CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Financial institutions typically compete in broad markets with numerous customers that may

be geographically dispersed and whom seek a variety of different service benefits (Minhas &

Jacobs, 2015). Recognizing that limited resources prevent banks from serving all customers in

the market effectively, banks are increasingly developing marketing strategies that target a

specific segment that provides the bank with the greatest opportunity for success.

Wilkie and Cohen (2017) define market segmentation as the process by which the total

heterogeneous market for a product is divided into several sub-markets or segments and each

segment is homogeneous in all major aspects and is different from the other. Besides, Wilkie

and Cohen (2001) assert that the need for market segmentation arises because a company with

its limited resources cannot cater for the demand of the total market. In view of this, it has to

identify the segments where its product would be most suitable and market that would be

most profitable. Hiam and Schewe (2010) argue that there are several benefits of market

segmentation. It helps in designing products that match with the market demand. A company

could determine the most effective promotional strategy and position its promotional efforts to

synchronize with the period when the consumer’s response is likely to be the maximum. The

underlying aims of market segmentation is to group customers with similar needs and buying

behaviour into segments, so that each segment can be reached with a distinct marketing

programme. The concept attempts to bridge the gap between diverse customer needs and

limited company resources, by encouraging

1
distinct product and marketing offerings to be developed to suit the requirements of different

customer segments (Assael & Roscoe, 2013; Blattberg & Sen, 2015).

The marketing literature suggests that segmentation leads to more satisfied customers because

it offers the practitioner a number of clear benefits: improved understanding of customer

needs, more appropriate resource allocation, clearer identification of market opportunities, and

better tuned and positioned marketing programmes (Kotler, Brown, Adam & Strong, 2011).

Despite the advantages which segmentation can bring, financial institutions have been slower

to capitalize on its potential than some other industries (Green & Krieger, 2012). However, as

the regulatory situation has changed, competitive pressures have increased and profits have

been squeezed, so that many institutions are now looking for ways to direct their resources at

the most lucrative customer groups. The most basic advantage offered by market segmentation

is that it provides a structured means of viewing the marketplace confronting the firm (Wilkie,

2012).

The present intensely competitive situation in the banking sector in Nigeria has stimulated

financial service providers to search for untapped market segments. Hence, segmentation has

become an extremely important strategy for the banking sector. One of the most important

strategic concepts contributed by the marketing discipline to business firms and other types of

organizations is that of market segmentation (Myers, 2010). Segmentation involves a three-

step process (Kotler et al., 2011). (Green & Krieger, 2012) reported that the first step in this

process is market segmentation, dividing a market into distinct groups of buyers who might

require separate products and/or marketing mixes. They stated that firm identifies different

ways to segment the market and develops profiles of the resulting market segments as one of

the most frequently used methods for segmenting a market has been demographic

2
segmentation. Demographic segmentation consists of dividing the market into groups based

on demographic variables such as age, gender, family life cycle, income, occupation,

education, religion, race, and nationality. One reason for the popularity of this method is that

consumer needs, wants, and usage rates often vary closely with demographic variables.

Another is that demographic variables are easier to measure than most other types of

variables. Other variables can be used to segment markets. Assael and Roscoe (2013) opined

that the consumerism movement has also made the financial services industry more sensitive

to previously unrecognized consumer needs. This interest has focused attention on improved

market segmentation and segmentation strategy. Smith (2014) submitted that with

increasingly competitive markets, the banking sector has sought untapped segments to gain an

advantage over the other. Increasingly, success in the battle for market share will be

determined by how well managers deal with the challenges of segmentation. He stated further

that more effective and efficient market segmentation is crucial in the new competitive

environment. The study seeks to examine the impact of market segmentation on profitability

of banks in Nigeria.

1.2 Statement of the Problem

Market segmentation is widely regarded as a panacea for a variety of marketing ailments. Yet

research in the financial services market highlights a number of significant barriers to the

implementation of segmentation schemes. These barriers range from weaknesses in customer

data and inappropriate organizational structure, to lack of marketing orientation and

difficulties in obtaining a fit within the existing distribution structure. While the marketing

literature acknowledges that these difficulties exist as there has been little formal analysis to

capture the characteristics of these barriers. This problem is compounded by the considerable

3
size and diversity of the sector which make it difficult to generalize about the implementation

problems.

4
Academic research in the financial services sector has sought to identify appropriate

segmentation approaches. Speed and Smith (2012) undertook a review of financial services

segmentation, suggest that a priori segmentation, which charges the researcher with

determining the size and character of segments is the most widely used approach. The use of

demographic variables, such as age and social class are especially popular (Doyle, Saunders

& Wong, 2012). Despite the attention which the literature has given to the application of

segmentation in financial services, the implementation aspect and problems associated with it

have been identified as key areas for further research (Speed & Smith, 2012). Similar

sentiments are expressed in other areas of the marketing literature, especially with the

apparent prevalence of implementation problems. For example, in the industrial marketing

literature, Blattberg (2015) and Keegan (2013) express concerns about the managerial

usefulness and practical ramifications associated with segmentation. More recently, Brown,

Askew, Baker, Denvir and Millett (2019) identified missed opportunities resulting from

unsystematic and inappropriate grouping of customers, a concern which is echoed by Smith

(2014). Although these concerns originate in a different part of the literature, the links with

issues raised by Speed and Smith (2012) seem almost uncanny. These opinions also arise in

work by Doyle, Saunders and Wong (2012), who expresses concerns about the degree to

which many managers understand and implement the segmentation concept. Hence the

researcher will seek to evaluate impact of market segmentation on profitability of banks in

Nigeria.

1.3 Objectives of the Study

The main general objective was to evaluate the impact of market segmentation on profitability

of banks in Nigeria.

5
The study was guided by the following specific objectives:

6
 (i) To evaluate the effect of geographical market segmentation on profitability of banks

in Nigeria.

(ii) To examine the influence of demographic market segmentation on profitability of

banks in Nigeria.

(iii) To determine the impact of behavioural market segmentation on profitability of

banks in Nigeria.

1.4 Research questions

The following research questions have been designed to guide this study:

i. What is the effect of geographical market segmentation on profitability of banks in

Nigeria?

ii.Does demographic market segmentation has influence on profitability of banks in

Nigeria?

iii. What is the impact of behavioural market segmentation on profitability of banks in

Nigeria?

1.5 Research Hypotheses

The following null hypotheses will be tested:

H01: There is no significant relationship between geographical market segmentation and

profitability of banks in Nigeria.

H02: There is no significant relationship between demographic market segmentation and

profitability of banks in Nigeria.

H03: There is no significant relationship between behavioural market segmentation and

profitability of banks in Nigeria.

7
1.6 Significance of the Study

The findings from this study are important because they will have the capacity of being used

to formulate positive fiscal policies which were relevant and sensitive to the forces

influencing the banking sector performance and penetration in Nigeria. This study will benefit

the government and especially the Ministry of Finance for making policy decisions whose

overall objectives are to reduce bottlenecks in distribution of banking services and at the same

time accelerate the rate of growth in the banking industry sector and take advantage of the

improved economy thus more lending to individuals and institutions.

To the academicians the study will contribute to the existing literature in the field of

marketing and profitability. It will act as a stimulus for further research to refine and extended

the present study especially in Nigeria. Findings of the study will be useful to researchers and

scholars as it will contribute to the body of knowledge in the area of marketing. It will also

assist other researchers to further their studies on areas of interest not yet exploited. It will

assist the management of banking industry to evaluate how market segmentation effect

profitability. The stakeholders and employees in Nigeria’s banking sector will appreciate and

prioritize appropriate marketing strategies as tools of marketing positioning in local and

international markets. Other organizations also can use the distribution strategies employed by

the bank to improve their performance.

1.7 Scope of the Study

The study focuses on the impact of market segmentation on profitability of banks in Nigeria.

This study in its content covers how demographic, behavioural and geographical market

segmentation affect bank’s profitability.

8
1.8 Limitations of the Study

The researcher encountered a lot of hurdles. Financial constraint affected the researcher since

much is needed for transportation and the procurement of materials. The time frame was not

also enough to complete a research of this magnitude since the researcher was also involved

in academic activities. However, it is categorically concluded that the limitations encountered

in the course of the study did not limit the findings of this research work.

1.9 Definition of Terms

Segmentation: the process of dividing a broad consumer or business market, normally

consisting of existing and potential customers, into sub- groups of consumers (known as

segments) based on some type of shared characteristics.

Market: is defined as the sum total of all the buyers and sellers in the area or region under

consideration

Banks: is a financial institution that accepts deposits from the public and creates credit and

also, lending activities can be performed either directly or indirectly through.

Profitability: It is defined as either accounting profits or economic profits. Accounting profits

mean net income, while economic profits mean net worth. Profitability is the difference

between the turnover or sales and the operating cost of business organization.

9
 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter presents a review of conceptual framework, theoretical review and empirical

studies.

2.2 Conceptual Framework

A conceptual framework to show the effects of market segmentation on profitability.

Independent Variables Dependent Variable

Geographical Market
Segmentation
Independent Variables

Profitability
Demographic Market
Segmentation

Behavioural Marketing
Segmentation

Figure 1: Conceptual Framework

Source: Research (2022)

A conceptual framework assists to simplify the proposed relationships between the dependent

variable and the independent variables in a study and allows the same to be depicted

diagrammatically. The conceptual framework of this study composed of three independent

variables: Extent to which geographical segmentation is used, factors that influence

demographic market segmentation and challenges of behavioral market segmentation and

dependent variable; profit. The Independent variables affect the dependent variable by

10
dividing

11
markets into distinct groups of buyers or perspective buyers who respond differently to

changes in marketing mix. The variables are likely to prove particular beneficial to those

attempting to influence consumer demand for a particular product or service.

2.2.1 Geographic Segmentation

Dividing a market into geographic segments is one of the oldest ways to perform market

segmentation. The underlying assumption is that people have different needs and wants based

on where they live. Commonly, a geographical segmentation scheme divides a market into

units such as nations, states, regions, counties, cities or neighborhoods. A company can decide

to operate in only a few of the segments, or in all of them but customize their offering

according to the geographical differences in needs and wants said by Kotler and Armstrong

(2003). Geographic segmentation is most commonly used by multi-national industrial and

high-tech businesses, which alter their marketing mix based on the differing needs of

consumers in each of the geographic segments they wish to serve. Simple geographic

segmentation is usually an easy, manageable and comparatively inexpensive way to handle a

market especially an international one. The practicality of geographical differentiation on a

multi-national scale in the banking industry has also been criticized by Kotler and Armstrong

(2003) and McDonald and Dunbar (2004).

2.2.2 Demographic segmentation

Another widely recognized consumer market segmentation scheme makes use of

demographics. Demographic segmentation is defined as the division of a market into groups

based on demographic variables such as age, gender, family size, family life cycle, income,

12
occupation, education, religion, race, generation and nationality by Kotler and Armstrong

(2003). Demographics have gained much popularity because they are easily measured and

often vary closely with consumer needs and usage rates. The complexity and costs of the

scheme also stay relatively low. Demographic variables must, however, be handled carefully.

Critique from Cahill (2006) points out that although there generally are behavioral differences

between e.g., men and women or teenagers and elders, they are at best displayed by only a

large majority of the group. Consequently, the remaining subset whose behavior does not into

the framework of the demographic group (e.g., youngsters acting like elders, or vice versa)

might not enjoy being reminded that they do not it with their peers. Reaching the desired

segment without offending anyone belonging or not-belonging to the target group can thus

prove to be challenging task. Demographic segmentation has also been criticized, together

with geographical segmentation, of the approach of predetermining how the market divides

into segments (McDonald & Dunbar, 2004). In reality, customers do not slot themselves into

any categories determined beforehand, and this is why banks should rather focus on getting a

holistic understanding of their customers' needs than engaging the market with ready-made

pigeonholes for groups of buyers.

2.2.3 Behavioral Segmentation

Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses

or responses to a product. Common approaches are, for example, usage rate and occasion

segmentations (Kotler & Armstrong, 2003). A behavioral segmentation scheme has the

advantage that it is rather closely tied to the product or service that the company is offering.

13
2.2.4 Profitability

Industry performance is based on Key Performance Indicators (KPI) and it is influenced by

the profitability of the company, its percentage of the market share, return on investment

(ROM), return on assets (ROA), and return on equity (ROE) as well as its customer retention

ability. In the words of Gichuru and Limiri (2017) the quantity and quality indicators of

performance are regulated by the profitability of the business and the risk which gives

alternatives for assessing and evaluating the achievement of objectives through maximization

of owners’ wealth.

2.3 Theoretical Review

This section examines the various theories that will be used to inform the study on the effects

of marketing segmentation on sales performance. The study is guided by the following

theories; marketing mix theory and theory of push and pull. Banking sector reforms and

consolidation all over the world are predicted upon the need for repositioning of the existing

state in the sector in order to attain an effective and efficient status. This is more so in the

developing nations like Nigeria where the banking sector has not been able to effectively

provide the needed funds and services for the development of the real sector as expected.

Hence, banking reforms become inevitable in the light of the global dynamic exigencies and

emerging landscape. Consequently, the banking sector, as an important sector in the financial

landscape, needs to be reformed in order to enhance its competitiveness and capacity to play a

fundamental role of financing investments.

The Nigerian experience indicates that banking sector reforms are propelled by the need to

deepen the financial sector and reposition it for growth; to become integrated into the global

financial architecture; and evolve a banking sector that is consistent with regional integration

14
requirements and international best practices. Bank consolidation is viewed as the reduction in

15
the number of banks and other deposit-taking institutions with a simultaneous increase in size

and concentration of the consolidated entities in the sector. It is mostly motivated by

technological innovations, deregulation of financial services, enhancing intermediation and

increased emphasis on shareholder value, privatization and international competition (Berger

2009). The nexus between consolidation and financial sector stability and growth is explained

by two polar views. Proponents of consolidation opine that increased size could potentially

increase bank returns, through revenue and cost efficiency gains. It may also, reduce industry

risks through the elimination of weak banks and create better diversification opportunities

(Berger, 2009). On the other hand, the opponents argue that consolidation could increase

banks’ propensity toward risk taking through increases in leverage and off-balance sheet

operations. In addition, scale economies are not unlimited as larger entities are usually more

complex and costly to manage.

2.3.1 The Resource Based View Theory

This model recognizes the importance of a firm’s internal organizational resources as

determinants of the firm’s strategy and performance (Grant, 2000; Wernerfelt, 2009). Grant

(2010) defines the term internal organizational resources as all assets, capabilities,

organizational processes, firm attributes, information, knowledge, that are controlled by a firm

and that enable it to envision and implement strategies to improve its efficiency and

effectiveness. Some intangibles resources of the firm are the market-assets such as customer

satisfaction and brand equity.

2.3.2 The Dynamic Capabilities Model Theory

The Dynamic Capabilities view strengthens the RBV, it emphasized on how combinations of

resources and competences can be developed, deployed and protected. The factors that

16
determine the essence of a firm’s dynamic capabilities are the organizational processes where

capabilities are embedded, the positions the firms have gained (e.g., assets endowment) and

the evolutionary paths adopted and inherited. Based on this perspective, the marketing factors

that determine the competitive advantage are marketing efficiency resulting from the

marketing organizational process and the endowments of market assets that has generated

such as customer satisfaction and brand equity for example marketing positions. In the context

of global competition, RBV and Dynamic capabilities theory suggest that historical evolution

of a firm (accumulation of different physical assets and acquisition of different intangible

organizational assets through tacit learning) constrains its strategic choice and so will affect

market outcomes.

According to Douglas and Craig (2002), the development of a Marketing Strategy is carried

out during the stage of global rationalization. It means that the firm has had to take the step of

initial foreign market entry and expansion of national markets during its process of

internationalization. Consequently, in the two previous stages, the firm learned and

accumulated not only different physical assets but also different intangible organizational

assets; likewise, it faced and took risks in different and complex market contexts. This process

of learning affected its performance.

2.3.3 Marketing Impact Model Theory

The need for measuring marketing impact is intensified as firms feel increasing pressure to

justify their marketing expenditures (Gruca & Rego, 2005). Accordingly, marketing

practitioners and scholars are under increased pressure to be more accountable for showing

how marketing activities link to shareholder value. It is important to know that marketing

actions, such as packaging, brand name, density of the distribution channel, advertising,

17
permanent exhibitions, sponsoring, press bulletins, among others can help build long-term

assets or positions as brand equity and customer satisfaction. These assets can be leveraged to

deliver short-term profitability and shareholder value

2.3.4 Marketing Mix Theory

According to Kotler and Keller (2006), the theory of Marketing Mix was coined by Borden.

The theory is still used today to make important decisions that lead to the execution of a

marketing plan. The idea of a marketing mix theory is to organize all aspects of the marketing

plan around the habits, desires and psychology of the target market. This orientation considers

marketing as it applies to the theory of the "4 Ps." The first P is product, and takes into

account its design, features and competitors. The second P, price, is a factor that can be

adjusted to manage demand, to determine profit margin, and to drive market share. Promotion

is the third

P. It seeks to find which media to engage in order to make the right people aware of the

product's benefits, and which slogans, tag lines and logos will resonate with the target market.

Placement, the fourth P, determines where and how potential customers can access the

product. Young people may want to browse, buy and pay online. Others may prefer the

personal service of a trained salesperson.

Keegan (2013) proposed a four Cs classification in which is a more consumer-oriented

version of the four Ps that attempts to better fit the movement from mass marketing to niche

marketing. The Cs represents; Consumer, cost, communication and convenience. Firstly, a

company will only sell what the consumer specifically wants to buy. So, marketers should

study consumer wants and needs in order to attract them one by one with something he/she

wants to purchase. Secondly, Price is only a part of the total cost to satisfy a want or a need.

18
The total cost

19
will consider for example the cost of time in acquiring a good or a service, a cost of

conscience by consuming that or even a cost of guilt "for not treating the kids. It reflects the

total cost of ownership. Many factors affect cost, including but not limited to the customer's

cost to change or implement the new product or service and the customer's cost for not

selecting a competitor's product or service (Karanja, 2008). Thirdly, while promotion is

manipulative and from the seller, communication is cooperative and from the buyer with the

aim to create a dialogue with the potential customers based on their needs and lifestyles; it

represents a broader focus. Communications can include advertising, public relations,

personal selling, viral advertising, and any form of communication between the organization

and the consumer.

2.4 Empirical Studies

Mohammad (2010) linked market orientation to strategy through segmentation

complexity. Segmentation complexity was introduced as a key mediator between market

orientation (i.e., customer orientation and competitor orientation) and the strategies of

differentiation, cost leadership, and innovation. Customer orientation is positively related to

segmentation complexity, differentiation, and innovation, and negatively to cost leadership.

Competitor orientation is positively related to all of these strategies. The indirect effects of

both customer and competitor orientation are mediated through segmentation complexity,

which is positively related to differentiation and innovation, and negatively to cost leadership.

Greg, Geraldine and Albert (2012) distinguished an ex-ante approach to market

segmentation research, which begins with studying the motivating conditions that lead people

to the tasks and interests in their lives, from an ex-post approach which begins with an

individual’s reaction to marketplace offerings. The study argues that the marketing task of

20
guiding managements to ‘make what people will want to buy’ will be more successful in light

21
of a deep understanding of behavior in the context of everyday life and work, rather than a

detailed understanding of preferences in the marketplace.

Shelby and Dennis (2011) examined the nature of market segmentation strategy and

identifies the characteristics that a theory of competition must possess if it is to provide a

theoretical foundation for it. The criteria are argued to be that a grounding theory must

provide for the existence of demand heterogeneity and justify why firms would choose to

produce and market a variety of market offerings. This study argues that resource-advantage

theory, a process theory of competition, meets these criteria and, therefore, provides a

theoretical foundation for market segmentation strategy. Furthermore, it argues that the use of

market segmentation promotes public welfare by prompting the innovations that foster firm-

level, industry-level, and societal-level productivity.

Hanmaikyur (2019) investigated the effect of market segmentation practices on the

performance of Small and Medium (SMEs) in Benue state. A cross- sectional survey design

was put in place for the study. The unit of analysis was organizations while the

owner/managers of SMEs were the respondents. The study employed systematic and simple

random sampling as well as the snowbell sampling techniques to collect the needed data for

the study with a sample size of 401 SMEs covering SMEs from all sectors that exist in the

study area. A combination of descriptive and inferential statistics were thereafter used to

empirically and statistically analyze the data collected, with the aid of Statistical Package for

Social Science (SPSS) version 20. Hence the regression analysis was used to test the

hypotheses. The findings of the study revealed market segmentation have significant positive

effect on SMEs performance in the study area. The study therefore has no option but to

conclude that Market segmentation have positive effect on SMEs performance in Makurdi

22
metropolis of Benue state,

23
Nigeria. It therefore recommends (among others that) SMEs managers and operators should

accord Segmentation practices more attention to derive the benefits that accrue from its usage.

Gichuru and Limiri (2017) looks at the use of market segmentation as a tool for

improving customer satisfaction. The paper argues that in spite of the egalitarian approach

that underpins the marketing of institutions, market segmentation may be used to better serve

the needs of their customers. In utilizing market segmentation, the institutions must pay

particular attention to barriers that may negatively impact the effectiveness of the market

segmentation exercise. Consequently, the need to pay particular attention to issues relating to

barriers to implementing market segmentation is highlighted.

Brian (2015) studied how Performance Solutions Group, LLC can effectively use

segmentation marketing both in their current market and in expansion. The goal is to find a

solution and suggest changes that should be made to the marketing team at Performance

Solutions Group. The research was completed by looking at how segmentation marketing is

used in broad industries currently and investigating how Performance Solutions Group can

use it in their company. The study shows that segmentation marketing is an effective way for

Performance Solutions Group to market its services.

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 CHAPTER THREE

METHODOLOGY

3.0 Introduction
This chapter describes the procedures for data collection and method of data analysis that was

used for this research. The segment therefore, examines the most suitable research

methodology required for the collection, analysis and presentation of data for the study with a

view of reaching objective outcome. The chapter will focus on the procedures adopted in

generating data for this research, how the data were analysed and interpreted in arriving at the

inferences.

3.1 Research Design

The research design was a descriptive survey research design. Descriptive surveys were used

to develop snapshots of a particular phenomenon of interest since they usually involved large

samples. There was careful mapping out of circumstances, situation or set of events to

describe what was happening or what happened. It was used when the purpose was: describe

the characteristics of certain items, estimate proportions of people who behave in certain ways

and make specific predictions. It involved collections of information through a questionnaire

from a sample (Orodho, 2009).

3.2 Study Population

The population of this study consists all deposit money banks in Nigeria. Due to convenience,

the study's target population would be drawn from deposit money banks in Osogbo, Osun

State.

25
3.3 Sample and Sampling Technique
Random sampling technique was adopted in this research study. It is an appropriate sampling

technique as it will help the researcher to achieve the objectives of the study.

Adefila (2008) judgmental or purposive sampling technique is a technique under which the

researcher will intentionally select certain groups or individuals as samples mainly because of

their relevance to the investigation being carried out. The study selected four (4) deposit

money banks including Union bank, Access bank, Polaris bank Wema bank due to their track

record in loan disbursement to farmers and those operating small and medium scale

businesses in the study area. The study selected twenty (20) respondents each from the

selected bank making a total of 80 respondents.

The sample size can be determined using Yaro Yamani statistical formula as follows:

n = N / 1+ ne2

Where:

n = sample size

N = estimated population e = error margin or level of significant 0.05 or 5%

Substituting, we have

n = 80/ 1 + 80 (0.05)2

80/ 1 + 80 (0.0025)

80/ 1+0.2

80/1.2

n = 66.67

n = 67

Hence, 67 represent the sample size for the population.

26
3.4 Research Instrument

Primary data was collected using self-administered questionnaires. The questionnaire is

designed in a close-ended form. The first part of the questionnaire dealt with the background

information of the respondents and the other part enables the respondents to respond clearly to

questions that will be rise for achieving the objectives of this research work. A total number

of 15 questions were be designed with four options from which the respondents are to respond

as either; Strongly Agree (SA), Agree (A), Disagreed (D) and Strongly Disagreed (SA)

following the Likert differentiated scale type from 1-4 as denoted above. These alternatives

stress the degree of feelings of the respondents for every question.

3.5 Validation of Research Instrument

The face and content validity of instrument of data collection for this research work was done

by an expert in the Department of Banking and Finance from Osun State Polytechnic, Iree,

3.6 Sources of Data

We made use of both primary and secondary sources of data collection. The primary source of

data collection consists of fact obtained through questionnaire. The secondary source of data

collection includes data source as references, magazines, publications, journals, etc.

3.7 Method of Data Analysis

Tabular simple percentage was used to describe the data collected. The data collected were

analysed qualitatively and quantitatively. Pearson correlation test was used to test the

formulated hypotheses at 0.05 alpha level.

27
 CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1 Data Presentation and Analysis

This study sought to examine the impact of market segmentation on profitability of banks in

Nigeria with special reference with Mainstreet Bank Plc. Presentation of the findings from

the data analysis in line with the research objectives is done in this chapter.

4.2 : Descriptive Statistics

The respondents were requested to state their age group. Results are as per table 4.1.

Table 4.1 Distribution of respondents by Age

Frequency Percent Cumulative Percent

7 10.4 10.4
18-25 26 38.8 49.3
26-33
34-41 27 40.3 89.6
42 & above
7 10.4 100.0
Total
67 100.0

Source: Research Survey Data, 2022

Based on age categorization of the respondents, table 4.1 shows that 7(10.4%) of the

respondents falls within the age bracket of 18-25 years, 26(38.8%) falls within the age bracket

of 26-33 years, 27(40.3%) falls within the age bracket of 34-41 years, while 7(10.4%) falls

within age range of 42 years above. This implies that majority of the respondents belong to

age group of 34-41 years. The respondents were requested to state their gender. Results are

as per table 4.2.

28
 Table 4.2 Distribution of the Respondents by Gender

Frequency Percent Cumulative Percent

Male 44 65.7 65.7

Female 23 34.3 100.0

Total 67 100.0

Source: Research Survey Data, 2022

The table shows that 44(65.7%) of the respondents sampled in the study are male while

23(34.3%) are female. This implies that majority of the respondents are male. The

respondents were also requested to indicate their marital status. Outcome is as shown in

table 4.3

Table 4.3: Distribution of Respondents by Marital status

Frequency Percent Cumulative Percent

Single 6 9.0 9.0

Married 56 83.6 92.5

Divorced 3 4.5 97.0

Widowed 2 3.0 100.0

Total 67 100.0

Source: Research Survey Data, 2022

From the table above, 6(9.0%) of the respondents were single, 56(83.6%) were married,

3(4.5%) were divorced while 2(3.0%) were widowed. This implies that majority of the

29
Respondents were married. The respondents were also requested to indicate the length of their

working experience in the firm. Outcome is as shown in table 4.4

Table 4.4: Distribution of the Respondents by Years of Experience

Frequency Percent Cumulative Percent

less than 1yr 7 10.4 10.4

1 – 5yrs 15 22.4 32.8

6 – 10yrs 28 41.8 74.6

above 10 17 25.4 100.0

Total 67 100.0

Source: Research Survey Data, 2022

As shown in table 4.4, 7(10.4%) of the respondents stated that they have been in the firm

for less than a year at the time of the study, 15(22.4%) stated that they have been in the

firm for 1-5 years, 28(41.8%) stated that they have been in the firm for 6-10 years, while

17(25.4%) have been in the firm for more than 10 years. This implies that majority of the

respondents have spent 6-10 years with the organization. The respondents were requested to

show their highest academic qualification. Results are as per table 4.5.

Table 4.5: Distribution of Respondents by Level of

Education
Frequency Percent Cumulative Percent

OND/NCE 22 32.8 32.8

B.Sc/HND 45 67.2 100.0

Total 67 100.0

30
 Source: Researcher (2020)

As shown in table 4.5, 22(32.8%) had attained a OND/NCE while 45(62.7%) had

attained B.Sc./HND. This implies that majority of the respondents were B.Sc. holders.

Analysis of Responses as Per the Research Objectives

Table 4.6: You link your products to people living in geographical areas

Frequency Percent Cumulative Percent

Strongly agree 33 49.3 49.3

Agree 29 43.3 92.5
Disagree 3 4.5 97.0
Strongly disagree 2 3.0 100.0
Total 67 100.0

Source: Research Survey Data, 2022

From the table above, 33(49.3%) of the respondents strongly agreed that the bank links
products/services to people living in geographical areas, 29(43.3%) agreed, 3(4.5%) disagreed
while 2(3%) strongly agreed.

Table 4.7: Segmentation of customers base on region/city has positive impact on the
banking profit
Frequency Percent Cumulative Percent

Agree 33 49.3 49.3

Strongly agree 29 43.3 92.5
Strongly disagree 3 4.5 97.0
Disagree 2 3.0 100.0
Total 67 100.0
Source: Research Survey Data, 2022

24
Table above indicated that 33(49.3%) of the respondents strongly agreed that segmentation of

customers base on region/city has positive impact on the banking profit, 29(43.3%) agreed,

3(4.5%) disagreed while 2(3%) strongly agreed.

Table 4.8: Geographic marketing strategies used by bank are very efficient and
effective to bank performance

Frequency Percent Cumulative Percent

Agree 35 52.2 52.2

Strongly agree 25 37.3 89.6

Strongly disagree 4 6.0 95.5

Disagree 3 4.5 100.0

Total 67 100.0

Source: Research Survey Data, 2022

Table above indicated that 35(49.3%) of the respondents agreed that geographic marketing

strategies used by bank are very efficient and effective to bank performance, 29(43.3%)

agreed, 3(4.5%) disagreed while 2(3%) strongly agreed.

Table 4.9: Segmentation of customers base on size of community leads to more customers
patronage

Frequency Percent Cumulative Percent

Strongly Agree 43 64.2 64.2

Agree 21 31.3 95.5

Disagree 3 4.5 100.0

Total 67 100.0

25
Table above indicated that 43(64.2%) of the respondents agreed that segmentation of

customers base on size of community leads to more customers patronage, 21(31.3%) agreed

while 3(4.5%) disagreed.

Table 4.10: Segmentation of customers base on climate and season improves the bank
performance
Frequency Percent Cumulative Percent

Strongly agree 45 67.2 67.2

Agree 19 28.4 95.5
Disagree 2 3.0 98.5
Strongly disagree 1 1.5 100.0
Total 67 100.0

Source: Research Survey Data, 2022

Table above indicated that 45(67.2%) of the respondents strongly agreed that segmentation of

customers base on climate and season improves the bank performance, 19(28.4%) agreed,

2(3.0%) disagreed while 2(1.5%) strongly disagreed.

Table 4.11: Market segmentation improved understanding of customers need

Frequency Percent Cumulative Percent

Strongly agree 43 64.2 64.2

Agree 20 29.9 94.0

Strongly disagree 2 3.0 97.0

Disagree 2 3.0 100.0

Total 67 100.0

Source: Research Survey Data, 2022

26
As revealed in the table above, 43(64.2%) of the respondents strongly agreed that market

segmentation improved understanding of customers need, 20(29.9%) agreed, 2(3.0%)

disagreed while 23.0%) strongly disagreed.

Table 4.12: Market segmentation leads to more appropriate resource allocation

Frequency Percent Cumulative Percent

Strongly agree 43 64.2 64.2

Agree 20 29.9 94.0

Disagree 3 4.5 98.5

Strongly disagree 1 1.5 100.0

Total 67 100.0

Source: Research Survey Data, 2022

As revealed in the table above, 43(64.2%) of the respondents strongly agreed that market

segmentation leads to more appropriate resource allocation, 20(29.9%) agreed, 3(4.5%)

disagreed while 1(1.5%) strongly disagreed.

Table 4.13: Market segmentation leads to clearer identification of market opportunities

Frequency Percent Cumulative Percent

Strongly agree 43 64.2 64.2

Agree 24 35.8 100.0
Total 67 100.0

Source: Research Survey Data, 2022

As revealed in the table above, 43(64.2%) of the respondents strongly agreed that market

segmentation leads to clearer identification of market opportunities, 24(35.8%) agreed.

27
 Table 4.14: Market segmentation leads to better tuned and positioned marketing
programme

Frequency Percent Cumulative Percent

Strongly agree 36 53.7 53.7

Agree 25 37.3 91.0

Disagree 4 6.0 97.0

Strongly disagree 2 3.0 100.0

Total 67 100.0

Source: Research Survey Data, 2022

As revealed in the table above, 36(53.7%) of the respondents strongly agreed that market

segmentation leads to better tuned and positioned marketing programme, 25(37.3%) agreed,

4(6.0%) disagreed while 2(3.0%) strongly disagreed.

Table 4.15: Market segmentation helps bank to discover new ways to reach current
customers

Frequency Percent Cumulative Percent

Strongly agree 35 52.2 52.2

Agree 27 40.3 92.5

Disagree 3 4.5 97.0

Disagree 2 3.0 100.0

Source: Research Survey Data, 2022

As revealed in the table above, 35(52.2%) of the respondents strongly agreed that market

segmentation helps bank to discover new ways to reach current customers, 27(40.3%) agreed,

3(4.5%) disagreed while 2(3.0%) strongly disagreed.

28
Table 4.16: Behavioural markets segmented improve customers retention rate of the
bank

Frequency Percent Cumulative Percent

Strongly Agree 33 49.3 49.3

Agree 28 41.8 91.0
Disagree 4 6.0 97.0
Strongly disagree 2 3.0 100.0
Total 67 100.0

Source: Research Survey Data, 2022

As revealed in the table above, 33(49.3%) of the respondents strongly agreed that the

behavioural markets segmented improve customers retention rate of the bank, 28(41.8%)

agreed, 4(6.0%) disagreed while 2(3.0%) strongly disagreed.

Table 4.17: Segmentation of customers base on personalization leads to more customers

patronage

Frequency Percent Cumulative Percent

Strongly Agree 40 59.7 59.7

Agree 24 35.8 95.5

Disagree 3 4.5 100.0

Total 67 100.0

Source: Research Survey Data, 2022

As revealed in the table above, 40(59.7%) of the respondents strongly agreed that

segmentation of customers base on personalization leads to more customers patronage,

24(35.8%) agreed while 3(4.5%) disagreed.

29
 Table 4.18: Segmentation of target consumers for a product/service enables bank to
focus on generating more sales

Frequency Percent Cumulative Percent

Strongly agree 45 67.2 67.2

Agree 18 26.9 94.0

Strongly disagree 2 3.0 97.0

Disagree 2 3.0 100.0

Total 67 100.0

Source: Research Survey Data, 2022

As revealed in the table above, 45(67.2%) of the respondents strongly agreed that

segmentation of target consumers for a product/service enables bank to focus on generating

more sales, 18(26.9%) agreed, 2(3.0%) disagreed while 2(3.0%) strongly disagreed.

Table 4.19: Segmentation of target consumers behaviour by loyalty has positive impact on
the banking profit

Frequency Percent Cumulative Percent

Strongly agree 45 67.2 67.2

Agree 18 26.9 94.0

Strongly disagree 2 3.0 97.0

Disagree 2 3.0 100.0

Total 67 100.0

Source: Research Survey Data, 2022

30
As revealed in the table above, 45(67.2%) of the respondents strongly agreed that

segmentation of target consumers behaviour by loyalty has positive impact on the banking

profit, 18(26.9%) agreed, 2(3.0%) disagreed while 2(3.0%) strongly disagreed.

Table 4.20: Segmentation of target consumers behaviour by quantity or frequency usage

improve bank financial performance
Frequency Percent Cumulative Percent

Strongly agree 37 55.2 55.2

Agree 25 37.3 92.5
Disagree 4 6.0 98.5
Strongly disagree 1 1.5 100.0
Total 67 100.0

Source: Research Survey Data, 2022

As revealed in the table above, 37(55.2%) of the respondents strongly agreed that

segmentation of target consumers behaviour by quantity or frequency usage improve bank

financial performance, 25(37.3%) agreed, 4(6.0%) disagreed while 1(1.5%) strongly

disagreed.

Test of Hypotheses

Restatement of Hypothesis One

H01: There is no significant relationship between geographical market segmentation and

profitability of banks in Nigeria.

Correlation analysis was conducted to establish the relationship between geographical

market segmentation and profitability of banks in Nigeria and the outcome was tabulated

as shown in table 4.21 below.

31
Correlations
Geographical
Market Profitability of
Segmentation banks
Geographical Market Pearson Correlation 1 .898
Segmentation Sig. (2-tailed) . 005
N 67 67
Profitability of banks Pearson Correlation . 898 1
Sig. (2-tailed) . 005
N 67 67
Source: Computation using SPSS 25.0

The decision rule is to accept the null hypothesis if the significance (2-tailed) value of the

resulting p is > 0.05 otherwise, reject the null hypothesis and accept the alternate

accordingly. Thus, given the significance (2-tailed) value of the result been 0.005 < 0.05,

we reject the null hypothesis and conclude that there is a significant relationship between

geographical market segmentation and profitability of banks in Nigeria. The test further

shows that geographical market segmentation has very high positive and significant

relationship with profitability of banks in Nigeria.

Restatement of Hypothesis Two

H02: There is no significant relationship between demographic market segmentation

and profitability of banks in Nigeria.

Correlation analysis was conducted to establish the relationship between demographic

market segmentation and profitability of banks in Nigeria and the outcome was tabulated as

shown in table 4.22 below.

32
Correlations
Demographic
Market Profitability of
Segmentation banks
Demographic Market Pearson Correlation 1 . 478
Segmentation Sig. (2-tailed) .013
N 67 67
Profitability of banks Pearson Correlation . 478 1
Sig. (2-tailed) .013
N 67 67
Source: Computation using SPSS 25.0

The decision rule is to accept the null hypothesis if the significance (2-tailed) value of the

resulting p is > 0.05 otherwise, reject the null hypothesis and accept the alternate

accordingly. Thus, given the significance (2-tailed) value of the result been 0.013 < 0.05,

we reject the null hypothesis and conclude that there is a significant relationship between

demographic market segmentation and profitability of banks in Nigeria. The test further

shows that demographic market segmentation has significant and positive relationship with

profitability of banks in Nigeria.

Restatement of Hypothesis Three

H03: There is no significant relationship between behavioural market segmentation and

profitability of banks in Nigeria.

Correlation analysis was conducted to establish the relationship between behavioural

market segmentation and profitability of banks in Nigeria and the outcome was tabulated as

shown in table 4.23 below.

33
Correlations
Behavioural
Market Profitability of
Segmentation banks
Behavioural Market Pearson Correlation 1 . 696
Segmentation Sig. (2-tailed) .000
N 67 67
Profitability of banks Pearson Correlation . 696 1
Sig. (2-tailed) .000
N 67 67
Source: Computation using SPSS 25.0

The decision rule is to accept the null hypothesis if the significance (2-tailed) value of the

resulting p is > 0.05 otherwise, reject the null hypothesis and accept the alternate

accordingly. Thus, given the significance (2-tailed) value of the result been 0.000 < 0.05,

we reject the null hypothesis and conclude that there is a significant relationship between

behavioural market segmentation and profitability of banks in Nigeria. The test further

shows that behavioural market segmentation has significant and positive relationship with

profitability of banks in Nigeria.

4.2 Discussion of Findings

The research work examined the impact of market segmentation on profitability

of banks in Nigeria in Mainstreet Bank Plc. The results of hypothesis one tested shows that

there is significant relationship between geographical market segmentation and profitability of

banks in Nigeria. The P-value of .005, which, obviously, lies below α values i.e., 0.05, so, it

means there is significant relationship between geographical market segmentation and

profitability of banks in Nigeria. The results confirmed that the relationship between

geographical market segmentation and profitability of banks in Nigeria.

34
Also, the results of hypothesis two tested shows that there is significant relationship between

demographic market segmentation and profitability of banks in Nigeria. The P-value of .013,

which, obviously, lies below α values i.e., 0.05, so, it means there is significant relationship

between demographic market segmentation and profitability of banks in Nigeria. The results

confirmed that the relationship between demographic market segmentation and profitability of

banks in Nigeria stood at average.

Finally, the results of hypothesis three tested shows that there is significant relationship

between behavioural market segmentation and profitability of banks in Nigeria. The P-value

of .013, which, obviously, lies below α values i.e., 0.05, so, it means there is significant

relationship between behavioural market segmentation and profitability of banks in Nigeria.

The results confirmed that the relationship between behavioural market segmentation and

profitability of banks in Nigeria is strong.

35
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary

The study examined the market segmentation on profitability of banks in Nigeria. It was

observed that:

i. There is significant relationship between geographical market segmentation and

profitability of banks in Nigeria.

ii. There is significant relationship between demographic market segmentation and

profitability of banks in Nigeria.

iii. There is significant relationship between behavioural market segmentation and

profitability of banks in Nigeria.

5.2 Conclusion

There is little understanding of customer differences if one views demographics only.

Recognizing that demographic and socioeconomic segmentation play an important role in

purchase patterns of financial assets, one must also recognize the importance of

psychographic attributes to increase a firm’s knowledge of the consumer. In part, there are

only two ways to significantly increase market share, one is to acquire a competitor. The

second is to take business from one’s competitors through aggressive marketing strategies.

From a marketing perspective, the use of behavioral data is a superior tool both in its ability to

increase sales as well as its ability to do so at far less cost than broad-based communication

approaches. No longer can a financial institution simply target by socioeconomic factors,

demographics, or psychographics. It must use behavioral cues in to differentiate between

consumers who would seemingly be classified in like-segments.

36
5.3 Recommendations

The following were recommended:

1. Money deposit banks managers should always adopt market segmentation strategies

that will assist the utilization of their strengths to exploit opportunities while avoiding

its weaknesses as the socio-political ambitions of some customers may lead to the

diversion of valuable funds and energy from business to social waste which in turn

will affect their performance.

2. The successful working of any organization irrespective of its size of operation

depends on the people working there. Bank managers should make the training of their

staff regular so that they will know and ascertain the cost benefit analysis of every

segmentation practice they employ at any point in time.

3. Banksmanagers should also put in place regular inspection and rectifying measures to

correct marketing problems, matching their segmentation practices with the target

markets need and correct discrepancies (if any) if they must ensure sustainable success

and high performance.

4. Since business environment is not static, market segmentation practices of banks need

to be regularly and effectively evaluated so that those that are no longer relevant are

replaced with relevant ones while those that are still relevant should be given a greater

attention.

37
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Journal of Marketing, 69(8), 115-130.
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38
Minhas, R.S. and Jacobs, E.M. (2005). Benefit segmentation by factor analysis: An improved
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39
 APPENDIX

Department of Banking and Finance,

Faculty of Mangement Studies,
Osun State Polytechnic,
P.M.B 301, Iree,
Osun State.
.

Dear Respondents,
I am a student of the above-named Institution. I am undertaking a research on “impact
of market segmentation on profitability of banks in Nigeria. Please your co-operation in
giving objective answers to these questions will determine to a very large extent the success
of this study. The information provided by you will be treated with utmost confidentiality.
Please answer the questions truthfully as you could and to the best of your knowledge.
Thanks.

Yours faithfully,

……….

40
 INSTRUCTIONS
Please answer the questions objectively by ticking the appropriate boxes [ ] and filling the
gaps provided against each question and leave others incorrect alternative boxes blank. You
may as well express your opinion in response to each question as you deem fit.

SECTION A: BIODATA OF RESPONDENTS

Please tick appropriately:
1. Age: 18-25 [ ] 26-33 [ ] 34-41 [ ] 42 and above [ ]
2. Gender: Male [ ] Female [ ]
3. Marital status: a) Single [ ] b) Married [ ] c) Divorced [ ] d) Widowed [ ]
4. Years of experience: a) less than 1yr [ ] b) 1 – 5yrs [ ] c) 6 – 10yrs [ ] d) above

10 [ ]

5. Level of education: a) GCE O/A Level [ ] b) OND/NCE [ ] c) B.Sc/HND [ ]

d) Others [ ]

41
SECTION B: GENERAL

HINT: SA – Strongly Agree, A – Agree, D – Disagree, SD – Strongly disagree

Geographical Market Segmentation

SA A D SD
1 You link your products/services to people living
in geographical areas
2 Segmentation of customers base on region/city
has positive impact on the banking profit
3 Geographic marketing strategies used by bank
are very efficient and effective to bank
performance
4 Segmentation of customers base on size of
community leads to more customers patronage
5 Segmentation of customers base on climate and
season improves the bank performance

Demographic Market Segmentation

SA A D SD
1 Market segmentation improved understanding of
customers need

2 Market segmentation leads to more appropriate

resource allocation

3 Market segmentation leads to clearer

identification of market opportunities
4 Market segmentation leads to better tuned and
positioned marketing programme

5 Market segmentation helps bank to discover new

ways to reach current customers

42
Behavioural Segmentation
SA A D SD

1 Behavioural markets segmented improve

customers retention rate of the bank

2 Segmentation of customers base on

personalization leads to more customers
patronage
3 Segmentation of target consumers for a
product/service enables bank to focus on
generating more sales
4 Segmentation of target consumers behaviour by
loyalty has positive impact on the banking profit
5 Segmentation of target consumers behaviour by
quantity or frequency usage improve bank
financial performance

Bank Profitability
SA A D SD

1 Customer satisfaction assists banks in providing

competitive customer service in meeting the
corporate objectives
2 Your bank is able to compete based on quality of
services provided to its customer

3 Productive efficiency (Bank utilizes all of its

resources efficiently to meet customer demands

43
 TABLE OF CONTENTS
CHAPTER ONE INTRODUCTION....................................................................................................................1
1.2 Statement of the Problem.............................................................................................................................3
1.3 Objectives of the Study................................................................................................................................4
1.4 Research questions.......................................................................................................................................5
1.5 Research Hypotheses...................................................................................................................................5
1.6 Significance of the Study.............................................................................................................................6
1.7 Scope of the Study.......................................................................................................................................6
1.8 Limitations of the Study...............................................................................................................................7
1.9 Definition of Terms.....................................................................................................................................7
CHAPTER TWO LITERATURE REVIEW.......................................................................................................8
2.1 Intrdouction.................................................................................................................................................8
2.2 Conceptual Framework................................................................................................................................8
2.2.1 Geographic Segmentation............................................................................................................................9
2.2.2 Demographic segmentation..........................................................................................................................9
2.2.3 Behavioral Segmentation...........................................................................................................................10
2.2.4 Profitability................................................................................................................................................11
2.3 Theoretical Review....................................................................................................................................11
2.3.1 The Resource Based View Theory.............................................................................................................12
2.3.2 The Dynamic Capabilities Model Theory..................................................................................................12
2.3.3 Marketing Impact Model Theory...............................................................................................................13
2.3.4 Marketing Mix Theory...............................................................................................................................14
2.4 Empirical Studies.......................................................................................................................................15
CHAPTER THREE METHODOLOGY...........................................................................................................18
3.1 Research Design........................................................................................................................................18
3.2 Study Population........................................................................................................................................18
3.3 Sample and Sampling Technique...............................................................................................................19
3.4 Research Instrument..................................................................................................................................20
3.5 Validation of Research Instrument.............................................................................................................20
3.6 Sources of Data..........................................................................................................................................20
3.7 Method of Data Analysis...........................................................................................................................20
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS......................................................................21
4.1: Descriptive Statistics.......................................................................................................................................21
4.2: Test of Hypotheses.........................................................................................................................................31
4.3 Discussion of Findings.....................................................................................................................................34
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS.........................................36
44
5.2 Conclusion.................................................................................................................................................36
5.3 Recommendations......................................................................................................................................37
References.............................................................................................................................................................38
APPENDIX...........................................................................................................................................................40

45