"We have a culture that recognizes that what's in the information vault is as critical to us as what's in the money vault," says Lippert. "It's important to understand that [segmentation is] not typically a year-one, year-two payback kind of investment. It's something that gets better with time and gets better with the organization's ability to understand the data."
Lefebvre says that companies just starting down the customer segmentation path should view it as an evolutionary process and just jump in and begin. "Don't wait for everything to be perfect," she says, "and don't wait for the next piece of data before you do things. Often you can improve the business successfully in a rudimentary way. Ten years ago we were not as granular.
"Segmentation," she says, "is a journey."
SIDEBAR: The Lifetime Value Equation
In financial services, calculating the lifetime value of customers is something of a misnomer, because few if any banks attempt to project customer value beyond five years. The calculation typically involves looking at a customer's age, tenure, and number of products and services used, as well as his propensity to acquire additional products and services minus the risk that he'll defect on his current products and services. The value of the customer's projected portfolio can then be calculated using typical profitability figures for each product and service.
SIDEBAR: Tips for Successful Segmentation
1.Put each customer in only one segment. Otherwise, customers can get bombarded with multiple, uncoordinated offers.
2.Be channel-neutral. Customers should get the same offers no matter which channel they use. So custom product recommendations should be available to all customer-facing employees and delivered to customers who go online.
3.Give customer-facing employees specific, action-oriented intelligence. Don't give them data that's open to interpretation. Tell them exactly which offer is most appropriate for each customer.
4.At the outset of customer segmentation, give the sales force only the best leads to ensure a very high success rate. Once the sales force sees the value of segment-driven sales recommendations, you can expand the lead list to include more customers, giving a "propensity to buy" score for each so that reps understand what level of receptivity to expect.
5.Give a senior manager P&L responsibility for each segment.
6.Put senior management in charge of driving segmentation. As RBC Financial Group vice chairman and CIO Martin Lippert notes, companies may miss part of the customer perspective if only a single line of business is pushing segmentation. Also, segmentation is less prone to budgetary constraints if it's funded by the enterprise instead of by a single group.
7.Start small, then evolve. First divide customers into a few coarse segments, then gradually break them into smaller, more precise subsegments. But don't wait until you've got it all perfect. Just begin.
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