Asia's private banks must make more efforts to segment their client bases, rather than purely segmenting clients based on their level of wealth, or risk losing out to competitors, according to two recent reports published by independent market analyst Datamonitor.
In the two reports, entitled 'Customer Segmentation in Australian Private Banking' and 'Customer Segmentation in Singaporean Private Banking', Datamonitor argues that the approach of segmenting purely by wealth is no longer sufficient on its own. Around the world, private banks such Coutts and Citigroup are investing in segmentation and there is much to be learned from these competitors.
"Those private banks that invest in segmentation are likely to be the ones that increase customer satisfaction and referrals and, therefore, market share," explained Alan Shields, head of Asia-Pacific wealth management analysis at Datamonitor, and author of the report.
High net worth
According to Shields, banks in the region increasingly need to recognise the diversity that exists among High Net Worth (HNW) clients. Almost every private banking player in the market advertises individually tailored services to acquire new clients but, in reality, the clients of a private bank are often lumped together as a single client group. Although they usually receive more individual attention, they often don't get the tailored services they are initially promised.
"Segmentation based upon level of wealth does not adequately address the issue of individual needs, just as one individual with a million dollars is as different from another as any two drivers of a similar car," said Shields. In fact, one participant in the research said that those who have made money from a one-off opportunity have very different banking needs from those who need to be continually successful with their investments."
The report showed that, across the Asia-Pacific region, very few private banks have yet segmented their client bases fully. However, for example, the Australian St George Private Bank is the only domestic private bank that Datamonitor found to have a formal segmentation approach.
Within the diverse client base of any bank there are a number of fundamental needs and sentiments that HNW individuals have in common, and it is these needs that should be translated into a range of very different product and service requirements through segmentation. Featuring high on the HNW 'wish list' is that providers should break away from the 'one size fits all' mentality and take into account each client's individual circumstances when tailoring their services. This desire was coupled with a need for ongoing responsive service.
"That element of personal attention is critical because it means there is someone who knows my issues and most importantly can help me with them," explained one research participant.
Communication is another area which providers must improve, even when the news is bad news. Advisors need to stay in touch with clients, and keep in contact whether their message is good, bad or indifferent. "Private Banks need to segment HNW clientele just as the retail base is segmented. This could be done based on a set of criteria that would enable the banks to more easily service groups of clients and, in turn, provide a more tailored service," said Shields.
There is a lot to be learned from banks such as Coutts in the UK, which uses ten different segments. According to Shields, banks have to establish a balance between insight and specialisation, and the pure economic advantages of a standardised offering. Indeed, HNW individuals themselves recognise that there is a business trade-off in this respect. But standardisation is very unlikely to create a worthwhile level of customer satisfaction."