Quadrant Marketing

One valuable method of segmentation is by quadrants. The idea in quadrant marketing is to take two variables, such as spending and income, and divide all customers into four groups based on these variables. For example, let’s take a bank. Most banks and financial institutions have learned to use a variety of inducements to capture the names and transactions of all their customers. What they may not have is their customers’ incomes and ages. These can be obtained as appended information from Experian or other sources. Armed with these data, they can develop four quadrants based on income and amount borrowed. The resulting quadrants might look like Table 8-1.

Table 8-1 : Quadrant Marketing

Q2 high income, low asset			Q1 high income, high asset
Population	356,331	Population	69,778
% of total	41%	% of total	8%
Income	$138,665	Income	$136,778
Marital	79%	Marital	78%
Average age	38	Average age	52
Average asset	$855	Average asset	$44,556
Total assets	$304,663,005	Total assets	$3,109,028,568
% of assets	5%	% of assets	51%
Q3 low income, low asset			Q4 low income, high asset
Population	377,221	Population	58,996
% of total	44%	% of total	7%
Income	$55,669	Income	$56,993
Marital	53%	Marital	54%
Average age	29	Average age	61
Average asset	$766	Average asset	$40,221
Total assets	$288,951,286	Total assets	$2,372,878,116
% of assets	5%	% of assets	39%

176

This bank has about 860,000 customers. Its total bank assets are about $6 billion. They are divided into four quadrants: high income, high bank assets; high income, low bank assets; low income, low bank assets; low income, high bank assets

It is interesting that the high-income customers tend to be married, whereas fewer of the lower-income customers are married. Also, the people with high assets tend to be much older than the people with low assets. We will set these facts aside for a moment and concentrate on the incomes and assets.

Here’s how to do the math for a quadrant analysis. For income, look at all household incomes. See if there are some at the top that are outrageous: $1 million, for example. Exclude the few outliers like this. Then add all the incomes together and divide by the number of people. For the data used to construct Table 8-1, the average income was $68,230. Then divide customers into two groups: those with incomes above and those with incomes below $68,230. Get the average income for those above, which was about $136,000, and for those below, which was about $56,000. Do the same thing with the average assets.

When you have done this, sit back and think about your table for a day or two. What is it telling you? What are these segments, and what can you do with them?

• Quadrant 1 marketing plan. Begin with the high highs. These people have a lot of money, and a lot of it is in your bank. What is your goal for these people? Retention. There is no point in marketing to them. They are maxed out. All the money they have is in your bank, and they can’t give you any more. But you don’t want to lose these people. They are your Gold customers. So you design a retention program for them and put them in it. Give them special benefits that come with being Gold customers. They shouldn’t have to do anything. They should be able to just sit there and let the benefits roll in. Thank-you letters from the branch manager. Birthday cards. Greetings whenever they come into the branch—each employee is taught to recognize them and use their name. The branch manager jumps up from his desk and shakes their hand whenever they come in. If he sees them waiting in a long line, he goes up to them and asks them to come to his desk, where he handles their transaction personally. I have enjoyed that treatment at my bank, and I love it. It works. I would never go anywhere else.

• Quadrant 2 marketing plan. These are the high lows. They have a lot of money, but your bank has very little of it. They probably have their money somewhere else. Here is an opportunity. Mar keting is going to work here, because these people have assets that they can manage, with your help. You might tell them the benefits that come with Gold status at the bank, and show them how easy it would be to reach Gold status by shifting deposits, buying mutual funds, or engaging in other activities that would benefit them.

• Quadrant 3 marketing plan. These are the low lows. Here is a group of really worthless people, as far as you are concerned. They have very little money, and they don’t put much of it in your bank. Marketing to them would be a waste of your money, since they don’t have much to work with. Here is a wonderful opportunity to reduce your marketing expenses. These are 44 percent of the bank’s customers. Spend your money somewhere else. You will have money left over to concentrate on the other quadrants.

• Quadrant 4 marketing plan. Here is a really interesting group: older people with a lot of money in your bank, but relatively low incomes. Who might these people be? They are mostly retired, of course. They have worked all their lives and they have saved (or they inherited money), and they have something to show for it. So what should you do? Well, in the first place, you don’t want to lose these valuable people, so you try to get inside their heads and think as they do. Focus groups would help here. Many of them will need help with their wills. This is a free service that you can provide for them. The bank might be the executor if they have no one else. Most of them are not interested in getting rich fast; they just want to keep what they have. Long-term care insurance would be an obvious offering if you handle insurance. If they are in anything risky, talk to them about moving into something more stable, so that you don’t lose them in a downturn. Become their financial adviser.

These may not be the best quadrant plans in the world, but they illustrate the power of this technique. They show what you can do with your customer base to make it come alive and to let you direct your efforts to areas where you can make more money for your company and make your customers happy at the same time.