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Use of Segmentation for Financial Marketers

An Excerpt from the 2016 Financial Services Exchange

Shannon Gatti McCarthy, a senior consultant at Nationwide Financial who presented at the Exchange, said it best: “As marketers our job is to develop experiences that will influence behavior efficiently and, therefore, we must be able to predict response to marketing stimuli.”

Or in other words, influencing decisions means understanding decisioning. While behavioral and life stage data can inform brands about whom to target and when to reach a particular audience, it doesn’t explain the implicit reasons individuals make certain purchase decisions. Understanding consumer decision making at both the functional and emotional levels, however, reveals the latent reasons why people do what they do.

Which brings us to segmentation.

Segmentation involves aggregating consumers into groups that will make decisions and react to marketing stimuli similarly, which can help bolster the planning and execution of addressable experiences.

Segmentation isn’t something that is alien to the marketing world, but getting it down to a T is critical for financial marketers who want to drive the most relevant customer experiences. There are multiple tools to group consumers with, but for financial services there are three key tools for segmentation to focus on:

  • Affluence and value – how much you should invest on a per customer basis
  • Lifestage – the age and life position of a customer will determine what product to offer
  • Motivation – what’s the psychology of consumer decision making

For the optimal toolbox, financial marketers need insight into all three segmentations to deliver the right offer, message, creative, and spend. For example, imagine you have two prospective customers. They are both young men in their 30s in the market for a mortgage. One of the young men, however, is high value and motivated by social status, while his counterpart is of medium value and motivated by a sense of security. Now, you have two people in the market for the same product but who have different value and motivations. Essentially, this means that how you market to and engage with them will need to be tailored to the individual’s needs and desires.

Understanding the psychology of consumer decision-making is what will provide financial services brands with a significant competitive edge. Merkle’s proprietary research on millennials in financial services, titled How Financial Services Can Meet Millennials’ Emotional Needsbreaks down how financial marketers can tie their brands to distinct personal values and motivations to help own the customer experience within the greatest market opportunity: millennials. 

We have seemingly endless data on millennials but we need the “so what,” that will bring clarity on how to appeal to millennials. To figure this out, we studied what drives millennials within three categories: auto insurance, mortgage lending, and digital wallet. We studied 600 individuals who responded to a survey that fit within the following criteria: they are millennial college graduates, have been employed full time for at least one year, and can come up with $2,000.

Based on that survey, we quantified the decisioning factors to discover what the most salient factors are, as well as developing correlations between them to understand how to appeal to both the emotional and rational in a connected way that makes sense to the consumer. Decisioning ladders were clustered into segments to determine driving factors among individuals and groups of respondents. Once those clusters are identified and developed, we then projected those clusters onto the database to have an idea into which individuals in the population will fall into which segments.

The study revealed that across auto insurance, mortgage lending, and digital wallet, there were three primary personal values that were driving decisions:

  • Respected by others, or social currency
  • Enjoying life
  • Sense of achievement

To optimize understanding of how primary personal values drive decisions, financial marketers must take the additional step of translating what those motivations mean. For example, the “enjoying life” motivational segment within digital wallet translates to less stress and hassle or the ability to do more with family and friends, because it’s easy to pay people back.

Millennials pose an enormous market opportunity for the industry. To truly seize that opportunity, however, financial marketers need to look beyond acquisition efforts and consider millennials’ life stage journey to plan continued, relevant experiences that are grounded in an understanding of consumer decision making.

Want to learn more? View an on-demand webinar titled “Use of Segmentation for Financial Marketers” that dives into:

  • How motivation-based insight can fuel your foundational customer engagement strategy
  • Learning about practical scenarios on where to start and how to move your organization toward motivation-based customer engagement
  • How Nationwide Financial’s life stage segmentation journey has evolved
  • Using Merkle’s proprietary research on millennials in financial services to tie your brand to distinct personal values and motivations to help own the customer experience

This blog is an excerpt from Merkle’s 2016 Financial Services Exchange. The Financial Services Exchange is an intimate forum where leaders of the best financial services and insurance brands can gain perspective from each other in the areas of performance marketing and CRM. The 2017 Financial Services Exchange will take place September 14-15 in Newport, Rhode Island at Hotel Viking Newport.

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