Micro-segmentation: The basis of niche banking December 2, 2009
Posted by nichebanking in Bank customer segmentation, Microsegmentation, Niche banking, The Long Tail of Banking.trackback
Earlier this week on Twitter, we were pleased to see some good conversation about niche banking (check out @miinsider, @jenshefner, @stacyliz and @matt_vance on 11/30/09 for some of the conversation exchanges).
@Matt_Vance used the term “micro-segmentation” in his tweet, asking if there was really a point to micro-segmentation in banking. Based on the concept of the long tail, the answer is a resounding yes! In fact, it’s micro-segmentation that is truly the basis of niche banking: dividing customers into tiny segments. (Special thanks to Matt for providing a great term, micro-segmentation, for us to use in explaining our concept.)
But the key for niche banking is in how the micro-segmentation happens. For long tail banking, customers must be micro-segmented by interest, passions and pursuits…not by demographics. I point this out explicitly, because the natural tendency in banking is to slice and dice customers and targets by criteria such as age (Gen Y), geography (within a region, or a credit union’s charter zone), social status (high net worth, etc.), race or profession (business owners, teachers, etc.). With niche banking, though, it’s important to tap into people’s passions, and become part of the communities that form around those passions. After all, it’s not “being a business owner” that brings people together into social communities, it’s a passion for being one’s own boss, or commiserating about cash flow woes, that brings people together.
very interesting!
The main question is how can the banks accumulate this information about their customers passions? it is not something that you write in your application form…
Good question, which brings up an important point. Rather than get customers, accumulate info about their passions and then market to that (a “push” strategy), we’re doing almost the exact opposite (a “pull” strategy). We are creating something that a certain group of people are passionate about (including us!), even before we have customers at all. Then, we are joining the communities those people spend time in (these are communities we love as well, because of our shared passion), and letting them come to us if they are attracted to our idea. So instead of marketing TO customers, we will be interacting with prospective customers who share our passions, and pulling them towards us like a magnet. Will we be a magnet to everyone who hears about us? Absolutely not. But for those who are passionate about the same things we are, we will be a magnet indeed.
What you guys bring up here is quite a revolutionary idea, that opposites the centralization trend in the banking industry as reflected by the gigantic banking corps that we all know. Maybe there is an interim solution, which combines the traditional banking with your suggested banking and achieves the same goals. For example, niche departments within the “general” bank or just a better segmentation and original oriented marketing system, that is able to reach people with all kinds of needs.
Do you feel that these solutions are applicable?
Thank you for your comment. We are actively working to bring this idea of niche banks to life right now, so our goal is to not need an interim solution, but rather to put this in place ASAP. That said, to your point about using traditional banking and having niche departments, our main concern is in the authenticity that a general traditional bank could achieve in creating meaning experiences for those niches.
One thing to point out (and of course we’ll elaborate more on this in our future posts) is that it’s not the “banking” part of traditional banking we think is broken. We don’t have a problem with today’s checking accounts or mortgages. But we have a problem with the delivery of those products and services. Therefore, in our minds, it’s the customer experience and delivery of it, that requires our long tail approach.