Markets and Channels
2.3 Market Segmentation of Corporate Banking Area
ternational presence is non-existent and their national presence is not com- plete. Services provided are essentially concentrated on lending and the di- versification of the offer is developed through commercial or equity agreements with specialized merchant banks. Examples include Credem and Antonveneta.
Table 2.4. First level segmentation criteria adopted by the Italian panel banks
First level segmentation criteria
Enterprise turnover
Given amount of lines of credit Used amount of lines of credit Turnover growth rate
Total business volume
Bank's share of overall lines of credit extended by banks Commodities sector Legal typology of customer Subjective choice of specific enter- prises
Other (EVA)
Number of banks today
7 2 0 0 1 0 0 1 4 0
Number of banks Next 3 years
7 2 0 1 2
1
1
0 1 5 1
Table 2.5. First level segmentation criteria adopted by the other European panel banks
_. , , .. . Number of banks Number of banks First level segmentation criteria . , .
° today next 3 years
Enterprise turnover 5 5 Given amount of lines of credit 0 0 Used amount of lines of credit 0 0 Turnover growth rate 1 1 Total business volume 2 2 Bank's share of overall lines of . „ credit extended by banks
Commodities sector 1 1 Legal typology of customer 1 1 Subjective choice of specific enter- .
prises
Other (customer original geo- _ graphical a r e a )
Other (cross selling ability) ! ,W_T-Trrm, j ,
With reference to second level segmentation, only two Italian banks (B and E) divide the corporate area into two sub-segments. This distinction is made with the same criteria as previously described for first level segmen- tation. The situation is similar for the other European banks.
However, three Italian banks have stated that they need and have planned a specific activity in such direction in the medium run. This last observation becomes even more important if associated with the comments regarding the major defects in first level segmentation. Here follow the most frequent:
- low efficiency in distinguishing customer needs and/or business poten- tial (five Italian panel banks);
- limited support to the positioning of products provided.
In other words, on the whole we can assume that so far segmentation has had a strategic role (macro-segmentation) that is going to be perfected in the medium term both at the strategic and operational level in order to achieve a better planning of the corporate business and the commercial ac- tivities directed to clients.
2.3.2 Information Sources for Segmentation Models
In the Italian banks the first-level segmentation model is not provided with an ad hoc information system within the marketing function.
The source of information is the customer credit information file from the credit function as the prevailing criteria for segmentation are turnover and the subjective choices made for specific companies. In the second case, the subjectivity of the choice is closely connected with credit infor- mation and evaluations.
However, the three banks (A, E, F) that have declared the need to adopt a second-level segmentation model have also pointed out the still generic necessity to design a more accurate information system able to merge the credit and the commercial components.
As for the other European banks examined:
- the first-level segmentation model is not provided with an ad hoc infor- mation system
- there is no connection with the commercial information system within the marketing function, just like the case of Italian banks.
However, all of the five banks (V, W, X, Y, Z) have a Customer Rela- tionship Management System specifically dedicated to the corporate area and in one bank (Y) there are client files gathering commercial, credit re- lated and personal information on the relative corporate customers.
2.3.3 Segmentation Models Usage and Maintenance
This issue is directly connected with the complexity of the model and the underlying information system. As a result, the adopted maintenance lo- gics seem to be simple and mainly related to the updating timing of the credit system information file. This means that companies enter or exit from the corporate area when:
- changes are made in customer information files;
- ad hoc corrections are made on an individual basis.
The usage of the segmentation model is still "limited" or "basic", as it simply meets the necessity to distinguish the corporate area from the other groups of clients; the purpose of utilization is neither more complex nor more refined; the model is not used for a proactive approach in the process of product buying or in the choices of product positioning (Fig.2.1).
Degree of in-depth analysis of the corporate customer
1 HIGH:
analysis of be- havioural
models
LOW:
analysis of
company data POOR MODEL
LOW:
analysis of pur- chase and non purchase rea-
sons
y
DEFENSIVE MODEL
PROACTIVE MODEL
COMPLEX MODEL
HIGH:
analysis of competitive strengths in each markets
Degree of in- depth analysis of services
Fig. 2.1. Evolution of segmentation models
It is possible to distinguish four stages of development in relation to the
"degree of in-depth analysis of the corporate customers" and the "degree of in-depth analysis of services". The four stages can be defined as "poor",
"defensive", "complex" and "proactive" segmentation models (Caselli 2003a).
The Italian banks in our panel are still at the first stage of development as they meet the primary need of segmentation, that is distinguish the cor- porate area from the other bank customers. The implementation of divi- sional structures will require more intensive and complex applications of the segmentation models, thus triggering the evolution of the underlying information system and the development of the multiple purposes of utili- zation.