FOUR STEPS TO CREATINGActionable Customer Segmentation

Bank marketers face many challenges in getting the appropriate messages and offers to the appropriate

prospects and customers. Their marketing budgets are under scrutiny, media markets are fragmenting

and consumer preferences are evolving. In fact, consumers have many choices in regard to what

information they receive and how they receive it. Increasingly they are taking control. But the cost of both

awareness efforts and direct media campaigns are substantial as indicated in January 2014 research from

the Consumer Financial Protection Bureau.

Addressing the CHALLENGESto Segmenting Bank Customers

$5.5B AWARENESS ANNUAL SPEND

Cost to Target Today’sFinancial Consumer

$12B DIRECT MARKETING ANNUAL SPEND

40% Credit Card24% Banking: checking, savings19% Services: ATM, check cashing

TV Advertising

Newspaper Advertising

Display Ads

Radio Ads

Magazine Ads

Outdoor Ads

50%

16%

15%

9%

5%5%

Source: Consumer Financial Protection Bureau in January 2014 The Financial Brand

Internet Display and Search

Direct Mail

Direct Response TV Advertising

Direct Response Print Ads

Social Networking

Direct Response Radio Ads

Marketing Emails

Other Methods

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

8%

22%

44%

16%

4%

2%

2%

2%

The key is to spend these marketing dollars wisely. Accurate, targeted marketing campaigns are crucial to reach the increasingly connected consumer effectively. In order for these campaigns to be successful, bank executives must know the answers to key questions such as:

• Who are my best customers?

• What is the potential demand for a particular product?

• How do I find growing consumer segments and markets?

• Which markets offer the best opportunity?

• How do I reach consumers most effectively?

Cost to Target Today’sFINANCIAL CONSUMER

In order to create insightful and useful customer segmentation, banks must maximize the use of demographic and market data. Knowledge of customers and markets is power – power that can help your offers stand out in a crowded field. Demographic and market data provides the foundation to understand market competition, to gain knowledge of potential in the marketplace and to develop more complete customer profiles to pursue targeted opportunities. In order to create effective segmentation, the following four-step approach can be applied:

THE FOUR STEPS to CreatingActionable Customer Segmentation

Know Your Competition

AssessMarket

Potential

EstablishCustomerProfiles

PursueTargeted

Opportunities

An analysis of where your competitors’ branches are located in your market area provides a good starting analysis for your bank. The following example shows such an analysis for a bank with branches in the southern United States. In this particular analysis, the top five institutions have 34 percent of the branches in the defined market area.

KNOW YOURCOMPETITION

Source: FIS Analytics

1.

0 20 40 60 80 100 120 140 160

TD Bank, NA

Bank Trust

Simmons First NB

Vision Bk

Synovus Bank

Capital City Bk

M&I Marshall & Ilsley Bk

Iberiabank

Arvest Bk

US Bk NA

Hancock Bk

Bank of the Ozarks

First Arkansas B&T

Trustco Bank

RBC Bank USA

Metropolitan NB

JPMorgan Chase Bk NA

First Security Bk

Branch Bkg&TC

Fifth Third Bk

Centennial Bank

Wells Fargo Bk NA

SunTrust Bk

Bank of America NA

Regions Bank

NUMBER OF BRANCHES IN MARKET AREA

Beyond location, the product offerings of your competition must be understood and evaluated. The following matrix shows a checking product analysis for each of the institutions listed in the bank’s market area.

Type

# Checking Products

Totally Free

Fee Based

Qualified Free Student Senior

Online 100%

Reward/ High

Interest

Cafeteria Build Your Own

Debit Card

Rewards

Credit Card

Rewards

JPMorgan Chase & Co. Big 4 N N Y Y N N N N N Y

Bank of America Big 3 N N Y N N Y Y N Y Y

Citigroup Inc. Big 4 N N Y N N Y Y N Y Y

Wells Fargo Big 5 N N Y Y N N Y N Y Y

US Bank Big 7 N (usually) Y Y Y Y 65+ N Y N Y Y

Bank of America Big 3 N N Y N N Y Y N Y Y

Ave 4.6

Regions Financial Market 7 N Y Y Y Y N Y N Y Y

Arvest Bank Market 5 Y Y Y N N N N N N Y

First Security Bank Market 5 Y N Y N Y50+ N N N N N

Bank of the Ozarks Market 6 Y Y Y N Y50+ N Y N Y N

BancorpSouth Bank Market 5 N Y N Y Y N N Y N Y

Iberiabank Market 7 N N Y N Y50+ N Y N Y Y

First National Bank Market 5 Y Y N N Y50+ N N N N N

First Federal Bank Market 4 Y Y N N Y50+ N N N N N

First Community Bank Market 11 N N Y N Y50+ y N N N N

Focus Bank Market 7 N Y Y N Y N Y N Y N

Simmons First Bank Market 8 N N Y Y Y Y N N N Y

Ave 6.4

COMPETITOR ANALYSIS FOR PRODUCTS AND OFFERINGS: QUALIFICATIONS AND REWARDS BY BANK TYPES

Source: FIS Analytics

ASSESS MARKETPOTENTIAL2.

Product Ownership Average BalanceMarket Share

Wallet Share Opportunity

ProductsSample Bank

Market Footprint

Sample Bank

Market Footprint

Ave Bal Differences

Share of HH

Share of Wallet / Balance

Potential Prospects in Market Footprint

Regular Checking 49% 48% $ 2,500 $3,660 ($1,160) 25% 17% 71,032

Interest Checking 25% 40% $ 12,000 $6,931 $5,069 16% 27% 67,763

Regular Savings 21% 73% $ 11,000 $31,037 ($20,037) 7% 3% 136,058

First Mortgages 31% 43% $ 120,000 $ 107,696 $12,304 18% 20% 70,156

Source: FIS Analytics

As a bank seeks to understand the potential in their market footprint, they need to assess if the market itself is growing or shrinking. Many banks make the mistake of evaluating territories or markets based on historical performance rather than potential opportunities. A true

assessment of market potential forces this type of critical review. Below is a section of a fair share analysis created by FIS™ to demonstrate to a bank the unrealized market potential available in the markets it serves. The red highlighted areas indicate opportunities.

ESTABLISHCUSTOMER PROFILES3.

Source: Nielsen

Established18%

Sophisticate15%

Traditionalist25%

Connected33%

Practical9%

DISTINCT MULTICHANNEL SEGMENTS

Established: upscale, well-educated empty nesters, many of whom have retired

Sophisticate: upscale, well-educated, middle-aged professionals, many of whom have kids

Traditionalist: midscale seniors, most of whom have retired

Connected: youngest segment with the most kids. They are more racially and ethnically diverse than other segments.

Practical: midscale, middle-aged and diverse; some with kids

The inclusion of county, state or the entire U.S. as a benchmark helps to quantify uniqueness within your bank’s market footprint. The next step is to link knowledge and findings to an action plan that is aligned with the overall bank growth and retention objectives.

The next step in the process is to establish meaningful market segments by creating customer profiles relevant to the market area(s) the bank plans to pursue. This is where the experience of a provider of demographic data can pay off. FIS utilizes sources such as Nielsen. Their customer profile approach identifies distinct segments within Lifestage Groups. Predictive demographics are optimized around financial product preferences. The principal drivers for this optimization are consumer income, age and income-producing assets. November 2013 Nielsen research has identified five distinct multichannel customer segments as shown.

It is important to understand how your bank customers compare to the overall bank market footprint. This determines opportunities to refine marketing strategies based on the profile of consumers residing in your footprint.

CONNECTING WITH MULTICHANNEL CUSTOMER SEGMENTS

ESTABLISHED

• Support both branch and online• Build trust and confidence in mobile banking• Focus on tablet usage to expand and diversify

their channel usage

• Banking needs to fit busy lifestyle• Value ease and convenience of smartphones, tablets and

withdrawing cash from ATM• Show efficiency and they will be open to other channels

• Visit their local branch• Open to online and mobile • Use of tablets

• Value the speed and convenience of online banking and the call center to manage finances

• Build trust in mobile banking• Open to mobile via smartphones

• Use mobile banking or call center • Reach by smartphones• Encourage other channels by emphazing speed and

efficiency

SOPHISTICATE

TRADITIONALIST

CONNECTED

PRACTICAL

Armed with the customer profile analysis, banks can now use the competitive landscape and market potential to create targeted market opportunities. Additionally, they can create a unique marketing message and a communications strategy for each target audience. Consumers expect messages and offers that resonate with their individual circumstances. Gone are the days of shotgun advertising with a one-size-fits-all approach. The following attributes are examples of the characteristics available within a customer profile.

PURSUE TARGETED OPPORTUNITIES4.

CASE STUDIES OF DEMOGRAPHICDATA IN ACTION

IDENTIFYING POTENTIAL HOMEOWNERS

A community bank was looking to increase its new mortgages and HELOCs to meet its annual goal for lending.

In addition, bank was looking to attract younger customers to offset its maturing customer base.

First-time homeowners are 25- to 35-year-old renters. Include messaging and offers that foster education about credit reporting, lending products and insurance.

HELOC customers are homeowners between 35 and 60 years old with above average income and a loan-to-value ratio of <65.

Identify potential first-time homeowners utilizing propensity models.

Utilize existing HELOC profiles to determine best acquisition selection criteria.

SITUATION RESEARCH / ANALYTICS

SOLUTION

A large regional bankwanted to increase knowledge about existing commercial customers for additional lending needs.

Target potential new commercial lending customers.

Obtain available public records that can supplement the bank’s existing commercial customer data:

• Business demographics and firmographics • UCC filings • Commercial mortgage lending filings

Append business demographics/firmographics to existing commercial customers.

Utilize match logic to known UCC filings in the past five years for existing customers.

Supply information to commercial lenders to drive additional sales.

Identify potential new commercial lending bank customers by utilizing past UCC filings.

SITUATION RESEARCH / ANALYTICS

SOLUTION

CASE STUDIES OF DEMOGRAPHICDATA IN ACTION

MINING COMMERCIAL LENDING LEADS

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Banks that employ both market and customer segmentation will create meaningful messages to the correct audience at the right time. The days of investing in broad awareness campaigns no long exist. Targeted and focused marketing is a key to bank survival.

SUMMARY

FOUR STEPS TO CREATINGActionable Customer Segmentation