partner’s more user friendly technology is one way to get others to do some of the hard work for you. Sometimes customer behaviour is counter intuitive. Whilst millennials are understood to live much of their lives online and be most open to internet purchases there are items, like holidays, that they still prefer to buy face to face.

When it comes to cars, there is a shift to usage versus ownership, but how can we identify which customers are likely to hand their current car back at the end of its lease and decide to switch to car sharing models instead? The advice here was for dealers to stay close to customers during the lease term and develop a relationship that will enable them to know their customer’s preferences.

For us all as subjects of segmentation as well as practitioners the future promises to be fascinating. Thank you to Ingrid for her insights.

How Affinion approaches this topic:

We combine our portfolio of value-added services with our insight-led data-driven marketing and multi-channel service delivery capabilities; we create tailored customer engagement programs for our clients. We analyse data and apply insights to profile and segment your customers ensuring that we deliver the right message at the right time based on their behaviour and preferences. Analytics enable optimisation of customer journeys and interactions across touch-points and channels to create engaging and personalised customer experiences, which maximise conversion, increase utilisation and boost loyalty and ROI. We respond to different client needs whether they need to drive a specific short term outcome or drive long term engagement.