EVALUATION OF THE EFFECT OF MARKET SEGMENTATION ON SALES
PERFORMANCE OF THE BANKING INDUSTRY;. A SURVEY OF COMMERCIAL
BANKS IN KISII TOWN , KISII COUNTY.
EDINAH BARONGO NYABWARI
A RESEARCH PROJECT SUBMITTED TO THE SCHOOL OF BUSINESS AND
ECONOMICS IN PARTIAL FULFILMENT FOR THE AWARD OF DIPLOMA IN
SALES AND MARKETING OF KISII UNIVESITY
NOVEMBER, 2017
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DECLARATION AND RECOMMENDATION
DECLARATION
This research project is my original work and has not been presented for a diploma in any other
university/ institution.
Signature ……………………………………. Date …………………………………..
EDINAH BARONGO NYABWARI
CB07/10455/15
RECOMMENDATION
This research project has been submitted for examination with my approval as a University
Supervisor.
Signature …………………………………….. Date …………………………………….
Mr. Peterson Sang’ania
Lecturer , School of Business and Economics
Kisii University
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DEDICATIONThis research project is dedicated to my father Christopher Nyabwari , my mother Ebisiba
Kwamboka , My sister Violet for the emotional and financial support accorded to me that
enabled me to carry on with this work to it’s logical conclusion and to my supervisor Mr.
Peterson Sang’ania for having allowed me to carry on with this work under his guidance
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ACKNOWLEDGEMENTI wish to express my sincere gratitude to my supervisor Mr .Peterson Sang’ania for his useful
guidance that enabled me to complete this research proposal in time. I also express my
appreciation to all my lecturers and my fellow students for their contribution towards the
success on this proposal.
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ABSTRACTThe main objective of this study was to evaluate the effects of market segmentation on sales
performance of banking industry. This research proposal was to evaluate the effects of market
segmentation on sales performance of the banking industry .The study was guided by four
relevant theories: The resource Based View theory ,dynamic capabilities model theory
,marketing impact model theory and marketing mix theory. The study was guided by three
specific objectives ;to obtain the extent to which Geographical market segmentation is used in
service provision by the commercial banks in Kisii town, to assess the factors that influence
demographic market segmentation by commercial banks in Kisii town and to establish
challenges of behavioral market segmentation. To achieve the objective of the study a descriptive
research design was adopted. The target population was 92 respondents from commercial Banks
in Kisii County, Kenya , primary source of data and secondary source of data was utilized in the
entirety of the study. Data was presented by use of , pie charts graphs and tables was used to
present various aspect of the variables .Validity was ensured by the university supervisors by
cross checking the questionnaires. For reliability Purpose the study was pre-tested before being
utilized to confirm that the survey tool meets the requirements. The nature of behavioral
segmentation provides the opportunity for real-time communication across a wide range of
marketing channels including direct mail, email, point-of-sale devices, and mobile channels as
well as personal contact at the branch or call center level. The downside of using behavioral data
as a marketing driver is that it does require detailed, in-depth data sets, models and market
testing.
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Table of ContentsDECLARATION AND RECOMMENDATION.....................................................................................................ii
DEDICATION................................................................................................................................................ iii
ACKNOWLEDGEMENT................................................................................................................................. iv
ABSTRACT....................................................................................................................................................v
LIST OF ABBREVIATIONS..............................................................................................................................ix
LIST OF TABLES.............................................................................................................................................x
LIST OF FIGURES..........................................................................................................................................xi
CHAPTER ONE..............................................................................................................................................1
INTRODUCTION...........................................................................................................................................1
1.1 Background of the Study.......................................................................................................................1
1.1.1 Concept of Market Segmentation...................................................................................................1
1.1.2 Commercial banks in Kisii Town......................................................................................................3
1.2 Statement of the Problem.....................................................................................................................3
1.3 Objectives of the Study..........................................................................................................................5
1.3.1 General Objective...........................................................................................................................5
1.3.2 Specific Objective............................................................................................................................5
1.4 Research questions................................................................................................................................5
1.5 Significance of the Study.......................................................................................................................6
1.6 Scope and Justification of the study......................................................................................................7
1.7 Limitations of the study.....................................................................................................................7
1.8 Assumptions of the study......................................................................................................................7
1.9 Definition of terms.................................................................................................................................8
CHAPTER TWO.............................................................................................................................................9
LITERATURE REVIEW....................................................................................................................................9
2.1 Literature Overview...............................................................................................................................9
2.2 Theoretical Foundation..........................................................................................................................9
2.2.1 The Resource Based View theory..................................................................................................10
2.2.2 The Dynamic Capabilities Model theory.......................................................................................11
2.2.3 Marketing Impact Model Theory.................................................................................................11
2.2.4 Marketing Mix Theory..................................................................................................................12
2.3 Empirical Literature.............................................................................................................................13
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2.3.1 Extent to which geographical market segmentation is used in service provision in commercial bank.......................................................................................................................................................13
2.3.2 Influence of demographic market Segmentation in Commercial Bank........................................16
2.4 Challenges of behavioral market segmentation in commercial bank in Kisii.......................................18
2.5 Research Gap.......................................................................................................................................22
2.6 Conceptual Framework........................................................................................................................24
CHAPTER THREE........................................................................................................................................25
RESEARCH METHODOLOGY.......................................................................................................................25
3.1 Research Design...................................................................................................................................25
3.2 Study Area...........................................................................................................................................25
3.3 The Target Population..........................................................................................................................25
3.4 Sampling Frame...................................................................................................................................25
3.5 Sample Size..........................................................................................................................................26
3.6 Instrumentation...................................................................................................................................28
3.6.1 Validity of Research Instruments.................................................................................................28
3.6.2 Reliability of Research Instruments.............................................................................................28
3.7 Data Collection Procedures..................................................................................................................28
3.8 Data Analysis and Presentation...........................................................................................................29
CHAPTER FOUR..........................................................................................................................................30
DATA , ANALYSIS , PRESENTATION AND INTERPRETATION OF FINDINGS....................................................30
4.1 Introduction.........................................................................................................................................30
4.2 Presentation of Findings......................................................................................................................30
4.2.1 Response Rate..............................................................................................................................30
4.2.2 Gender response..........................................................................................................................31
4.2.3 Age Analysis..................................................................................................................................31
4.2.4 Highest Education Level................................................................................................................32
4.2.5 Work Experience...........................................................................................................................33
4.3 Geographical Market Segmentation...................................................................................................33
4.4 Demographic Market Segmentation..................................................................................................34
4.5 Behavioral Segmentation...................................................................................................................35
CHAPTER FIVE............................................................................................................................................36
SUMMARY, CONCLUSIONS AND RECOMMENDATION...............................................................................36
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5.1 Summary.............................................................................................................................................36
5.2 Conclusion...........................................................................................................................................37
5.3 Recommendations for further Studies...............................................................................................37
5.4 Suggestions for further studies...........................................................................................................37
References.................................................................................................................................................39
Appendix i : Questionnaire........................................................................................................................41
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LIST OF ABBREVIATIONSCBK - Central Bank of Kenya
RBV - Resource Based View
KCB - Kenya Central Bank of Kenya
NIC - National Industrial Credit Bank
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LIST OF TABLESTable 3.1 Target Population and Sample Size ………………………………………………. 38
Table 4.1 Response Rate …………………………………………………………………….. 41
Table 4.2 Gender Response ………………………………………………………………….. 42
Table 4.3 Age analysis ……………………………………………………………………… 42
Table 4.4 Highest Education Level ………………………………………………………… 43
Table 4.5 work Experience ………………………………………………………………… 44
Table 4.6 Geographical Market Segmentation …………………………………………… 44
Table 4.7 Demographic market segmentation ………………………………………….. 45
Table 4.8 Behavioural Segmentation …………………………………………………… 46
x
LIST OF FIGURES
Figure 2.6 Conceptual Framework ………………………………………………….. 35
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CHAPTER ONEINTRODUCTION
1.1 Background of the Study
Financial institutions typically compete in broad markets with numerous customers that may be
geographically dispersed and whom seek a variety of different service benefits (Minhas &
Jacobs, (2005). Recognizing that limited resources prevent banks from serving all customers in
the market effectively, banks are increasingly developing marketing strategies that target a
specific segment that provides the bank with the greatest opportunity for success. Strategic
questions such as Which criteria or characteristics should be used to segment the market? Which
segment provides our bank with the greatest opportunity? What combination of benefits and
costs provide the targeted segment the greatest value relative to competitive offerings?, in
addition to operational decisions pertaining to pricing, promoting, distributing and product
design can be addressed by understanding the market structure in which the bank chooses to
compete. Market structure can be viewed as a profile of the market showing consumers’
perceptions of different banks on important attributes.
1.1.1 Concept of Market SegmentationWilkie & Cohen (2006), define market segmentation as the process by which the total
heterogeneous market for a product is divided into several sub-markets or segments and each
segment is homogeneous in all major aspects and is different from the other. Wilkie and Cohen
(2006) assert that the need for market segmentation arises because a company with its limited
resources cannot cater for the demand of the total market. In view of this, it has to identify the
segments where its product would be most suitable and market that would be most profitable.
Hiam & Schewe (2010), argue that there are several benefits of market segmentation. It helps in
designing products that match with the market demand. A company could determine the most
effective promotional strategy and position its promotional efforts to synchronize with the period
when the consumer’s response is likely to be the maximum. The underlying aims of market
segmentation is to group customers with similar needs and buying behaviour into segments, so
that each segment can be reached with a distinct marketing programme. The concept attempts to
bridge the gap between diverse customer needs and limited company resources, by encouraging
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distinct product and marketing offerings to be developed to suit the requirements of different
customer segments (Assael & Roscoe, 2006 ; Blattberg & Sen, (2015); Wind, (2002). The
marketing literature suggests that segmentation leads to more satisfied customers because it
offers the practitioner a number of clear benefits: improved understanding of customer needs,
more appropriate resource allocation, clearer identification of market opportunities, and better
tuned and positioned marketing programmes (Kotler, 2002 ; Wind, 2003). Despite the advantages
which segmentation can bring, financial institutions have been slower to capitalize on its
potential than some other industries (McKechnie & Harrison, 2004). However, as the regulatory
situation has changed, competitive pressures have increased and profits have been squeezed, so
that many institutions are now looking for ways to direct their resources at the most lucrative
customer groups. The concept of market segmentation was first introduced by Wendell Smith in
2006 (Smith, 2002). The most basic advantage offered by market segmentation is that it provides
a structured means of viewing the marketplace confronting the firm (Wilkie, 2012). The present
intensely competitive situation in the banking sector in Kenya has stimulated financial service
providers to search for untapped market segments. Hence, segmentation has become an
extremely important strategy for the banking sector. “One of the most important strategic
concepts contributed by the marketing discipline to business firms and other types of
organizations is that of market segmentation” (Myers, 2010). Segmentation involves a three-step
process (Kotler et al., 2011). The first step in this process is market segmentation, dividing a
market into distinct groups of buyers who might require separate products and/or marketing
mixes. The company identifies different ways to segment the market and develops profiles of the
resulting market segments. One of the most frequently used methods for segmenting a market
has been demographic segmentation. Demographic segmentation consists of dividing the market
into groups based on demographic variables such as age, gender, family life cycle, income,
occupation, education, religion, race, and nationality. One reason for the popularity of this
method is that consumer needs, wants, and usage rates often vary closely with demographic
variables.
Another is that demographic variables are easier to measure than most other types of variables.
Other variables can be used to segment markets. For example, geographic, psychographic and
behaviouristic variables are other common segmentation variables. The consumerism movement
has also made the financial services industry more sensitive to previously unrecognized
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consumer needs. This interest has focused attention on improved market segmentation and
segmentation strategy. With increasingly competitive markets, the banking sector has sought
untapped segments to gain an advantage over the other. Increasingly, success in the battle for
market share will be determined by how well managers deal with the challenges of segmentation.
More effective and efficient market segmentation is crucial in the new competitive environment.
The current study seeks to examine the factors that influence the adoption of market
segmentation strategy and barriers to implementation of the same in commercial banks in Kenya.
1.1.2 Commercial banks in Kisii Town These commercial banks offer both corporate and retail banking services. Licensing of financial
institutions in Kenya is done by the minister for finance, through the central bank of Kenya. The
companies Act, the Banking Act, the Central Bank of Kenya, govern the banking industry. The
banks have come together under the Kenya Bankers Association, which serves as a lobby for the
banks interest and also addresses issues affecting its members. Ideally financial reforms and free
market should spur the adoption of innovations that improve efficiency and provide a healthy
balance between lending and deposit rates. (Banking Act Cap 488, pp 6, 10-12). More
specifically, increased competition, technological developments, changes in customer
preferences and the growth of the various institutions have significantly altered the environment
in which banks operate (Orlow & Wenninger, 2004). At the same time, many banking activities
are now performed by nonbanking institutions. In reality, banking institutions in developed
countries have started to lose their market shares, while technology has minimized transaction
costs and the number of competitors is continuously increasing (Avery et al, 2003). Legislative
liberalization has strengthened competition not only among banking institutions but also among
other non-banking organizations (Krishnan et al, 2003).
1.2 Statement of the ProblemMarket segmentation is widely regarded as a panacea for a variety of marketing ailments. Yet
research in the financial services market highlights a number of significant barriers to the
implementation of segmentation schemes. These barriers range from weaknesses in customer
data and inappropriate organizational structure, to lack of marketing orientation and difficulties
in obtaining a fit within the existing distribution structure. While the marketing literature
acknowledges that these difficulties exist, there has been little formal analysis to capture the
3
characteristics of these barriers. This problem is compounded by the considerable size and
diversity of the sector which make it difficult to generalize about the implementation problems.
Academic research in the financial services sector, as in other industries, has sought to identify
appropriate segmentation approaches. For example, Speed & Smith (2002), who have undertaken
a review of financial services segmentation, suggest that a priori segmentation, which charges the
researcher with determining the size and character of segments (Green, 2012) is the most widely
used approach. The use of demographic variables, such as age and social class, are especially
popular (for example, Burnett & Wilkes, 2013; Mathews & Slocum, 2012; Yorke and Hayes,
2002). Post hoc segmentation is less widely used. This entails the grouping of respondents
according to their responses to particular variables. Multivariate techniques may be applied in
post hoc research, such as cluster analysis, factor analysis or multidimensional scaling. Despite
the attention which the literature has given to the application of segmentation in financial
services, the implementation aspect and problems associated with it have been identified as key
areas for further research (Speed & Smith, 2005). Similar sentiments are expressed in other areas
of the marketing literature, especially with the apparent prevalence of implementation problems.
For example, in the industrial marketing literature, Blattberg et al. (2015) and Yankelovich
(2007) express concerns about the managerial usefulness and practical ramifications associated
with segmentation. More recently, Brown et al. (2009) identified missed opportunities resulting
from unsystematic and inappropriate grouping of customers, a concern which is echoed by Wind
& Cardoza (2010). Although these concerns originate in a different part of the literature, the links
with issues raised by Speed & Smith (2011) seem almost uncanny. These sentiments also arise in
work by Doyle et al. (2002), who express concerns about the degree to which many managers
understand and implement the segmentation concept. Hence the researcher will seek to
evaluate the effect of market segmentation on sales performance .
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When taken as a whole, the literature seems to indicate that there may be a number of barriers
which inhibit the successful implementation of the market segmentation process. For example,
existing distribution systems, unsuitable organizational structure and existing relationships with
suppliers and intermediaries may all make modified or new segmentation approaches difficult to
implement. The consensus seems to be that success is more likely when segmentation
programmes are implemented which are sympathetic to organizational characteristics, deal
realistically with the current market situation, and yield easy to interpret segments (Garda,
2004; Webster, 2003).
1.3 Objectives of the Study
1.3.1 General Objective The main general objective was to evaluate the effect of market segmentation on sales
performance of the banking industry in commercial banks in Kisii town .
1.3.2 Specific ObjectiveThe study was guided by the following specific objectives:-
(i) To evaluate the extent to which Geographical market segmentation is used in service
provision by the commercial bank in Kisii town .
(ii) To evaluate the factors that influence demographic market segmentation affects commercial
bank in Kisii Town
(iii) To determine how behavioural market segmentation affects Commercial bank in Kisii Town
1.4 Research questions
i. To what extent geographical market segmentation has been used in service provision by the
commercial bank in Kisii town ?
ii. What are the factors that influence demographic market segmentation by commercial bank in
Kisii town ?
iii. What are the challenges of behavioural market segmentation in commercial bank in Kisii
Town ?
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1.5 Significance of the Study The findings from this study were important because they had the capacity of being used to
formulate positive fiscal policies which were relevant and sensitive to the forces influencing the
banking sector performance and penetration in Kenya. This study benefited the government and
especially the Ministry of Finance for making policy decisions whose overall objectives were to
reduce bottlenecks in distribution of banking services and at the same time accelerate the rate of
growth in the banking industry sector and take advantage of the improved economy thus more
lending to individuals and institutions.
To the academicians the study contributed to the existing literature in the field of marketing and
sales performance. It acted as a stimulus for further research to refine and extended the present
study especially in Kenya. Findings of the study were useful to researchers and scholars as it
contributed to the body of knowledge in the area of marketing. It also assisted other researchers
to further their studies on areas of interest not yet exploited. It assisted the management of
commercial banks to evaluate how effective they had been in adopting appropriate distribution
channel strategies of their services and products. This enabled them identify gaps in their
strategies which enhanced their strategic response as a result move to effectively manage the
existing strategies which improved their financial performance. The study findings benefited
firms in the banking industry in formulating marketing strategies that improved their
effectiveness at national and international levels. The stakeholders and employees in Kenya’s
banking sector appreciated and prioritized appropriate marketing strategies as tools of marketing
positioning in local and international markets. It assisted the management of commercial banks
to evaluate how effective they had been in adopting appropriate distribution channel strategies of
their services and products. This enabled them identify gaps in their strategies which enhanced
their strategic response as a result to move to effectively manage the existing strategies which
improved their financial performance. It was useful to the shareholders of the bank in evaluating
the effectiveness of the banks distribution strategies as they cope with the increasingly
competitive financial market locally. Other organizations also used the distribution strategies
employed by the bank to improve their performance. In addition, the study was an invaluable
source of material and information to the many other banks operating in the country since the
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banking industry has a great role to play in the country’s quest to become a middle income
country as envisioned in the Vision 2030. By identifying the appropriate distribution strategies,
the industry was also able to achieve their objective much faster and growth of the individual
firms.
1.6 Scope and Justification of the study
The study failed in the area of savings and credit commercial banks .The study was conducted in
major Commercial Banks in Kisii town which had been in operation for more than five years.
Banks have a wide coverage in both rural and urban areas of the country. The study was relevant
as it sought to evaluate the effect of market segmentation n sales performance in commercial
banks in Kisii Town .
1.7 Limitations of the studySome information was legally restricted thus making it a challenge in obtaining information,
unfavorable climatic conditions, the respondents was not readily available due to their busy
work schedule and the information given by the respondents was inaccurate.
1.8 Assumptions of the study
The respondents cooperated, information obtained was accurate, the information given was
representative of the entire population in the county, the respondents were available and the
climatic conditions were favorable
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1.9 Definition of terms
Segmentation : the process of dividing a broad consumer or business market,
normally consisting of existing and potential customers, into sub-
groups of consumers (known as segments) based on some type of
shared characteristics.
Market : is defined as the sum total of all the buyers and sellers in the area
or region under consideration
Banks : is a financial institution that accepts deposits from the public and
creates credit. Lending activities can be performed either directly
or indirectly through.
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CHAPTER TWO
LITERATURE REVIEW
2.1 Literature OverviewThis chapter presents a review of theoretical foundation , empirical literature, research gap and
a conceptual Framework.
2.2 Theoretical Foundation
This section examines the various theories that will be used to inform the study on the effects of
marketing segmentation on sales performance. The study is guided by the following theories;
marketing mix theory and theory of push and pull. Banking sector reforms and consolidation all
over the world are predicted upon the need for repositioning of the existing state of affairs in the
sector in order to attain an effective and efficient status. This is more so in the developing nations
like Kenya where the banking sector has not been able to effectively provide the needed funds
and services for the development of the real sector as expected. Hence, banking reforms become
inevitable in the light of the global dynamic exigencies and emerging landscape. Consequently,
the banking sector, as an important sector in the financial landscape, needs to be reformed in
order to enhance its competitiveness and capacity to play a fundamental role of financing
investments.
The Kenyan experience indicates that banking sector reforms are propelled by the need to deepen
the financial sector and reposition it for growth; to become integrated into the global financial
architecture; and evolve a banking sector that is consistent with regional integration requirements
and international best practices. Bank consolidation is viewed as the reduction in the number of
banks and other deposit-taking institutions with a simultaneous increase in size and concentration
9
of the consolidated entities in the sector. It is mostly motivated by technological innovations,
deregulation of financial services, enhancing intermediation and increased emphasis on
shareholder value, privatization and international competition (Berger, N. Allen., (2009); De
Nicolo and Gianni 2003; IMF, 2001).
The nexus between consolidation and financial sector stability and growth is explained by two
polar views. Proponents of consolidation opine that increased size could potentially increase
bank returns, through revenue and cost efficiency gains. It may also, reduce industry risks
through the elimination of weak banks and create better diversification opportunities (Berger,
2009,). On the other hand, the opponents argue that consolidation could increase banks’
propensity toward risk taking through increases in leverage and off balance sheet operations. In
addition, scale economies are not unlimited as larger entities are usually more complex and
costly to manage.
2.2.1 The Resource Based View theory This model recognizes the importance of a firm’s internal organizational resources as
determinants of the firm’s strategy and performance (Grant 2000; Wernerfelt 2009 ,). Grant
(2010) defines the term internal organizational resources as all assets, capabilities, organizational
processes, firm attributes, information, knowledge, that are controlled by a firm and that enable it
to envision and implement strategies to improve its efficiency and effectiveness. Although the
RBV recognizes that a firm’s physical resources are important determinants of performance, it
places primary emphasis on the intangible skills and organizational resources of the firm (Collis,
2003). Some intangibles resources of the firm are the market-assets such as customer satisfaction
and brand equity.
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2.2.2 The Dynamic Capabilities Model theory The Dynamic Capabilities view strengthens the RBV, it emphasis on how combinations of
resources and competences (Teece et al., 2001) can be developed, deployed and protected. The
factors that determine the essence of a firm’s dynamic capabilities are the organizational
processes where capabilities are embedded, the positions the firms have gained (e.g. assets
endowment) and the evolutionary paths adopted and inherited. Based on this perspective, the
marketing factors that determine the competitive advantage are marketing efficiency resulting
from the marketing organizational process and the endowments of market assets that has
generated such as customer satisfaction and brand equity for example marketing positions. In the
context of global competition, RBV and Dynamic capabilities theory suggest that historical
evolution of a firm (accumulation of different physical assets and acquisition of different
intangible organizational assets through tacit learning) constrains its strategic choice and so will
affect market outcomes (Collis, 2004).
According to Douglas and Craig (2002), the development of a Marketing Strategy is carried out
during the stage of global rationalization. It means that the firm has had to take the step of initial
foreign market entry and expansion of national markets during its process of internationalization.
Consequently, in the two previous stages, the firm learned and accumulated not only different
physical assets but also different intangible organizational assets; likewise, it faced and took risks
in different and complex market contexts. This process of learning affected its performance.
2.2.3 Marketing Impact Model Theory The need for measuring marketing impact is intensified as firms feel increasing pressure to
justify their marketing expenditures (Gruca and Rego 2005; Rust et al., 2004; Srivastava et
al.,2001). Accordingly, marketing practitioners and scholars are under increased pressure to be
more accountable for showing how marketing activities link to shareholder value.It is important
11
to know that marketing actions, such as packaging, brand name, density of the distribution
channel, advertising, permanent exhibitions, sponsoring, press bulletins, among others (Van
Waters hoot and Van den Bullet, 2009) can help build long-term assets or positions as brand
equity and customer satisfaction (Srivastava et al., 2010). These assets can be leveraged to
deliver short-term profitability and shareholder value
2.2.4 Marketing Mix Theory According to Kotler and Keller (2006), the theory of Marketing Mix was coined by Borden. The
theory is still used today to make important decisions that lead to the execution of a marketing
plan. The idea of a marketing mix theory is to organize all aspects of the marketing plan around
the habits, desires and psychology of the target market (McCarthy, 2004). This orientation
considers marketing as it applies to the theory of the "4 Ps." The first P is product, and takes into
account its design, features and competitors. The second P, price, is a factor that can be adjusted
to manage demand, to determine profit margin, and to drive market share. Promotion is the third
P. It seeks to find which media to engage in order to make the right people aware of the product's
benefits, and which slogans, tag lines and logos will resonate with the target market. Placement,
the fourth P, determines where and how potential customers can access the product. Young
people may want to browse, buy and pay online. Others may prefer the personal service of a
trained salesperson.
Later Robert (2000), proposed a four Cs classification in which is a more consumer-oriented
version of the four Ps that attempts to better fit the movement from mass marketing to niche
marketing. The Cs represents; Consumer, cost, communication and convenience. Firstly, a
company will only sell what the consumer specifically wants to buy. So, marketers should study
consumer wants and needs in order to attract them one by one with something he/she wants to
purchase. Secondly, Price is only a part of the total cost to satisfy a want or a need. The total cost
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will consider for example the cost of time in acquiring a good or a service, a cost of conscience
by consuming that or even a cost of guilt "for not treating the kids. It reflects the total cost of
ownership. Many factors affect cost, including but not limited to the customer's cost to change or
implement the new product or service and the customer's cost for not selecting a competitor's
product or service (Richard, 2009). Thirdly, while promotion is manipulative and from the seller,
communication is cooperative and from the buyer with the aim to create a dialogue with the
potential customers based on their needs and lifestyles; it represents a broader focus.
Communications can include advertising, public relations, personal selling, viral advertising, and
any form of communication between the organization and the consumer.
2.3 Empirical Literature
2.3.1 Extent to which geographical market segmentation is used in service provision in commercial bank Market segmentation aims to divide markets comprised of individuals into groups whose
characteristics are relatively homogeneous within each set or segment and heterogeneous
between segments, based on an identified set of variables (Kara & Kaynak, 2009). Marketing
academics and practitioners have adopted the concept of market segmentation enthusiastically.
The benefits have been seen to include an ability to gain a fuller understanding of a particular
market, improved techniques to predict consumer behaviour, and an improved ability to identify
and exploit new market opportunities for commercial benefit (Heok, Gendall and Esslemont,
2002 ). A capacity to divide markets into distinct groups of buyers, or prospective buyers, who
respond differently to changes in marketing mix variables is likely to prove particularly
beneficial to those attempting to influence consumer demand for a particular product or service.
As outlined by Kotler, Brown, Adam & Armstrong (2001), segmentation effectiveness depends
on arriving at segments which are measurable, accessible, substantial, actionable and
13
differentiable. Kotler et al.refers to a measurable segment as one where the size of the segment
and the related purchasing power can be quantified. For a segment to be accessible it must be
able to be reached and served effectively by the marketing entity. Further, the segment must be
substantial in that it is large and profitable enough to warrant the marketing entity to design
marketing mix strategies that are differentiated from strategies that target other segments. The
segment must also be actionable in that the marketing entity can design effective marketing
strategies to attract and serve the segment and for the segments to be differentiable, they must
respond differently to different marketing stimuli.
Hoek, Gendall & Esslemont (2005) have argued that at an intuitive level, market segmentation
appears worthwhile in terms of increasing sales and revenue. For example, vendors of yacht
fittings would appear to increase their chances of making sales if they target yacht owners rather
than a broad market that has not been segmented. However, market segmentation strategies go
beyond such clearly rational judgments aiming to gain a competitive advantage by identifying
and serving the needs of customers more effectively than competitors.
Complex segmentation exercises use a wide number of consumer variables as the basis for
segmenting markets and then adopt sophisticated statistical analysis to group customers together
based on these variables. The dilemma facing such segmentation studies is how to actually
segment the market from a myriad of possible approaches and how to choose the statistical
technique likely to prove most suitable in providing the information required to aid market
segmentation. The literature discusses two principal approaches to segmentation. They are; a-
priori and post-hoc or data driven (Dolnicar, 2004; Kara & Kaynak, 2007, Wind, 2001). A-priori
segmentation requires the researcher to first choose variables of interest and then classify buyers
according to that designation (Wind, 2007). While an a-priori approach may guarantee within
14
segment similarity by ensuring, for example, that all segment members come from similar
geographic regions and income ranges, this does not necessarily mean that all segment
members will respond in the same way to marketing stimuli (Hoek, Gendall & Esslemont, 2003).
For example, consumers with similar demographic characteristics may respond in a similar way
to a change in pricing strategy but may have very different reactions to a promotional theme.
Further, the selection of variables in an a-priori study, to some degree, reflect underlying
assumptions concerning the market and about which variables are most likely to respond to
marketing stimuli. Such assumptions are likely to influence the findings and marketing
strategies that ensue. The second approach is to segment markets on a post-hoc basis where the
researcher chooses a range of interrelated variables and then clusters buyers into groups whose
average within-group similarity is high and whose between group similarity is low (Wind, 2010).
This approach may result in segments that are not necessarily internally consistent. Even if
researchers can identify groups with similar attitudes or usage habits,
members often posses different demographic characteristics making marketing decisions such as
media buying, difficult to action (Hoek, Gendall & Esslemont, 2001). Indeed Young et.al (2000),
suggest that a common reason segmentation studies fail in the implementation stage is that
marketing research is too preoccupied with the methods and techniques of segmentation, and
fails to consider the competitive structure of the market and general marketing environment.
Hoek, Gendall & Esslemont (2004) have argued that despite sophisticated approaches to market
segmentation, the selection of variables on which such studies are based involves subjective
judgments. For
example, researchers using consumption benefits as a segmentation basis must determine which
benefits to measure and select appropriate means of assessing their relative importance to
15
respondents. It needs to be recognized that this process may have a significant impact on the
research outcome. Everitt (2003) argues that ‘the initial choice of variables is itself a
categorization of the data which has no mathematical or statistical guidelines and which reflects
the investigator’s judgment of relevance for the purpose of the classification.’ However, the
subjective decisions and assumptions inherent in segmentation studies do not preclude the
studies from being potentially useful to gaining an improved understanding of the key factors
influencing the choice of a tourism destination. However, such assumptions need to be made
explicit and transparent so that users of the models understand the limitations of any findings.
While numerous segmentation studies have been undertaken within the realm of tourism
destination marketing, few of these studies make clear the subjective elements of the research.
2.3.2 Influence of demographic market Segmentation in Commercial Bank Segmentation has become one of the most dominant concepts in both marketing theory and
practice. In banking industry, like any other service industries, segmentation is considered as a
major way of operationalizing the marketing concept, and providing guidelines for a bank’s
marketing strategy and resource allocation among markets and services (Dickson & Ginter,
2001; Rao & Wang, 2000; Wind, 2003. As theory, market segmentation is the process of dividing
a market into distinct groups of individuals, or organizations, who share one or more similar
responses to some elements of the marketing mix (Pride & Ferrell, 2004). The segmentation
process calls for dividing the total market into homogeneous segments, selecting the target The
literature of market segmentation indicates that there are two schools of thought. Firstly, the
behaviorally-oriented school which is concerned with the identification and documentation of
generalizable differences among buyer groups. These differences can lead to insights about the
basic process of consumer behavior (Assael and Roscoe, 2001; Frank et al., 2002; Lessing and
Tollefson, 2003). Second, the decision oriented school which focuses not so much on why there
16
are differences among consumers as on how these differences can be exploited to increase the
productivity of the bank’s marketing programmes (Dhalla & Mahatoo, 2001; Frank et al., 2000).
In practice, these two approaches are not mutually exclusive; indeed they overlap in many
segmentation studies. For instances, research that aims at contributing to behaviorist theory is
often motivated by a normative problem. Conversely, a decision-oriented study may end up by
contributing to general knowledge about market segments.
Referring to the bank marketing literature, many studies have been conducted on individual
customer segmentation using both the behavior and decision-oriented approaches (Boyd et al.,
2002.
Similarly, both the behavioral and decision orientations would be very useful and productive for
any segmentation strategy of a bank’s business-customer market. In the latter case, bank
management should focus on differences between its customers (their selection behavior of a
bank, or their perceptions of the service quality provided), as well as the impact of such
identifiable differences on their response to the various elements of the bank marketing
programme. Therefore, the segmentation strategy and analysis adopted in this study are based on
both the behavior and decision-oriented approaches. The study seeks to identify the main
differences among the customers of the commercial banks in Kenya in their perceptions of the
relative importance of the banking services provided, and their bank selection behavior. In
addition, the study attempts to show how such possible differences would affect the marketing
strategies of commercial banks in Kenya segments, and creating separate marketing programmes
to meet the needs and wants of these selected segments (Frank et al., 2003) . As strategy, market
segmentation is the allocation of marketing resources, given a heterogeneous market. The
identification of segments, heterogeneous in response, allows the evaluation and refinement of a
17
bank’s marketing strategy. The effectiveness of the segmentation process and strategy depends
on identifying segments that are measurable, accessible, stable, substantial, and actionable (Raaij
& Verhallen, 2003). Companies try to segment their customers by identifying groups of persons
with need structures that are as homogeneous as possible within each group and significantly
heterogeneous between groups (Smith, 2004. These groups can then be addressed with a
specially designed but also standardised strategy (Kotler, 2001). The goal is to solve the conflict
between the intentions to satisfy customer needs as individually as possible but also to allocate
marketing resources as economically as possible (Wind, 2000).
2.4 Challenges of behavioral market segmentation in commercial bank in Kisii
The underlying aim of market segmentation is to group customers with similar needs and buying
behavior into segments, so that each segment can be reached with a distinct marketing
programme. The concept attempts to bridge the gap between diverse customer needs and limited
company resources, by encouraging distinct product and marketing offerings to be developed to
suit the requirements of different customer segments (Assael & Roscoe, 2000; Blattberg & Sen,
2001; Wind, 2010). The marketing literature suggests that segmentation leads to more satisfied
customers, because it offers the practitioner a number of clear benefits: improved understanding
of customer needs, more appropriate resource allocation, clearer identification of market
opportunities, and better tuned and positioned marketing programmes (Kotler, 2009).
Despite the attention which the literature has given to the application of segmentation in financial
services, the implementation aspect and problems associated with it have been identified as key
areas for further research (Speed & Smith, 2014). Similar sentiments are expressed in other areas
of the marketing literature, especially with the apparent prevalence of implementation problems.
For example, in the industrial marketing literature, Blattberg et al. (2001) express concerns about
18
the managerial usefulness and practical ramifications associated with segmentation. More
recently, Brown et al. (2006) identify missed opportunities resulting from unsystematic and
inappropriate grouping of customers, a concern which is echoed
by Wind & Cardoza (2001). Although these concerns originate in a different part of the literature,
the links with issues raised by Speed & Smith (2000) seem almost uncanny. These sentiments
also arise in work by Doyle et al. (2000), who express concerns about the degree to which many
managers understand and implement the segmentation concept. When taken as a whole, the
literature seems to indicate that there may be a number of barriers which inhibit the successful
implementation of the market segmentation process. For example, existing distribution systems,
unsuitable organizational structure and existing relationships with suppliers and intermediaries
may all make modified or new segmentation approaches difficult to implement. The consensus
seems to be that success is more likely when segmentation programmes are implemented which
are sympathetic to organizational characteristics, deal realistically with the current market
situation, and yield easy to interpret segments (Garda,2005)
The concept of segmentation in marketing recognizes that consumers differ not only in the price
they will pay, but also in a wide range of benefits they expect from the product (or service), and
its method of delivery (Doyle, 2009). In this regard, there are limitations in the traditional
approaches to segmentation, especially with respect to financial services. Geographic
segmentation calls for dividing the market into different geographical units such as local town,
region or country as a whole. However, the nature of the financial services industry is such that
banks, building societies and insurance companies cannot discriminate in terms of locality or
region. For one thing, under the influence of technological innovation, definitions of market
boundaries keep on changing. For example, by using a plastic card or telephone banking, one can
19
transact business from anywhere in the country, and in many cases from anywhere in the world,
without visiting a branch office. Moreover, differences in preference and purchase patterns for
financial products/services do not appear to emerge along regional lines, thereby removing the
usefulness of geographic segmentation (Chee & Harris, 2001).
Demographic and socio-economic segmentation, based on age, sex, marital status, income,
occupation, education, religion, social class and so on, assumes these variables have an influence
on consumer behavior, and that they can therefore be used as proxies for direct needs analysis.
Demography refers to the vital and measurable statistics of a population (Schiffman & Kanuk,
2002). It helps to locate the target segment. However, there has been much discussion in recent
years about the role of such variables as determinants or even correlates of consumption
behavior. A number of researchers have expressed skepticism that such variables can be used
effectively (Bieda & Kassarjian, 2003). According to these authors, there are some undeniable
demographic patterns to purchasing, such as that razor blades are purchased mainly for men (but
not always by them). However, except for specific products aimed directly at specific socio-
demographic groups, evidence indicates that demographic measures, outside of education, are
not an accurate predictor of consumer behavior. These findings are backed up by the research of
Frank (2000), Rich & Jain (2001), and Jacobs (2000). Psychographic segmentation can be based
on social class, lifestyle, or personality variables (Kotler,2002). Social class segmentation, which
often determines social class simply by averaging the person’s position on several status
dimensions (Loudon & Della Bitta, 2000), ignores the inconsistencies which arise from an
individual ranking high on one dimension (such as income), but low on another (such as
education). Also, the assumption that a person’s social class is stable ignores the effects of
mobility . Moreover, the further supposition that an individual identifies only with the social
20
class in which he/she is categorized ignores reference group effects from other classes. The
common practice of measuring the social class of an entire family via the characteristics of the
adult male wage earner alone overlooks characteristics of other family members, particularly the
employment and education of the adult female. Opinions differ concerning which procedures are
best for identifying social classes. Indeed, social class may not always be a relevant
consideration in segmentation. But when it is, it can be more effective when used in conjunction
with other approaches (Dhalla & Mahatoo, 2001).
The approaches to market segmentation discussed so far are useful to locate and describe target
segments. However, they suffer from the underlying disadvantage that all are based on an ex post
factor analysis of the kinds of people who make up specific segments of a market. With these
methods, we never find out what causes the segments to develop, nor does buying behavior
determine membership of a segment. We first identify the segments, and then look at the segment
members’ behavior, instead of first identifying a certain kind of behavior, and then finding out
what kind of people are grouped in the segment. Clearly, the way we go about the task will
determine the nature and content of the segments identified, and will influence our marketing
strategy.
The disadvantages of other methods can be overcome by using benefit segmentation, a form of
behavioral segmentation. Its proponents argue that the benefits that people seek constitute the
basic reason for purchase, and therefore form the proper basis for market segmentation (Assael,
(2005) goes so far as to call it a “powerful form” of segmentation. Marketing and advertising
executives constantly attempt to isolate the particular benefit or benefits that they should
communicate to consumers, for example, Merrill Lynch’s concentration on financial security.
21
Merrill Lynch’s pioneering Cash Management Account, launched in 1978 and integrating
brokerage, credit/debit card, and banking with the aid of a sophisticated computer system, still
retained market leadership in 1985. Knowing consumers’ level of interest in alternative benefits
is important in shaping, and perhaps changing, a company’s product portfolio. Moreover, such
knowledge is helpful in predicting the attention that will be paid to advertising copy developed
around those benefits. Thus, benefit segmentation can be used not only to develop new products
and reposition or discontinue old products, but also to facilitate a two-way communication
process between the consumers and the company. The main strength of benefit segmentation is
that the benefits sought have a causal relationship to future behavior. However, difficulties can
arise in choosing the correct benefits to be emphasized and making certain that consumers’ stated
motives are their real motives. Failure to understand the benefits which consumers may be
seeking can prevent market success (Young et al., 2002). Keeping those caveats in mind, our
research has centered on the task of applying benefit segmentation to the financial services
market, using the specific example of building societies.
2.5 Research Gap
Many researchers have previously been conducted on sales performance .However no
research has been done on the effect of segmentation on sales. Berheand Jooh (2008) studied
the impact of major marketing factors on firms accounting performance in the pharmaceutical
industry. They used a research design called survey method. They discovered that there is a
relationship between the firm size and the return on equity.
Heiner and Mühlbacher (2010),studied Strategic marketing and business performance in three
European ‘engineering countries, they used the survey research design. They found out that the
key contradiction of the study is the low impact of market orientation on financial performance,
22
which is not assumed, as several previous studies propose the link to be strongly positive. Also,
this result is surprising in light of a recent, general development of increased customer focus.
Nevertheless, it is characteristic to market orientation that it also contributes to the accumulation
of other organizational resources and increases their value. Farshid (2011) looked at the influence
of export marketing strategy determinants on firm export performance between 1993-2010.
Karanja (2014) studied the effect of market segmentation on sales performance in Kisii County,
Kenya. The researcher used the descript to-explanatory cross-sectional survey research design. In
this case, the research found out that superior marketing capabilities and the choice of
distribution strategy contributed significantly to the performance of MSP Intermediary
organizations. Based on the results obtained, it was established that the composite effect of
marketing capabilities and distribution strategy further enhanced the performance of MSP
Intermediary organizations. From the above local studies little has been done on the effects of
marketing strategies on sales performance of the commercial banks in Kenya, hence the research
gap.
23
2.6 Conceptual Framework A conceptual framework to show the effects of market segmentation on sales performance.
Independent Variables Dependent Variable
Intervening variables
Figure 2.6 Conceptual Framework
Source : Research ( 2017)
A conceptual framework assists to simplify the proposed relationships between the dependent
variable and the independent variables in a study and allows the same to be depicted
diagrammatically. The conceptual framework of this study composed of three independent
variables: Extent to which geographical segmentation is used, factors that influence demographic
market segmentation and challenges of behavioral market segmentation and dependent
variable;. Sales , the intervening variable is Government policy and Business culture . The
Independent variables affect the dependent variable by dividing markets into distinct groups of
buyers or perspective buyers who respond differently to changes in marketing mix . The
24
Geographical market segmentation used in banks
Sales Performance
- High - Low
Demographic market segmentation
Behavioural market segmentation
Government policy
Business Culture
variables is likely to prove particular beneficial to those attempting to influence consumer
demand for a particular product or service.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Research Design The research design was a descriptive survey research design .Descriptive surveys were used to
develop snapshots of a particular phenomenon of interest since they usually involved large
samples. There was careful mapping out of circumstances, situation or set of events to describe
what was happening or what happened. It was used when the purpose was: describe the
characteristics of certain items, estimate proportions of people who behave in certain ways and
make specific predictions. It involved collections of information through a questionnaire from a
sample (Orodho, 2009).
3.2 Study Area The study area was taken in Kisii county in all Commercial banks namely KCB, Equity ,
Barclays , Family Bank, Eco Bank , PostBank , NIC and Bank of Africa
3.3 The Target Population The target population for this study comprised of 92 respondents in Kisii county, Kenya.
Economic Survey 2015 indicated that there were eight major branches of commercial banks in
Kisii Town. Secondary data sources was employed through the use of previous documents or
materials to supplement the data received from questionnaires and information from interviews.
25
3.4 Sampling FrameInorder to ensure fair representation and generalization of research outcomes to the general
population, this study employed participatory sampling to select firms to provide data for the
third emphasis of the study. Simple random probability was used.
3.5 Sample Size According to (Nachemias & Nachemias 2004), researchers select sampling unit subjectively in
an attempt to obtain a sample that appears to the representatives of the population. In this case,
the chance that the particular unit was selected as a sample depends on the subjective judgement
of the researchers. To arrive at representatives sample the study by Cochran (1963) and later
simplifies by Yamane (1967) will be used.
The formula is n =N/1 + N (e) 2
Where n is the sample size, N is the population size and e is the level of precision at 95%
confidence level. Then the sample size of the study will be:
92/1+92(0.05)2 = 75
26
Table 3.1 Target Population and Sample Size
C A B M C O R M Population percentage Sample SizeKCB 5 1 5 1 10 10 10
Barclays 4 1 4 1 9 10 17
Equity 3 1 5 2 20 22 13
Family Bank 5 1 6 1 15 16 15
Eco 3 1 10 1 20 22 5
Post bank 4 1 7 1 9 10 5
NIC 3 1 1 1 5 5 5
Bank of Africa 4 1 6 1 4 4 5
Total 31 8 44 9 92 100% 75
N1+N (0.05)2
n=92/1+92(0.0025)
n=92/1.23=75
27
3.6 Instrumentation
3.6.1 Validity of Research Instruments Validity refers to the ability of the data collection instruments to measure or provide accuracy
sought through the research questions. Validity was ensured by the University Supervisor’s
cross-checking the questionnaires to ensure that they were correct and accurate Dooley, 2003
3.6.2 Reliability of Research Instruments By use of a pilot study, the questionnaires for the study was pre-tested before being utilized by
the researcher so as to confirm that the survey tool met the requirements for reliability. A pilot
study was conducted at the commercial banks in Kisii County. This enabled the researcher to
determine whether it measured what it claimed to measure,(Sanders et al,2008).Through this
pilot study reliability was determined. By use of a pre-test sample, the researcher aligned the
reliability of the instrument to its consistent in attaining the study objectives in an attempt to
answer the research questions. A good questionnaire had the potential to yield similar results
when repeated again and again. Thus through both pre-test and post-test analysis of the
questionnaire the researcher was in a position to rectify and reframe the research items in the
questionnaires as to obtain the expected data and intended results when applied in the main study
(Sekeran,2009).This in turn ensured the validity and reliability of the research instruments was
observed accordingly and that they were within the required limits.
28
3.7 Data Collection Procedures Data was collected by use of questionnaires . This method was adopted because it covered all
the areas that the researcher intended to research on the perception that the data was well versed
with the subject under research thereby requiring no guidance when doing the analysis.
3.8 Data Analysis and Presentation
Data collected was analyzed through both qualitative and quantitative data analysis .On the
other hand, the descriptive statistics method of mean, mode, medium and standard deviation
was used, thereafter analyzed and presented by use of graphs tables and charts.
29
CHAPTER FOUR
DATA , ANALYSIS , PRESENTATION AND INTERPRETATION OF FINDINGS
4.1 Introduction This chapter gives the data analysis of the study findings which were collected and analysed by
the researcher by use of quantitative and qualitative method so that to enable a good understand
of the findings.
4.2 Presentation of Findings
4.2.1 Response Rate Table 4.1 Response Rate
RESPONSE RATE FREQUENCY PERCENTAGE Response 60 86
No response 10 14
Total 70 100
From the study findings on table 4.1 , out of 75 questionnaires that were administered to the
responded, only 70 of this were returned for analysis .This 70 response rate was considered to be
appropriate for analysis. Out of this 70 questionnaires only 60 respondents responded
positively which is 60% and the other remaining 10 questionnaires responded negatively and
they were unfilled . This indicated that the respondents were able to answer the questionnaire
30
4.2.2 Gender response Table 4.2 Gender Response
Response rate Frequency Percentage Female 50 71
Male 20 29
Total 70 100
The table 4.2, findings indicate that 71% of the respondents were female and 29% were male.
The indicated that female were more than male who responded to the questionnaires. Out of this
show that Kenya Commercial Banks has more female than male.
4.2.3 Age Analysis Table 4.3 Age analysis
Response rate Frequency Percentage 20-30 yrs 15 21
31 – 40 yrs 30 43
41 -50 yrs 15 22
Above 50 yrs 10 14
Total 70 100
31
The table 4.3 and figure 4.3 shows that response of the age bracket of the employees of the
company. The response of the employee age who are 20 – 30 years were 21% .31-40 years were
43% , 41 -50 were 22 % and finally above 50 years were 14% this indicated that the majority
responded were aged between 31-40 years. This indicated that employees between 31-40 are
more energetic and accurate in their work than employees aged 41-50 years.
4.2.4 Highest Education Level Table 4.4 Highest Education Level
Response rate Frequency Percentage College 50 71
University 20 29
Total 70 100
The table 4.4 indicate the response on the highest education level qualifications. There was
response of 71% , indicating college level and finally there was a response of 20 % which
indicated the university level of education. It was indicated the majority were college level since
employees from colleges has passed through many challenges rather than University
employees.
32
4.2.5 Work Experience Table 4.5 work Experience
Response rate Frequency Percentage Below 1 yr 5 71 – 5 yrs 45 656 – 10 yr 15 21Above 10 yrs 5 7Total 70 100
The table 4.5 indicated the response that was got on the work experience of employees. There
was a response of 7% indicated the experience of less than one year, 1-5 years responded 65 % ,
6-10 yrs response was 21% and finally above 10 years the response was 7%.This showed that a
big number of employees were the range of 1-5 years. Also this indicated that there was a good
experience workers in the bank
4.3 Geographical Market Segmentation Table 4.6 Geographical Market Segmentation
Response Frequency percentageYes 60 86
No 10 14
Total 70 100
33
From the research findings , the study established that majority of the respondent’s as shown
by 86% were Yes and 14% said No. This indicates that more respondents agreed that bank
should employ marketing strategies in order to improve sales performance .
4.4 Demographic Market Segmentation Table 4.7 Demographic market segmentation
Effects SA5
A4
N 3
D 2
SD1
∑fi ∑fiwi ∑fiwi ∑f)
Improved understanding of
customers need
40 10 5 5 10 70 275 3.9
More appropriate resource
allocation
35 15 7 10 3 70 279 4.0
Clearer identification of market
opportunities
Better tuned and positioned
marketing programme
Customer retention and loyalty
25
35
20
20
10
20
10
10
6
10
10
10
5
5
14
70
70
70
260
270
232
3.7
3.8
3.3
From the data shown on table 4.7 it showed more appropriate resource allocation had a mean
of 4.0 was given more weight, improved understanding customer need had 3.9 ,better tuned
and positioned had 3.8 and customer retention and loyalty had 3.3 . This shows that support
segmentation leads to more satisfied customers because it offers the practioner a number of
clear benefits.
34
4.5 Behavioral Segmentation Table 4.8 Behavioural Segmentation
Effects SA5
A4
N 3
D 2
SD1
∑fi ∑fiwi ∑fiwi ∑f)
Occasion oriented 29 11 4 6 20 70 233 3.3Usage Oriented 4 6 8 12 40 70 132 1.8
Loyalty Oriented
Benefits sought
3
10
8
3
6
8
13
4
40
45
70
70
123
139
1.7
2.0
From the data shown on table 4.8 it showed more occasion oriented of 3.3 was given more
weight, Benefits sought 2.0 ,Usage Oriented of 1.8 and Loyalty Oriented had 1.7 . This
showed that the target consumers for a product or a campaign can be grouped on the basis of
their behavioral characteristics
35
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATION
5.1 Summary Geographic segmentation is beneficial for a large-scale campaign execution when the product to
be promoted is largely understood and needed by a wide and diverse group of consumers . The
negative aspect of geographic segmentation is the assumption that everyone with the geographic
footprint is identical, displaying the same predictors of behavior
Demographic and socioeconomic division is perhaps the most widely used form of marketing
segmentation. Keep in mind, however, that this methodology focuses on the descriptive nature of
an individual as opposed to making a prediction with regard to desire to purchase a specific
product. One of the largest benefits of demographic segmentation is its simplicity and cost. It can
easily be explained to frontline staff and tends to be relatively inexpensive to acquire. Typical
appended elements include income, family size, occupation, and homeownership status. Internal
elements include age, presence and balance of product, service indicators, branch assignment,
and tenure. The downside of this methodology is the assumption that everyone within the same
demographic behaves identically.
Practically speaking, behavioral segmentation for banks focuses on tactical analysis of credit
data, propensity models, online banking, or credit card transactions. Armed with this knowledge,
a financial institution can create specific marketing communications based on recent transaction
data.The nature of behavioral segmentation provides the opportunity for real-time
communication across a wide range of marketing channels including direct mail, email, point-of-
sale devices, and mobile channels as well as personal contact at the branch or call center level.
The downside of using behavioral data as a marketing driver is that it does require detailed, in-
depth data sets, models and market testing. Additionally, the importance of action when using
behavioral data is critical. In order for the use of behavioral data (and its considerable expense)
to make financial sense, a bank must act immediately on the triggers that are produced with this
type of analysis. This means near real-time marketing reaction to behavior events that will drive
product purchase.
36
5.2 Conclusion
In other words, there is little understanding of customer differences if one views demographics
only. Recognizing that demographic and socioeconomic segmentation play an important role in
purchase patterns of financial assets, one must also recognize the importance of psychographic
attributes to increase a firm’s knowledge of the consumer. Banking is a mature market. In part,
there are only two ways to significantly increase market share. One is to acquire a competitor.
The second is to take business from one’s competitors through aggressive marketing strategies.
From a marketing perspective, the use of behavioral data is a superior tool both in its ability to
increase sales as well as its ability to do so at far less cost than broad-based communication
approaches. No longer can a financial institution simply target by socioeconomic factors,
demographics, or psychographics. It must use behavioral cues in order to differentiate between
consumers who would seemingly be classified in like-segments.
5.3 Recommendations for further Studies
The researcher further recommended that a group of individuals have a specific need,they have
the ability to purchase or obtain a specific product, have the desire to spend what they have to
get this product and have the authority to buy this product. Through these four conditions that are
used in determining the market, the concept of ‘the public’ could be reached from the points
made. The market definition of marketing is as a set of existing customers and prospective
debt, they have needs or desires that are saturated, and they have the ability and desire to
purchase, and religion can serve them and keep them happy .
5.4 Suggestions for further studies The study also suggests that banking market as the planning and implementation in order to
prepare and pricing, promotion, and distribution of an idea or a good or service for the purpose
of completing the exchange of verification organization and individuals goals it should not be
matching the banking market in some cases. The need is contained in the concept that applies to
37
the markets, without exception, no matter what the client is dealing with the banking system or
with any other parties. It stems the need of the feelings of the individual and what led to the
deal with banking services displayed (Kotler, 2001).
38
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Appendix i : Questionnaire This questionnaire is to collect data for purely academic purposes. All information will be
treated with strict confidence. Do not put any name or identification on this questionnaire.
Answer all questions as indicated by either filling in the blank or ticking the option that
applies.
Section A: Background Information
1. Indicate your job title
............................................................................................................
2. For how long have you worked with this bank?
Less than 2 years ( )
3 to 5 years( )
5 to 8 years ( )
More than nine years ( )
3.How many branches does the bank have in Kenya?
< 50( )
51 -100( )
101 -150 ( )
150 >( )
4.For how long has the bank operated in Kenya?
< 10 years ( )
11 to 20 years ( )
21 to 30 years ( )
30 years> ( )
Section B
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1. Geographical market segmentation
a. Do you link your products to people living in geographical areas?
Yes No
b. Does the bank employ marketing strategies in order to improve sales
performance?
Yes ( )
No ( )
c. . To what extent are geographic marketing strategies used by banking industry in Kenya
effective
Highly effective ( )
Effective ( )
Moderately effective ( )
Little effective ( )
Not effective at all ( )
2. Demographic Market Segmentation
a. To what extent do you agree with the following
Segmentation leads to more satisfied customers because it offers the practioner a
number of clear benefits
1. Agree 2. Strongly Disagree 3. Disagree 4. Strongly Agree
No Particulars A S
D
D S
AImproved understanding of customers needMore appropriate resource allocationClearer identification of market opportunities’Better tuned and positioned marketing programmecensus data to determine who, where, and how you want to
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market your product.Customer retention and loyalty.
2. Do demographics segmentation help an organization target its consumers more
accurately?
Yes No
3. Behavioural Segmentation
a. To what extent do you agree with the following
The target consumers for a product or a campaign can be grouped on the basis of their
behavioral characteristics
1. Agree 2. Strongly Disagree 3. Disagree 4. Strongly Agree
No Particulars A S
D
D S
AOccasion oriented Usage oriented Loyalty oriented Benefits sought
b. Can occasion be repetitive?
Yes No
c. Are Markets segmented based on the retention rates of the consumers
Yes No
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