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Segmentation Of Sme Portfolio In Banking System

Author

Listed:
  • Namolosu Simona Mihaela

    (Academy of Economic Studies, Bucharest; Marketing Faculty, Marketing Faculty)

Abstract

The Small and Medium Enterprises (SMEs) represent an important target market for commercial Banks. In this respect, finding the best methods for designing and implementing the optimal marketing strategies (for this target) are a continuous concern for the marketing specialists and researchers from the banking system; the purpose is to find the most suitable service model for these companies. SME portfolio of a bank is not homogeneous, different characteristics and behaviours being identified. The current paper reveals empirical evidence about SME portfolio characteristics and segmentation methods used in banking system. Its purpose is to identify if segmentation has an impact in finding the optimal marketing strategies and service model and if this hypothesis might be applicable for any commercial bank, irrespective of country/ region. Some banks are segmenting the SME portfolio by a single criterion: the annual company (official) turnover; others are considering also profitability and other financial indicators of the company. In some cases, even the banking behaviour becomes a criterion. For all cases, creating scenarios with different thresholds and estimating the impact in profitability and volumes are two mandatory steps in establishing the final segmentation (criteria) matrix. Details about each of these segmentation methods may be found in the paper. Testing the final matrix of criteria is also detailed, with the purpose of making realistic estimations. Example for lending products is provided; the product offer is presented as responding to needs of targeted sub segment and therefore being correlated with the sub segment characteristics. Identifying key issues and trends leads to further action plan proposal. Depending on overall strategy and commercial target of the bank, the focus may shift, one or more sub segments becoming high priority (for acquisition/ activation/ retention/ cross sell/ up sell/ increase profitability etc.), while others (risky/ non-profitable etc.) may be left aside. This entire shift in strategy is considering also growth potential per sub segment. Examples are provided for different strategies considering growth potential of each sub segment.

Suggested Citation

  • Namolosu Simona Mihaela, 2013. "Segmentation Of Sme Portfolio In Banking System," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 1786-1796, July.
    • Handle: RePEc:ora:journl:v:1:y:2013:i:1:p:1786-1796
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    File URL: http://anale.steconomiceuoradea.ro/volume/2013/n1/189.pdf
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    References listed on IDEAS

    as
    1. Daniela Rodica Silivestru(Popescu), 2012. "Bank Loans And Small Firm Financing In Romania," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(14), pages 1-15.
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    Cited by:

    1. Hosseini Kashkouyieh , Seyyed Mahmoud & Asadi , Gholam Hossein & Hamidizadeh , Mohammad Reza & Moqaddasi , Mohammad, 2015. "Developing a Macro-segmentation Model at Industry Level: Iranian Banking Industry," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 10(4), pages 95-123, October.

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    More about this item

    Keywords

    SME; banking; marketing; strategy; segmentation; lending;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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