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Client Segmentation in Agriculture Finance 2015

Segmentation is at the core of a bank’s strategy and marketing for all its business segments: wholesale, small and medium enterprise (SME), retail, or agriculture. This paper discusses the importance of segmentation in agriculture finance, approaches to segmentation, possible product, and service offerings to different segments of agriculture players, organizational structures to serve client segments, and the process to be followed for effective segmentation. Relationship managers play a key role in revenue maximization, which is the main objective of segmentation. Relationship managers are responsible for new client acquisition and deepening the relationship with existing clients. The paper discusses how banks can leverage the cadre of relationship managers and serve different client segments.

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What is Client Segmentation?

Segmentation is the process of defining and subdividing a large, homogeneous market like agriculture finance into clearly identifiable segments having similar needs, demands and characteristics. Customers within the same segment share common characteristics that can help a financial institution target those customers and market to them effectively. Customer segmentation can also be defined as “the practice of dividing the customer into groups with similar characteristics in order to value offers, which are effective and unique”. The grouping can be relevant in different ways to the marketing strategies of the financial institution. The critical factors that have a bearing in market segmentation are clear identification of the segment, measurability of its effective size, its accessibility through promotional efforts, and its appropriateness to the policies and resources of the financial institution.

The main objectives of segmentation are profit optimization for each segment, monitoring of clients to provide them with the most suitable value offer, and encouraging clients to grow in order to increase profitability by moving up the segmentation ladder.