3 Reasons Why Banks Should No Longer Segment Their Customers by Generation

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From Baby Boomers, to Millennials, to Generation Z – as a society we’ve become all too accustomed with categorising people based on the year they’re born in. For banks in particular, it’s long been tradition to segment by age and build campaigns that target customers accordingly. Here Karen Wheeler, Country Manager and Vice-President at Affinion UK, explains to Finance Monthly why banks shouldn’t follow this tradition.

But, have they become too hung up on age groups? We’re now in an era in which we’ve never had more access to rich customer data, which should – in theory – mean that banks can better understand their customers’ behaviour, preferences and expectations. However, according to research by Vanson Bourne and Sitecore, 64% of UK consumers still feel like brands make assumptions about them based on single interactions alone.

Consumers are now easily frustrated by a business that doesn’t seem to understand them. So, what can banks do to prove they have a deep understanding of what their customers really want?

It’s time that banks shifted their thinking and took a smarter approach to segmentation. Basic grouping by age or gender is no longer accurate enough and developing a “segment of one” is key. Here’s three reasons why banks need to look beyond basic segmentation to build better relationships with customers.

1. Broad brushing generations can back-fire

There used to be a predictable life pattern, but now you can get married, have a baby, buy your first house or travel the world at almost any age. The lines are blurring, and things are becoming more fluid. It’s now recognised that just because two people are born in the same age bracket, it doesn’t mean they share the same experiences, needs, attitudes and desires in life.

For example, a 31 year old woman who is married and living in the country with school age children, has very different needs to a single, 31 year old women with a flat share in London. At best, irrelevant offers based on outdated life patterns can be a mild nuisance to customers, but at worst, making assumptions risks causing offence and can backfire on the brand.

Air France recently faced backlash after announcing that it will be launching ‘Joon’, an airline for millennials. Passengers of the airline will be served by cabin crew wearing “basic chic” uniform including white trainers, blazers and ankle-length trousers. Experts have excused the airline of stereotyping millennials and for assuming that every consumer born between the years 1981 and 2000 act and think the same.

2. Personalised offers have more impact

In the past, life stages were more fixed by age, but as society changes and with so much data now available, banks have the ability to build a much more holistic view of their customers which can enable personalised, relevant interactions – giving people what they like most, at the right moment in their lives.

A good example of a bank that’s already doing this well is Barclays. Its “Life moments” strategy is built upon carefully targeting customers with appropriate financial products and services as they approach new life stages, such as having a baby or buying a car – regardless of their age. More recently, Barclays announced it will offer recent graduate job interviewees free overnight accommodation in London, Birmingham and Manchester, after its research found that more than half of graduates surveyed said they had not applied for a job because of the amount it would cost to travel to the interview. By targeting this life specific stage, it positions them as a bank that not only has the best interests of graduates at heart, but a source of help during a time of need.

3. PSD2 is coming

2018 is set to be a game-changing year for banks. As the PSD2 (Revised Payment Service Directive) becomes implemented across the EU, banks’ monopoly on their customer’s transaction data and payment services is about to disappear. The new EU directive opens the door to almost any company interested in eating a bank’s lunch.

Before it’s implemented, there’s an opportunity for banks to use their ‘first mover advantage’. They shouldn’t wait for fintechs, AISPs or PISPs to encroach on their customer relationships, instead they should look at their own platforms and how they interact with their customers. Investing in tactics like better segmentation could improve and consolidate relationships at a time when it’s never been more important.

Many loyalty programmes haven’t worked for banks in the past. But is this simply because they’ve taken an outdated approach to UK consumers and not been personalised enough? Next generation customer engagement is all about tackling this with personalised content and interactions across more levels than ever previously possible. It’s about understanding the intangibles of human motivation to create more rewarding journeys, recognising the value of different rewards to different people and utilising new ways of collecting, storing and making sense of the data that’s generated.

If banks are to become truly valued in their customers’ lives, demonstrating an understanding of their priorities and anticipating their needs is key.

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