MBFB 3073

MARKETING OF FINANCIAL SERVICES

CUSTOMER BEHAVIOR/
MARKET SEGMENTATION

NUZUL AKHTAR BAHARUDIN,FPM

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 After studying this topic you should be able to:
 discuss the factors that influence attitudes and behavioral
characteristics of consumers.
 explain the Engel-Kollat-Blackwell model.
 explain the factors affecting market segmentation.
 describe the segmentation in the financial services.
 discuss the approaches to market segmentation.
 discuss the elements for effective market segmentation.
 discuss the benefits of market segmentation.

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 Consumer needs and motives are at the heart of
marketing.
 Thus, it is very important to address what basic
financial needs consumers have and what motives
or drives consumers to acquire FS.
 Motivation describes the forces which initiate and
drive behavior towards the attainment of specific
goals or objectives (Markin 1977).

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 Goals are the result of needs which cause a
state of tension in an individual.
 Thus, two important aspects are necessary in a
motivating situation:
1st: there must be a goal or an objective that act
as an incentive.
2nd: there must be a state or condition within
the person that stimulates action.

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 Therefore, understanding the nature of
consumer buying behavior is the heart of
marketing.
 Thus to fully understand, we need to look into
customers’ attitudes and behavioral
characteristics.

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The attitudes and behavioral characteristics basically
influenced by three sets of factors:
1. External factors – from influential person and
reference groups, these may include culture,
occupation, age, social class (family, reference
groups,roles and status) and geographical location.
2. Internal factors – within the individual such as
motives, attitudes, learnt behavior, beliefs and
perception.
3. The consumer process – a series of experiences or
stages that satisfied them with the present situation.

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 How consumers buy FS?

 Understanding on how consumers buy FS is

limited/difficult because of the characteristics
of the FS.

 Typically, consumer choice is looked at as a

problem-solving decision process with several
distinct stages.

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 Therefore, it is important for service marketer to
gain understanding on consumers buying
behavior because at different stages the
consumer requires different information. Thus in
view of this needs, we now look at the following
model:

The Engel-Kollat-Blackwell Model

(EKB Model)

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 This model was developed primarily to explain
the behavior of final consumers – retail
consumers or personal consumers.

 The decision process begins when:

1. the buyer recognises a “problem” and
2. the buyer is motivated to act.

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 To solve the “problem”, the consumers tries to find
relevant information and on the basis of that
information, evaluates the alternative options that
are available.
 Evaluation would usually be followed by purchase
and by various post-purchase responses that affect
levels of satisfaction, willingness to recommend
and willingness to repurchase.

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Problem Recognition
 Concerned with understanding the needs

and wants and the extend to which

consumers are motivated to satisfy those
needs and want.
 FS provider must understand customers

needs in order to be able to identify

appropriate products which meet their
customers’ needs.
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Information Search
 To the extend that the nature of FS
encourages consumers to be rather
passive, the extend of information search is
likely to be limited.
 Usually, FS consumers rely heavily on
others’ experiences, through word-of-
mouth recommendations and on the
organization's reputation as a whole.
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Evaluation of Alternatives
 FS are processes (i.e. things that the
customer experiences) rather than physical
objects.
 Therefore, pre-purchase evaluation is often

difficult.
 Normally, customer attempt to evaluate

alternatives by comparing how different

products could help meet their needs.
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Purchase
 FS – For personal customer, needs are only

created when the customer is about to buy.

 FS – For corporate customer, they normally

will evaluate alternatives thoroughly

because they have better information and a
more systematic understanding on a
product.

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Post-Purchase Behavior
 The difficulties with post-purchase
evaluation would tend to suggest that
personal customers might experience
significant doubts after making their
purchases – if this situation continue,
customers may be less loyal and more likely
to purchase from other FS provider in the
future.
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 Make the service seem “real” = provide physical
evidence
 Reduce the consumer’s perceived risk = build trust and
confidence
 Perfect delivery process = will affect the consumer’s
assessment/evaluation of the service

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 Definition of segmentation:
 is concerned with the process of identifying

different groups of customers in the marketplace

who have similar needs.
 is an extension of the process of trying to
understand consumer buying behavior.
 To segment a market, it is necessary to understand:
 Who customers are?

 Why they behave in particular ways?

 How they may be grouped together?

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 Market segment – a subgroup of people or
organizations sharing one or more characteristics that
cause them to have similar product needs.
 Market segmentation – the process of dividing a
market into more meaningful and identifiable segments
or groups.
 Through market segmentation, companies divide large,
heterogeneous markets into smaller segments that can
be reached more efficiently and effectively with
products and services that match their unique needs.

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 Market segmentation plays a key role in the
marketing strategy of almost all successful
financial services.
 It helps marketers define customer needs and
wants more precisely.
 Segmentation also helps decision makers more
accurately define marketing objectives and
better allocate resources.
 In turn, performance can be better evaluated
when objectives are more precise.

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 To identify distinct group of customers .
 To develop products which meet the customer’s
need.
 To gain a competitive edge as compared with
those that simply offer the same product to all
customers.

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Location
 Most common forms of segmentation is
segmentation by different geographic locations.

Socio-Economic Variables
 Encompass various measures of income, wealth
or social status.

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Demographic Variable
 The market is divided on the basis of age, gender,
housing, family characteristics or family life
cycle stage or by some combination of these
factors.
Psychographic Segmentation
 Or Life style segmentation is a method that seeks
to classify people according to their values,
opinions, personality characteristics, interests and
attitudes.
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Lifestyle Segmentation
 Refers to the ways in which individual and
groups of individuals choose to live their lives.
 It includes a variety of factors such as
motivation, values, personality and culture.

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Religion
 An important form of segmentation in many
countries including Malaysia.
 FS provider must take into account the
requirement of Muslim consumers who have a
strong preference for products that conform to
the Syariah.

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 Measurable • Size, purchasing power, profiles
of segments can be measured.

Accessible • Segments can be effectively

reached and served.

Substantial • Segments are large or

profitable enough to serve.
• Segments must respond
Differential differently to different
marketing mix elements &
programs.
• Effective programs can be
Actionable designed to attract and serve
the segments.
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 Can reduced cost through a closer matching of
company resources with market requirement.
 Customer satisfaction can be enhanced by meeting
customer requirements more accurately e.g:
personalized service.
 Certain groups can be selected to the exclusion of
others, enable the organization focus on narrower
target i.e more focus on selected group.

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 New customer requirements can be anticipated.
 Customer retention can be improved via
increased satisfaction.

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THANK YOU

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