With this approach, the bank takes the responsibility for understanding customer needs. Segmentation is structured around those needs and customers' ability and willingness to pay. Then the bank develops the processes required to serve the various needs segments in a profitable manner. It is more easily adopted, and it focuses on where performance can be improved in the future. Further, it targets bank processes for improvement, as opposed to just attempting to shift the mix of customers willing to interact with the institution as it stands.
All employees easily understand targeting customers by volume and number of accounts.
A problem with the profit segmentation model,by contrast, is that it rubs employees wrong when management says some customers are simply more important than others based solely on their respective profitability. Customer representatives often express considerable angst following the internal publication of calculations used to define the most profitable clients and how they will be treated. They may even refuse to accept the results or abide by the new rules. Segmentation by usage helps bankers achieve the objective of serving all customers with a process matched to their needs and ability to pay. Everyone understands that the bank needs to cover all of the costs of doing business, including the cost of capital, but reps want to pursue this objective in a manner that is comfortable, clear and fair.