How Customer Segmentation Opened-up New Avenues to Improve the Wallet Share of a Banking Services Provider by Over 45%

Jan 9, 2019

Benefits of Customer Segmentation

In today’s rapidly developing market space, customer segmentation holds a top spot in the management agenda of professionals across industries. In fact, even the most laggard businesses consider customer segmentation as a key growth strategy. Segmenting your customer base will help you gain a deeper understanding of each of your customers and discover what makes them tick. Here are the four key benefits of customer segmentation:

Effective acquisition and retention: Customer segmentation allows businesses to learn a great deal about their customers to help them cater to their needs more efficiently. A robust customer segmentation strategy also helps organizations to tailor their marketing message depending on the customer lifecycle.

Increase in sales: With the right customer segmentation strategy in place, it is now possible to increase sales and enhance profitability.

Better ROI from marketing: Successful marketing not only requires knowledge about who your customers are but also where exactly they are in the buying process. A successful customer segmentation strategy based on such information can ensure that your marketing campaigns are truly effective. 

Unearth new opportunities: With customer segmentation, you will never miss out on new market trends. It also enables businesses to develop new products according to the changing preferences of their global customer base.

Though customer segmentation offers several such advantages, companies in the banking services sector encounter a plethora of challenges while developing a customer segmentation strategy to target the most profitable customer segments. The customer segmentation challenges faced by the banking sector can be attributed to a number of factors including the growing need to develop customized marketing programs, design product bundles to effectively address customer preferences, and the need to enhance wallet share through the existing customer base.

In today’s digital environment, the customer segmentation strategies long used by players in the banking sector will no longer help them gain a strategic advantage. While such traditional customer segmentation models serve as a valid starting point for basic customer segmentation strategies, they don’t come close to capturing the full story of how customers prefer to manage their finances. To help organizations in their pursuit for deeper customer insights, the customer analytics experts at Quantzig have identified a comprehensive customer segmentation approach that will help them effortlessly enhance their organizational capabilities and associated customer analytics strategies.

About the Client

The client is a multinational banking services provider based out of the US. The banking services client is well-known for a wide range of offerings that cover investments, mortgage, payment services, government entities, business organizations, and financial institutions. The client’s operations are spread across the United States with 3,000+ branches primarily situated in the Midwestern United States.

How long does it take to become a customer analytics-driven company, and does the journey ever end? There is not an ideal customer segmentation strategy but there are common guideposts along the way. Request a free proposal today.

The Business Challenge

As one of the leading banking services company in the US, the client spent decades extracting actionable insights from customer behavioral patterns and successfully incorporated them into their upstream business operations. However, with rapid developments in the field of e-banking services, the client found themselves tackling various challenges for bringing about improvements in customer satisfaction levels. Owing to their huge customer base and evolving customer preferences, they also faced several predicaments in getting the appropriate message and offers to the appropriate prospects and customers.

Hence, they approached Quantzig to leverage its expertise in developing customer segmentation strategies and drive revenue generation by growing their wallet share from existing customer relationships as well as new customer groups. Through the use of appropriate customer segmentation models, the client wanted to extract meaningful insights from customer datasets and apply them toward the redesign of their internal business operations. Additionally, the bank was looking at expanding its customer base by attracting younger customers to offset its maturing customer base.

Top challenges faced by the banking services client included:

Problem Statement 1

While customer acquisition and customer retention are of key importance in the banking industry, greater emphasis is being placed on more accurately targeting customer segments. The client’s primary goal was to identify and capitalize on opportunities for revenue growth through cross-sell and up-sell. Meeting this priority required the use of appropriate customer segmentation models to gain a deeper understanding of what customers need, what they expect, and value in a banking services institution.

Problem Statement 2

The banking services client found it challenging to differentiate the customer servicing experience and design product bundles to more effectively address customer preferences.

Problem Statement 3

The client wanted to leverage the use of customer segmentation models to devise more targeted approaches to maximize wallet share and develop deeper customer relationships.

Problem Statement 4

Since most of the client’s existing customer segmentation models were fairly rudimentary, they were facing difficulties in developing newer, more robust schemas that go beyond some combination of assets and demographics to include attitudes, preferences, customer satisfaction, relationship with financial institutions, and several such factors.

Problem Statement 5

Through an advanced customer segmentation strategy, the client wanted to connect with multi-channel customer segments and more precisely identify which potential customer segments along with ways to market and serve them.

Quantzig offers the most comprehensive customer analytics solutions that are in line with the banking industry’s requirements. Contact us for more information.

Solutions Offered and Value Delivered

Rapid technological advancements are expected to bring in several challenges for players in the banking sector. To help the banking services client tackle the above-mentioned challenges, our customer segmentation experts adopted a comprehensive approach comprising of four phases. This approach focused more on the development of a customer segmentation strategy by conducting a detailed analysis of various customer segments. With the growing trend toward investment in customer analytics in full swing, this business function is expected to rank high on the top management agenda of players in the banking services industry. The banking services client gained enormous benefits by establishing customer analytics as a true business discipline. The customer segmentation strategy not only helped generate near-term profitability but also improved long-term customer relationships.

Phase 1

The initial phase of this customer analytics engagement revolved around a detailed study of the competitive forces and different customer groups to profile them into five distinct customer segments. The five customer segments provided the much-needed direction to help the banking services client to more precisely target value propositions.

Phase 2

The next phase focused on the establishment of meaningful customer segments by assessing demographic datasets and creating customer profiles relevant to the market areas the bank planned to pursue. This is where Quantzig’s expertise as an analytics service provider truly paid off.  Such a comprehensive approach to customer segmentation helped profile customers and revealed different customer segments based on their financial product preferences.

Phase 3

Armed with detailed customer profiles, the banking services client was able to use the competitive landscape and market potential to create targeted market opportunities. Additionally, the development of a unique customer segmentation strategy in the third phase helped them create unique marketing messages and a communications strategy for each target audience.

With the objective of helping the client achieve their business goals, Quantzig’s customer analytics experts helped the client to capture the full potential of their customer base by catering to their customers’ needs in a consistent, professional manner at every touch point. The solutions also helped them gauge the profitability based on parameters such as customer lifetime value, customer churn rate, and customer loyalty.

In addition, the analytic solutions and recommendations enabled the client to transform their operating model into a segmented, customer-relationship based structure. We also helped them develop enhanced capabilities for insight-driven selling and cross-business unit collaborations. This, in turn, helped improve the customer experience and wallet share by over 45% through cross-channel integration.

The streamlined approach to customer segmentation resulted in improvements in several areas due to which the client witnessed:

  • 3X increase in customer acquisition and retention rates
  • 20% decrease in customer churn
  • 70% rise in customer satisfaction levels

By transforming its customer segmentation model to one based on segments and relationships, the bank was able to materially improve both customer satisfaction and retention while accelerating the achievement of its strategic goals. To devise an insightful customer segmentation strategy, banking services firms must maximize the use of demographic and market data. 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.

Building a customer analytics capability is no easy task, but within the banking services sector, it is quickly becoming a necessity. To know why request a FREE Proposal.

Why Quantzig?

Quantzig is a visionary in the field of customer analytics capabilities and continues to set the bar for the most advanced customer segmentation strategies. Our analytics solutions have been proven to deliver insight-driven outcomes at scale, to help businesses improve their overall performance. The extensive analytic capabilities of our experts range from customer segmentation, data modeling, forecasting, development of visual dashboards to sophisticated statistical analysis and the development of detailed reports.

We have a dedicated team of 500+ professionals with profound functional and analytic experience to develop innovative consulting and outsourcing services for our clients across sectors. With decades of experience working with the world’s most successful business establishments, we help clients effectively manage business complexity and transform global operating models to effectively serve developing and mature market segments and drive growth through the evolving market trends.

Why is customer segmentation important?

Businesses of today have a plethora of customer data that is available due to the increasing number of disparate sources. While most enterprises certainly appreciate the benefits of leveraging customer segmentation strategies, many face difficulties effectively turning information into actionable insights. However, an effective customer segmentation strategy can help drive top-line revenue growth, avoid maverick spend, and improve customer satisfaction. The importance of customer segmentation is that it empowers businesses to precisely target consumers with specific needs. In the long run, this benefits companies as it enables them to use their corporate resources more effectively and make better strategic business decisions. 

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