Segmentation of bank customers by

expected benefits and attitudes

Achim Machauer-Sebastian Morgner (2001)

A Review
By

Muhammad Abubakar Siddique

Ms. Islamic banking and finance
International Islamic university Islamabad
The marketing of financial products is mostly based on
demographic features of customers. Though there is no
correlation between demographic features and the customer’s
needs.

Because of technology, by classification of customers in the light

of their multidimensional basic characteristics, a better
homogenous customer groups can be achieved than through
demographic segmentation.

The purpose of the paper is to enforce an effective bank

marketing strategy by classification of customers on the bases of
multi-dimensional intrinsic characteristics.

In a comparison between traditional methods of, and modern

approaches to customer segmentation, latter is found better.
Because Traditional methods deal with priori segmentation
(which is the process of dividing markets on the basis of hunches,
assumptions, or custom by the management of an organization,
rather than by marketing research) where many draw backs are
found such as high probability to provide unsuitable services. On
the other hand, modern approaches deal with post hoc
segmentation (which people are grouped into segments on the
basis of findings) where psychological segmentation is to be
characterized by a combination of attitudes and expected
benefits of customers from information services and technology
by which customers are satisfied.

To derive the segmentation empirically, survey was made on 285

persons who were interviewed about their attitude towards and
expected benefits from bank service. In research cluster
analysis technique is used. This technique works to arrange
respondent into various groups or clusters, which are as
homogeneous as possible within the groups and as
heterogeneous as possible between groups.

The researchers divided the analysis into two steps.

• Step-1 :

- A comparison between object’s attitudinal

dimensions.

- Dissimilarities were expressed mathematically.

- For finding pairwise distance, city block metric was

preferred over Euclid distance because of its
neutral processing of observed data.

• Step-2:

- Grouping the objects according to their

attitudinal

dimensions.

- For grouping, values of dissimilarities were

used.

Moreover in this research, agglomerative hierarchical method

of merging in which the object is to “group together objects” or
records that are “close” to one another is used. For distance
calculation between clusters, WARD method is used.

After three stages of cluster analysis, composition,

Interpretation and Characteristics of clusters, a comparison
is made between Psychological cluster approach and simple
segmentation approach where Psychological clusterapproach is
preferred over the latter one on the bases of Homogeneity of
clusters, minimum variance and small means values.