Segmenting the client base for effective marketing and service Presented to: Securities & Investment Institute Presented by: Martin Heale Date: 19 February 2008

© Kleinwort Benson, , page 2 Why segment?  One organisation cannot satisfy the needs and wants of all consumers  In other words, you cannot be all things to all people  However you can discover common wants, needs, behaviours and attitudes, both in your existing client base and in a desired marketplace, and successfully build your business in these clusters or ‘segments’  Is it understanding what the client feels to better service them or is it manipulating them?

© Kleinwort Benson, , page 3 Benefits of segmentation  Better matching of customer needs and wants  Enhanced profits – variables in disposable income creates variables is sensitivity to price. Canny businesses understand sensitivities in segments and can raise average prices  Better opportunities for growth – increased level understanding of what customers want and need now, want and need more of, now and in the future  Retention – understand lifecycle of consumer, varying needs and wants at each stage and be primed to respond to these changes at key milestones will undoubtedly aid retention  Growth of share of market and wallet  Targeted marketing and sales activity – less scattergun, more cost effective

© Kleinwort Benson, , page 4 We should have been doing this years ago…  Financial services, especially private wealth management slow to catch onto segmentation and its benefits  Surprising we were slow to catch on to segmentation given an abundance of data at individual level and enjoy highly intimate relationships with our clients equipping with us a knowledge of needs, wants, aspirations, behaviours and attitudes that other industries can only dream of!  FMCGs have been doing it longer and better but they would kill for our level of data and the access to and intimacy with the consumer  Segmentation can and will save (and make) time and money – allows us to differentiate between profitable and less profitable clients and therefore enhancing long term profitability of business

© Kleinwort Benson, , page 5 Successful segmentation requires  Homogeneity in each segment  Heterogeneity between segments  Segments that are measurable and identifiable  Segments that are actionable and accessible  Segments that are large enough to be profitable

© Kleinwort Benson, , page 6 Types of segmentation Geographical  Region  Country  Density of area (i.e urban, semi-urban, rural)  Climate

© Kleinwort Benson, , page 7 Types of segmentation Demographical  Age  Sexuality  Gender  Race  Religion  Language  Occupation  Education  Family size  Lifecycle

© Kleinwort Benson, , page 8 Types of segmentation Behavioural  Benefits sought  Decision making unit  Product usage rate  Brand loyalty  Product end usage  Readiness to buy

© Kleinwort Benson, , page 9 Types of segmentation Top down, bottom up (George Day, 1980)  Top down –Dividing whole market into defined segments  Bottom up –Start with single customer and build on that profile

© Kleinwort Benson, , page 10 ‘Bottoms up’ at Kleinwort Benson  Traditional PWM industry segmentation purely by wealth thrown out the window  Existing client base profiled and single profile emerged and developed  Depth segmentation utilised - demographic, behavioural, psychographic analysis  Clearer picture of wants, needs, behaviours and attitudes emerged – position statements  Clearer understanding of how all above affected by lifecycle

© Kleinwort Benson, , page 11 ‘Bottoms up’ at Kleinwort Benson  Eight main profiles identified  Internal segment experts or ‘champions’ identified and key teams developed  Deeper mining ongoing to understand further client needs, wants, aspirations, attitudes and behaviours within  Happy realisation our products and services fit segments already or need very little tailoring  Segments however will never take precedence over the ‘individual’  The best banker for the individual, regardless of segment

© Kleinwort Benson, , page 12 The difference  Language  Product design  Events planning  “People like people like them”  Matching bankers and clients  Gap analysis  Segmenting the segmentation

© Kleinwort Benson, , page 13 Pitfalls of segmentation  Will not deliver on ROI unless based on robust management information strategy and platform  Don’t publicise what could be perceived as pigeonholing – remember Mondeo Man?  Don’t think because you’ve identified a segment that it’s worth targeting for growth, segments have lifecycles and therefore limitations  You don’t necessarily have to create a series of products and services for every single segment – clever companies tailor what they have to the individual needs of each segment or pinpoint common wants and needs

© Kleinwort Benson, , page 14 In conclusion  We have always been segmenting in our own minds  Good bankers already understand the triggers for their clients  Segmentation simply formalises great service