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Segmentation in the Financial Services Industry

By Jennifer Wilson, Webtrends and Gary Angel, Semphonic

OVERVIEW
Like most things of value in this world, segmentation is used in a variety of ways by businesses today. The two most common applications of segmentation are reporting/analysis and targeting. Segmentation is often applied to reporting and analysis to help marketers understand the behavior of one portion of the population when compared to another. Segmentation is also used by virtually every marketer who is responsible for targeting their prospects and customers. This white paper focuses on common applications of segments in targeting within the financial services industry.

TYPES OF SEGMENTS
Segmentation is as much of an art as it is a science. Its done a million different ways, and there is no right or wrong. It is important, however, to understand the nuances of segmentation a bit before jumping in feet first. The segment categories listed below may help you devise a segmentation framework that you can use to influence your targeting activities. Life Stage Segments These segments are used to classify your target audience into discrete segments which are mutually exclusive. These may map to a defined business process within your organization like a sales cycle, to your relationship with the individual, to the individuals engagement with your brand such as recency or social media interaction, etc. The possibilities are endless as they are specific to your business. Life stage segments are often too broad to be used for targeting on their own, but they are often the starting point for additional segmentation. Focused Target Segments Focused target segments are used for very specific targeting campaigns. Sometimes, these segments are based on a combination of Life-Stage Segments, behaviors and demographics. People may move in or out of these segments, depending on changes in behaviors or demographics so the population is constantly changing. Discrete Population Segments Discrete population segments are used to designate a specific group of people you want to track and/or interact with over time. These segments are typically behavioral-based (e.g. people who opened a savings account in June) and governed by a specific time frame. Therefore, this population does not change over time. No one new joins the segment and no one leaves it either. This type of segment is sometimes referred to as a cohort.

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Life stage segments

Include EVERY person Mutually exclusive; people only in one segment Track progression across segments Use in combination with focused target segments

Focused target segments

Subset of people with behavior(s)/attribute(s) No natural relationship within or across segments Track membership (in or out) and profile members Can be used for specific campaigns and offers

Discreet population segments

Describe a specific set of individuals Static people do not move in or out of this segment Track behavior over time and compare Used for retention analysis and seasonal analysis

Comparison of the different types of segments and their most common uses.

COMMON LIFE STAGE SEGMENTS FOR FINANCIAL SERVICES INDUSTRY

Mature organizations understand that you can have many different views of a customer, depending on the lens. These same organizations track people in multiple life stage models, not just one. Why? Because life stage models are typically focused on different aspects of the relationship. Below are several common life stage models used in Financial Services today. Sales Cycle The sales cycle life stage model defines the journey from prospect to customer through the lens of the buying cycle. Segment Name Browser Researching prospect Planning prospect Deciding prospect Engaged prospect Active customer Dormant customer Sample Definition Visited site in recent period but viewed no substantive content (product or services info) Viewed information about a type of financial product or service in recent period (such as money market savings, 529s, Trading Account, IRA, etc.) Viewed in-depth content around a life-stage topic or used a relevant tool (e.g. Mortgage Calculator, Retirement Planning, College Saving, etc.) Viewing specific financial service product variants (Funds, Account Types, etc.) Post lead-generation, continued interaction as a prospect but has not yet converted Customer who is using operational or transactional features of the web site on a regular basis (e.g. online banking) Customer who is not using operational or transactional features of the web site on a regular basis (e.g. online banking)

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Digital Channel Interaction Preference The digital channel interaction preference life stage model defines customers interactions with an organizations online presence. Segment Name Digital resistors Personal relationships Digital dabblers Digital preferred Commited to digital Lapsed Sample Definition Customers who have not interacted with your digital presence (web, mobile, social) Customers who prefer personal relationships over digital interaction, so they prefer direct communication channels (e.g. teller at a local branch, personal banker via phone, etc) Customers who will use online sporadically but only for simple tasks Customers who use digital channels for some specific tasks but not everything Customers who use digital channels for all tasks unless personal interaction is required to complete transaction Customers who have interacted with your digital presence but no longer do so actively

Online Engagement The online engagement life stage model defines the levels of engagement that a customer or prospect has with your web site. Segment Name Newcomer Receptive Attracted Engaged Active Hyperactive Dormant Sample Definition Visited for the first time in recent period Viewed information about a financial product or service in recent period (such as money market savings, 529s, Trading Account, IRA, etc.) Returned to site within 1 week or prior visit Visited 3+ times or logged in during recent period Frequent visitor for more than 4 weeks, or logged in multiple times in the past 4 weeks Multiple log-ins or very frequent visitor (e.g. more than 4 weeks more than 2 visits per week) No activity for the past x months

COMMON FOCUSED TARGET SEGMENTS FOR FINANCIAL SERVICES INDUSTRY

Focused target segments are used for very specific targeting campaigns. Typically, these segments are based on a combination of behaviors and demographics. People may move in or out of these segments, depending on changes in behaviors or demographics so the population is constantly changing. Target segments are often used in conjunction with a specific life stage segment. As people move from one life stage segment to another, there is an opportunity for targeting relative to that change. Below are a few examples of focused target segments. New User Your organization spends marketing dollars to get its customers to use its online tools or online banking capabilities, and help reduce costs associated with personal interactions. Once youve acquired new users, WHITEPAPER / SEGMENTATION 4

you should employ targeting to help ensure adoption. The first use of a new tool or service is absolutely critical to establishing an ongoing pattern of adoption. Use on-site targeting to show instructions, help videos, and did you know content. Use email targeting to welcome the user and share tips or hints about the capabilities and functions available on the web site, along with a link to the site. Lapsed User Is it true that all good things must come to an end? Not if you can help it. Your organization should be targeting users who stop using online tools or online banking capabilities. A lapse in use can often signal a shift to another financial institution. A 2010 comScore survey 1 indicates that nearly half of respondents use more than one financial institution for their banking needs. Because of this ongoing competition, keeping customers satisfied and engaged is critical as their loyalty wanes. There is a significant opportunity for targeting here. Email targeting can serve as a gentle reminder that were here when you need us or perhaps to promote something new; try out our new service. Use email targeting to drive log-in, and then leverage on-site targeting to highlight those new features or services. New Planner When prospects move from the researching segment to the planning segment in the sales cycle life stage model, there is an opportunity to interact with the prospect via targeting. At this stage, you most likely do not have their email address, so on-site targeting would be the primary method for interaction. You might, for instance, promote the two most popular retirement planning tools you have to someone who recently started looking at your retirement products.

COMMON DISCRETE POPULATION SEGMENTS FOR FINANCIAL SERVICES INDUSTRY

Discrete population segments are used to designate a specific group of people you want to track and/or interact with over time. In Financial Services, these segments are typically used to follow people who exhibited a high-value behavior in a specific time, such as opening a savings account in June or attending portfolio review in July. Discrete populations, sometimes called cohorts, are tracked over time and often analyzed and compared to a control population to determine differences over time. Sometimes, these discrete populations are later targeted with life stage related offers. For instance, a cohort of people who opened checking accounts in June may receive an email with tips for using online banking in July and bill pay in August.

WEBTRENDS CAN HELP

Webtrends offers a variety of products and services to help you in your targeting and segmentation endeavors. It is incredibly simple to discover new segments or build segments you already know using Webtrends Segments. Once defined, these segments can be automated for integration into action systems such as email and on-site targeting including Webtrends Optimize. Webtrends Optimize provides organizations the ability to test and target relevant content in real-time on their web site and the ability to optimize the content over time.
1

"The State of Online Banking" published by comScore in May 2010

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Additionally, many organizations just dont have the experience or the bandwidth to create a targeting and segmentation strategy, much less execute on it. Webtrends offers consulting services with experience in Financial Services to help your organization formulate your strategy and define your targeting plan for prospects and customers. Once defined, we can also help with segment development and mapping content and offers to those segments. Additionally, we have creative resources who can build targeted content for on-site targeting. Whether you need the right tools or the right people, Webtrends can help.

Jennifer Wilson Bio

Jennifer serves as Product Manager for the visitor centric products at Webtrends. In her 5 years tenure at Webtrends, she has led the company in bringing to market Visitor Data Mart, Score, and Segments. She is responsible for ensuring that Webtrends brings to market products to help digital marketers and database marketers achieve their business goals. She works with customers in industries including Financial Services, Insurance, Healthcare, Travel, Retail, Commerce, Technology and Telecommunication. Prior to Webtrends, Jennifer served as product manager at Kronos for their reporting and analysis products for workforce hiring. Jennifer began her career as a market research analyst which fostered her love for data driven decision-making. Jennifer received her Bachelor's of Business Administration from the University of Texas, majoring in marketing.

Gary Angel Bio

Gary is the Co-Founder and President of Semphonic, the largest independent web analytics consultancy in the United States. He has led Semphonics Web analytics practice and consulting for more than a decade. Prior to Semphonic, Gary worked in the credit-card database marketing industry developing transactional analysis systems for marketing purposes. His clients included both American Express and Visa. Garys work in Web analytics includes the development of online behavioral segmentation systems, creation of several core Web analytics methodologies including Functionalism, and the development of SEM analytics for PPC marketing Gary blogs at http://semphonic.blogs.com/semangel.

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