Until now, financial services firms have played by the rules. They have been product oriented and they have taken a traditional segmentation approach to marketing and distribution—focused on the age, sex, income, occupation and location of their customers. But in a GAFA world, a gap is emerging between what consumers want, and what traditional financial services firms are offering—or has it always existed but digital technologies are making it more readily apparent?
Our research shows that customer mindsets around money and financial services might be key to closing that gap. By developing a powerful new segmentation model that groups customers according to their attitudes and behaviors rather than according to their demographic characteristics, financial services firms can fine-tune their offerings and improve the customer experience, giving customers what they really want, where and when they want it.
A segmentation model built on money mindsets—experiencers, balancers, explorers and achievers—could have a number of benefits:
- Improved return on equity and investments. Focus investments on “valuable” segments, and avoid investing in “poor” segments and unprofitable customers.
- New products and revenue sources. Evolve away from a traditional product-based portfolio to a needs-based ecosystem of services, to explore new sources of revenue based on real needs and behaviors of consumers.
- Competitive advantage. Put data to work to understand if there is a dominant mindset in the customer base or if there are emergent mindsets that are not being served. Get intimate with changing client behaviors and expectations, and serve them according to their digital lifestyle.
- Surgical precision in service design. Identify the need for new products and services, or improve experience in poor performing segments. Design, build and manage different sets of services for each segment to get the most value for them.
- Design the services of the future. Gain a more vivid picture of customers, and their needs and behaviors, rather than using generic visions that overlook what customers really want.
To build a mindset segmentation model, financial services companies need to tap into big data and analytics to rate customers on two scales:
- Structure. How do customers formulate and define their approach to money? People who rate low on structure follow their instincts when they make decisions about money, whereas people who rate high on structure tend to follow the rules.
- Scope. How do customers think about money? People with a narrow scope look at the current moment and do not necessarily consider the impact an action now has on the future. People with a wide scope do understand and consider the impact things they do now might have on the future. They look at the big picture and the long term, planning for unforeseen events.
After rating customers on these two scales, companies can determine which of the four mindset segments they fit into:
Traditional demographic segmentation fails to account for human insights and modern digital behaviors, and it offers limited opportunities for cause and effect analysis. Mindset segmentation, however, takes advantage of customer-insight analytics based on real-time behavior—and it enables financial services firms to design, market and deliver seamless individualized customer experiences fit for a GAFA world.
To read more about Mindset Segmentation, you can find additional information and materials at https://mindsets.fjordnet.com/.