EVALUATION OF THE EFFECT OF SEGMENTATION ON 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 AND ECONOMICS IN PARTIAL FULFILMENT FOR THE AWARD OF DIPLOMA IN SALES AND OF KISII UNIVESITY

NOVEMBER, 2017

i 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

ii DEDICATION This 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

iii ACKNOWLEDGEMENT I 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.

iv ABSTRACT The 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 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.

v Table of Contents DECLARATION 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

vi 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

vii 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

viii LIST OF ABBREVIATIONS CBK - Central Bank of Kenya

RBV - Resource Based View

KCB - Kenya Central Bank of Kenya

NIC - National Industrial Credit Bank

ix LIST OF TABLES Table 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

xi CHAPTER ONE INTRODUCTION

1.1 Background of the Study

Financial institutions typically compete in broad markets with numerous 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 relative to competitive offerings?, in addition to operational decisions pertaining to , 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 Segmentation Wilkie & 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 needs and limited company resources, by encouraging

1 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

2 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 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 , 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 Problem Market 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 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 , or . 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 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 .

4 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 Objective The 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 ?

5 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 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

6 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 study Some 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

7 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.

8 CHAPTER TWO

LITERATURE REVIEW

2.1 Literature Overview This 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 equity.

10 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 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, , 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 . The idea of a marketing mix theory is to organize all aspects of the marketing plan around the habits, desires and psychology of the (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. 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 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

12 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, , 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 , 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 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 Geographical market segmentation used in banks

Demographic market segmentation Sales Performance

- High - Low Behavioural market segmentation Intervening variables Government policy

Business Culture 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 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 Frame Inorder 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 Size KCB 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

N 1+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 7 1 – 5 yrs 45 65 6 – 10 yr 15 21 Above 10 yrs 5 7 Total 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 percentage Yes 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 SA A N D SD ∑fi ∑fiwi ∑fiwi 5 4 3 2 1 ∑f)

Improved understanding of 40 10 5 5 10 70 275 3.9 customers need More appropriate resource 35 15 7 10 3 70 279 4.0 allocation Clearer identification of market 25 20 10 10 5 70 260 3.7 opportunities Better tuned and positioned 35 10 10 10 5 70 270 3.8 marketing programme 232 Customer retention and loyalty 20 20 6 10 14 70 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 SA A N D SD ∑fi ∑fiwi ∑fiwi 5 4 3 2 1 ∑f)

Occasion oriented 29 11 4 6 20 70 233 3.3 Usage Oriented 4 6 8 12 40 70 132 1.8 Loyalty Oriented 3 8 6 13 40 70 123 1.7 Benefits sought 10 3 8 4 45 70 139 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 . 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 References Assael & Rossie, B. (2006). HRM Practice Clusters in Relation to Size and Performance: An Empirical Investigation in Canadian Manufacturing SMEs. Journal of Small Business and Entrepreneurship 2007. 20 (1): 25-40. Berger, G. (2009). International Journal of Business, Humanities and Technology Vol. 2; the Influence of Promotional Strategies on Banks Performance in Kenya Brown, M., Askew, M., Baker, D., Denvir, H & Millett, A. (2003). ‘Is the National Numeracy Strategy Research-Based?’ British Journal of Educational Studies, 46, 4, 362-385 (A review of the evidence for and against the numeracy strategy) Blattberg, R., Peacock, P. & Sen, S. (2002). ‘Purchasing strategies across product categories’, Journal of Consumer Research, 3, pp. 143-54. Bank of Kenya (CBK); Retrieved 2 August 2013 accounts for 2009, Nairobi CBK, (2013)."Central Bank of Kenya: Commercial Banks & Mortgage Finance Institutions". Central Charnes, A., W.W. Cooper, and E. Rhodes (1978). “Measuring the Efficiency of Decision Making Units.” European Journal of Operational Research, Volume 3: 429-444 Douglas, S.P., and C.S. Craig (2005). “Evolution of Global Market Strategy: Scale, Scope and Synergy”. Columbia Journal of World Business, Vol 24, No 3: 47-59 Doyle, P., Saunders, J. & Wong, V. (2002 v). "A comparative study of Japanese marketing strategies in the British market", Journal of International Business Studies, Vol. 17 No.1. Equity Bank (2010). Annual report and accounts for 2009, Nairobi. Grant , N. H. (2000). "The Concept of the Marketing Mix"; In Schwartz, George; Science in marketing; Wiley marketing series; Wiley: 286ff. Retrieved 2013-11-04 Gruca, T.S., and Rego.L.L. (2005). “Customer Satisfaction, Cash Flow, and Shareholder Value” Journal of Marketing, Vol.69: 115-130. Green, P.E. & Krieger, A.M. (2012). "Segmenting markets with conjoint analysis", Journal of Marketing, Vol. 55 pp.20-31.

Heiner, R. S. & Mühlbacher, N. (2007). Modern Marketing. Revised Edition. New Delhi: S. C

39 Hand and Company Ltd Hopp, W J., & Spearman, M. L. (2013). "To pull or not to pull: what is the question?” ManufServOper Manage. Retrieved 13 June 2014 Hiam, A. & Schewe, C.D. (2010). "Market segmentation: can it work for your company?", Incentive, Vol. 167No.1, pp.65-6. Jain, S.C. and Punj, G. (1997) "Developing marketing strategy: a framework", Marketing Intelligence & Planning, Vol. 5 No.1: 34-9. Karanja, G.P. (2008). Innovation Strategies Adopted by Insurance Companies in Kenya Kathuni L. K. and Mugenda, N. G. (2012). International Journal of Business, Humanities and Technology; Direct Sales Strategy Applied by Commercial Banks in Kenya Keegan, D. (2003) “: strategic and tactical implications”, Management Decision, Vol. 34 No. 3: 5-14 Kotler, P., Brown, L., Adam, S. & Armstrong, G. (2011). Marketing, 5th Edition, Pearson Education, Frenches Forest, Australia. Minhas, R.S. & Jacobs, E.M. (2005. ‘Benefit segmentation by factor analysis: An improved method of targeting customers for financial services’, International Journal of Bank Marketing, 14, 3, pp. 3-13. Nicole &Ganni G. (2000). Developing your strategy; Marketing culture and customer retention in the tourism industry’, Journal of Service Industries, 20(2): 95–113 Orlow, D.K., Radecki L.J. & Wenninger, J. (2004). “Ongoing restructuring of retail banking”, Research paper, No 9634, New York, NY: Federal Reserve Bank of New York, 245-247 Speed, R. & Smith, G. (1992). "Retail financial services segmentation", The Service Industries Journal, Vol. 12 pp.368-83. Smith, W.R. (2002). " and market segmentation as alternative marketing strategies",Journal of Bank Marketing, pp.3-8 Wernerfelt G. (2009). Managing the Drivers of Organizational Commitment and Salesperson Effort: An Application of Meyer and Allen’s Three Component Model. Journal of Marketing Theory and Practice; fall 2009; 17, 4: 335 Wilkie, W.L. & Cohen, J.B. (1994). "An overview of market segmentation: behavioral concepts and research approaches", Marketing Science Report, pp.77-10

40 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

41 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 S

D A Improved understanding of customers need More appropriate resource allocation Clearer identification of market opportunities’ Better tuned and positioned marketing programme census data to determine who, where, and how you want to

42 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 S

D A Occasion 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

43