Customer segmentation in banking - Glossary

Customer segmentation in banking is a strategic approach that entails dividing a bank's customer base into distinct groups based on shared characteristics. This method allows financial institutions to tailor their services marketing efforts and products to meet the specific needs and preferences of each segment. Imagine a bank recognizing that young professionals and retirees have different banking needs; while the former might be interested in services like digital apps and investment options the latter could prioritize security features and savings plans tailored towards retirement. By effectively segmenting their customers banks deliver more personalized experiences enhancing customer satisfaction and loyalty. A real-world example is a bank offering targeted financial advice workshops for millennials who are embarking on their home-buying journey while also providing bespoke financial planning for retirees looking to maximize their savings. This not only boosts customer engagement but also helps in gaining a competitive edge in the financial industry.