Digital Segmentation: One Size Does Not Fit All

Unlike traditional businesses, where sellers even know their clients personally, for digital businesses, in order to grow, it is essential to know well who visits your platform, why and how they purchase your products/services, and why not. In the digital world, you only have one chance: the first impression is what counts and disloyalty is just a click away. 

The first step prior to segmentation is to distinguish the digital user, the digital client and the digital prospect, because each one requires different actions for the business to be profitable. The Digital User is recruited by a seller or a branch and consults/operates on a digital platform. This user “belongs” to a physical branch. The Digital Client has a digital native relationship with the company. In other words, he bought your service/product directly on your platform, without any seller or intermediary, through a 100% digital onboarding and may (or may not) operate on the same platform as digital users. The digital native customer behaves very differently from the customer attracted by a branch and operates on a digital platform. In short: it is important to know the origin of the client to really know the dimension and behavior of your digital business. If you mix the two, you won't be able to segment, and you'll be back making blind decisions.

Tailor Digital Strategy With Segmentation Focus

Once you distinguish these users, you can segment them and use standard market KPIs specific to digital businesses. Segmentation in this sector involves categorizing clients based on mainly four dimensions, to allow more personalized, effective engagement strategies:

1. Behavioral Segmentation: Focusing on how clients use digital financial services, including transaction frequency, product preferences, and online behavior.
2. Psychographic Segmentation: This looks at clients' lifestyle choices, values, and attitudes toward financial management and investments.
3. Investment and Savings Segmentation: This strategy categorizes clients based on their financial capabilities, from small-scale savers to large investors.
4. Value-Based Segmentation: Segmenting clients based on their potential value to the business.

Some leading brands in the digital finance sector demonstrate successful segmentation strategies.

Most financial entities have segmented their traditional business clients and are maturing their digital segmentation within their learning curve process. With the incursion of AI, the trend is accelerating. Some brands are considered to use best practices on this topic:

• Betterment: Customizes investment advice based on individual risk profiles and financial goals, using advanced algorithms.
• Wealthfront: Offers automated, personalized financial planning, catering to tech-savvy clients seeking low-cost solutions.
• Acorns: Specializes in micro-investing, attracting clients with small investment capabilities and a preference for automated savings.
• Mint: Provides tailored budgeting and tracking tools, appealing to individuals seeking better financial management.
• SoFi: Focuses on offering personalized financial advice and a range of products, from loans to investment services, catering to a broad client base.

Synergizing Segmented Channels for Enhanced Value

Different segmented channels can significantly increase company value and profitability, if they are part of the same strategy, accompanying clients in their different life phases, accompanying them in the construction of their assets, their personal finances and positioning the company as an inter-generational brand. This synergy involves leveraging insights across each channel to offer more comprehensive and personalized services. 
It's about striking a balance between addressing lifestyle needs and financial capabilities, thus enhancing overall client engagement and satisfaction.

Risks of Different Non-Segmented Digital Channels

In the same way that there is an umbrella strategy for traditional business, there must be another specific one for digital business. Operating different digital channels without focused segmentation and under different digital strategies presents several risks:

1. Diluted Brand Messaging: When marketing efforts are not segmented, they may fail to resonate with any particular group effectively.
2. Resource Wastage: Without segmentation, resources might be spread too thinly or focused on the wrong targets, and are probably duplicating efforts or wasting resources.
3. Decreased Customer Satisfaction: A lack of targeted communication can result in a less personalized customer experience.
4. Inconsistent Client Experience: Without segmentation, clients may encounter a one-size-fits-all approach, leading to a less personalized and less satisfying experience.
5. Reduced Client Retention: Non-targeted strategies can result in lower client engagement and loyalty, as services may not adequately meet the diverse needs of different client groups.

Embracing Segmentation for Digital Mastery in Finance

Segmentation is not merely a tactical approach; it is a strategic imperative in the digital financial, wealth management, and personal finance industries. In the digital age, where personalization is key, effective segmentation allows institutions to offer more relevant, engaging, and profitable services. By understanding and categorizing clients based on their lifestyles, investment sizes, and savings capacities, financial institutions can forge stronger, more meaningful relationships with their clients.

The key to thriving in the dynamic world of digital finance lies in understanding and catering to the diverse needs of your clientele. By harnessing the power of segmentation, financial institutions and fintech companies can navigate the complexities of the digital landscape successfully, ensuring relevance, responsiveness, and resilience in the face of change.

In the journey toward digital transformation, remember, segmentation is more than a tool – it is the cornerstone of digital financial innovation and client satisfaction. Embrace it, and you will unlock new horizons of success and sustainability.