How the famous bank – a spotlight on segmentation.

StarBanking is banking, right? So how did a small team establish a new brand for famous customers (sports people and entertainers) in a highly competitive and commoditised market and achieve an amazing $1 billion dollars in funds under management in less than two years? Welcome to the highly profitable world of segmentation.

I will share with you how we got this business off the ground and the many valuable lessons that can be applied to any business, including the 10 steps of segmentation based around the Westpac Alpha brand case study.

Louis Vuitton, Bentley, Apple, Zegna, Chanel, and the Four Seasons Hotels all command a premium for their products and services. Arguably, there are equivalent, or even better, products available out there on the market.  Yet, these aspirational brands not only sell well but are able to charge a premium for their services or products.

You can pay over $5000 for the privilege of investing in a Louis Vuitton handbag and yet all it does is carry your personal belongings around, something that a recyclable plastic bag could do at no cost. The same principle applies to men’s suits; you can buy one off the rack for $99 or invest in a bespoke suit for over $10,000.

Segmentation may be based on a range of factors from geographical, behavioural and economic through to attitudinal preferences. Obviously some segmentation is necessary; such as warm clothing in cold climates or specialists such as Neurosurgeons. However, there is another type of segmentation based on personal preferences that enable companies to make greater profits by getting their products just right for those who can afford to pay extra for them.

In our supermarkets we are subjected to even greater segmentation. You can choose between the generic milk or the milk that comes from areas renowned for their greener pastures and beautiful scenery at twice the price. It doesn’t make sense from a functional or economic perspective to pay double for basically the same product, and it is certainly not rational human behaviour.

If rationality and functionality are not where the big bucks are, then there must be other human traits at play that influence segmentation success. This is where aspirations and self-perception come into play. Generally, the market for any product or service has a generic offering, which services the masses, and is priced accordingly. Then as the price increases, obviously the market size reduces proportionately. For this to be profitable, consumers must perceive additional value such as quality, exclusivity or fit-for-purpose that they are willing to pay extra for. Then, as you get right to the upper limits of the cost for this segment, you find that the market size is relatively small and the profit margins incredibly large. It is this exclusivity that captures the hearts, minds and dollars of the rich and famous – as well as those who would like to be. Do you buy the cheap brand or do you get the one that you believe you deserve?

Google and Amazon are masters of online segmentation. They use complex algorithms to identify your preferences as you interact with the web and then charge advertisers’ large fees to target your very specific niche segment. It’s no coincidence that advertising appearing with your Google search is strangely relevant to you, or that the suggested books offered by Amazon seem very interesting. That is the benefit of extreme segmentation.

‘Big data’ has become the latest buzz phrase, which refers to the analysis of customer data to identify trends, behaviours and segments that businesses can further profit from by servicing segments in real time. Think about millions upon millions of customers, all of the data related to their searches, purchases and interests and you are talking about huge amounts of data. When analysed properly, patterns of behaviour become evident that can inform future product and servicing decisions.

The pervasiveness of the internet in establishing a global marketplace has enabled further micro segmentation of markets. Prior to the internet, customers’ choices were limited to the products they had available in their own countries and often micro segments were not identified or serviced. In today’s digital world, a segment may only be small and unprofitable locally, but when targeted on a global scale are highly profitable and draw interest from many customers.

Case study

Alpha – Westpac Sports and Entertainment was designed to service the specific banking needs of Australia’s most famous entertainers and sports people. The three people charged with leading the team to bring it to life were Grant Hackett (Olympic Gold Medallist and Westpac Banker), Tim Horan (former Wallabies rugby union great and Westpac Banker), and Gary Waldon (specialist business strategy and innovation consultant). Hackett originally came up with a vision of creating this highly segmented banking service while he was still swimming competitively. He understood the uniqueness of this micro segment and saw a profitable gap that was poorly serviced by the current market offerings.

Admittedly, it had the backing of Australia’s oldest bank Westpac, but the approach to building this service offering has become a model that is now widely used across the bank for market segmentation, and the principles can be applied to any business.

Take a second to think about the life of the famous. Every time they step out the door people recognise them. People want their autograph, a photo, their endorsement, a favour or to sell them something. To protect themselves, they only let those people who they think are sincere and interested in them as a person, into their trusted circle.

If you have ever read the social pages or flicked through the weekly magazines you will have an idea of the benefits of being famous. You get invited to the best events, you get preferential treatment wherever you go and the general public often give you things just to win your favour. You can imagine that over time you get used to this treatment and come to expect it. For those of us not so famous it is no different than going to your local café and having the owner always greet you by name, shake your hand and take you to your ‘usual’ table. You get used to it and it becomes the standard by which you measure all other services.

The challenge for Alpha was how do you take a generic service such as banking, with all of the standard products and make it appealing to this group of famous people who are inherently are very sceptical ? How do you build a service that is unique and tailored to their needs? How do you provide an aspirational banking experience that they want to be a part of? After all, that is all segmentation is; building something that a select group of people find appealing and want to be involved in.

Here are the steps we undertook to establish Alpha as the number one private banking service for sports people and entertainers and achieved $1 billion of funds under management.

  1. Specialise on micro segments

Often businesses will take the approach of trying to be everything to everyone, which is the equivalent of Grant Hackett competing in the 1500 metres swimming and track events at the same time. He may be ok at both, but he will never be the best at either. He certainly wouldn’t have made the Olympics. With Alpha we undertook a detailed business feasibility assessment on the unrealised potential of this market and made informed decisions based on this understanding.

  1. Define what success looks like

What does success look like? This is a question we continually asked ourselves to ensure we remained on track. Unless you can clearly articulate what success looks like, how can you focus all of your energy towards achieving it? Grant and Tim successfully applied their approach to achieving sporting success into visualising what business success looked like for Alpha and then went about making it happen. The same principles apply in segmentation in that you can only target a market by knowing what it is you want to deliver.

  1. Understand your customers better than they understand themselves

With Alpha we engaged a behavioural strategist, Warren Kannaugh, to help us understand the values, attitudes and behaviours of our target clients. We delved into what they liked, what their lives were like, how they communicated and what influenced their decision making through comprehensive personality profiling. It was with this understanding we set about designing the branding and marketing material as well as the customer experience that would be appealing for this segment.

  1. Define your value proposition

Delivering a unique service that your customers ‘get’ is the key to segmentation success. The value you add needs to be over and above the functional value. In Alpha’s case we understood the segment better than anyone else and built a customer experience that was aspirational for our customers.

  1. Align your brand

Branding is critical when you are segmenting. Customers need to relate to the brand logo, colours and look and feel of all products and experience. Branding is not only the marketing material but also the experience your product leads with. Every element of the customer experience needs to be aligned to enable a premium to be leveraged. Even the smallest deviation can create confusion and devalue your brand.

  1. Create your customer experience

The customer life cycle has many moments of truth. These are opportunities to meet, exceed or fail to deliver on their expectations. To service a micro segment you must always, always meet a customer’s expectations as the minimum and then exceed their expectations regularly to cement your relationship.

  1. Invest in your people, product and presence

These 3 Ps make up your customer experience. In Alpha’s case we not only found the best bankers we could but we accredited them through a comprehensive training program and then provided ongoing development and performance coaching. Just like any high performing team it is about driving engagement, commitment and results.

  1. Establish influence in your segment

Customers of micro segments have their key influencers who they respect and follow. In Alpha’s case Grant and Tim worked tirelessly to build awareness in a closed market place. Over time we engaged additional spokespeople to engage at a more personal level. Industry insiders who believed in the value we were offering assisted in having relevant conversations with clients to lower barriers.

  1. Deliver the meaningful unexpected

True advocacy and brand loyalty are created by consistently exceeding expectations. In Alpha we encouraged our bankers to surprise our customers. By building strong relationships, the bankers knew what was important to their customers and celebrated and supported them through their milestones. These bankers didn’t deliver the unexpected to just to win their business; instead we had people caring about people, acknowledging their highs and lows. Sincerity and authenticity are paramount to being able to deliver a meaningful unexpected.

 10. Remain disciplined and focused

You are only as good as your last interaction – it doesn’t matter what has happened in the past. True success in segmentation is about meeting and exceeding expectations on an ongoing basis. It should become what you are known for. Our star bankers are frequently recommended to other customers based on the relationships they have built and the high level of customer satisfaction they have established. It’s all about consistency.

© Gary Waldon and garywaldon.com 2014. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Gary Waldon and garywaldon.com with appropriate and specific direction to the original content.

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How the famous bank – a spotlight on segmentation.

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