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

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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

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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

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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

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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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