options for customisation
There is a need for banks to develop
strategic options to satisfy the needs of customers spread across
the previous article, we talked about the need for banks to customise
their products and services according to different types of customer
segments. In this article, we discuss the various strategic options
that banks should consider while targeting a particular segment.
need to examine the economies of serving a particular customer
segment and the specific needs of that segment keeping in mind
their current skills and strengths and the competencies to be
developed. Banks can choose to offer their services to more than
one segment based on the match between their capabilities and
McKinsey identified 3 models to help banks to select target
segments. These models are:
This strategy concentrates on a single segment, which is feasible
with the available resources. The frontline staff and back office
are trained to meet the needs of the select segment. For example,
South Africa's Standard Bank decided to target low-income groups.
It provided information about personal loans, savings accounts
and debit cards in a clear and simple manner to customers. Customers
were also given assistance to use ATMs. The result was that the
bank was able to attract 2.5 million customers within five years.
system, multiple brands
A single back office along with different channels helps the banks
to serve different segments. For example, Singapore-based DBS
Bank has different branches and ATMs for low risk and sophisticated
products. The high-risk products are offered under the DBS brand
name and the low risk products are offered under the POSB (Post
Office Savings Bank) brand name, which is a subsidiary of DBS
having huge customer base.
Alternatively, a bank may create separate units with distinct
brands. Banco Comercial Portugues adopted a similar strategy by
setting up separate units, rather than by acquiring another firm.
It has ten different products to cater to different segments.
a bank uses a single back office and front-end to offer different
products under a similar brand name. This is the most difficult
approach for the bank, as through the same office, it has to serve
several customer segments. This requires world-class skills and
few banks can succeed with this strategy.
For example Citibank offers different products using a common
brand name Citi. The CitiGold product is open to individual customers
having assets worth more than $100,000.
can effectively target a specific group of customers, and provide
tailor made products, through segmentation, and adoption of a
strategy that is in line with its strengths.
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