Simple division: segmentation is an important strategic process that can be accomplished successfully by following a few basic rules. Don't waste your time doing a lot of slicing and dicing that isn't relevant to your core marketing objective.

• Author: Compton, Tony
• Position: Customer segmentation

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At a time when the economic meltdown is giving banks in general a bad name, it's nice to know that there is an easy and affordable way to improve retention and engender long-term loyalty from your best customers.

This success formula involves segmenting your customers and then delivering consistent, targeted offers across channels to these segments.

This kind of strategic approach is ideal in a recession because the cost to acquire new customers is high, while marketing to existing customers is much less expensive--and the likelihood of acceptance is higher due to the prior relationship.

One of the key ways to segment is by coupling the process with an interaction customer relationship management (CRM) engine. This may be the easiest and most affordable route, but don't be stopped just because you don't yet have a CRM. Segmentation can also be done by an MCIF with data pulled from the bank's core system--or even manually. The important thing is that you start segmenting, even if you don't have the ideal technology to help you out in the beginning.

Determining what to do

The first step in segmentation is to understand what you want to accomplish and align the segmentation campaign with that strategy.

Too often, segmentation is treated tactically with overeager marketers slicing and dicing data sets and customer demographics to deliver all kinds of offers. Nonstrategic, opportunistic event-based segmentation campaigns based on things like birthdays and anniversaries aren't usually in the effective long term. Managing a large number of these campaigns is difficult, and often doesn't deliver results because the customer sets are too thinly sliced.

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Worse yet, the "spaghetti on the wall" approach can confuse customers with too many competing offers and torpedo your loyalty efforts. Too much segmentation can lead to inaccuracies so, for example, could be pestering a senior with offers for retirement accounts or a 9-to-5 office manager with small-business loans.

A better segmentation approach is to identify specific goals--such as:

* Moving customers to self-service channels where margins are high.

* Engaging young consumers early in the life cycle to sell long-term products.

* Engaging a specific demographic for products based on major life events.

Which channels to use

To accomplish any of these goals, the critical second step is to understand your customers. For instance, you need to know what...