What does 'customer segmentation' in banking involve?

Customer segmentation in banking involves dividing customers into distinct groups based on shared characteristics, such as demographics, behaviors, needs, or preferences. This strategy allows banks to tailor their products, services, and marketing efforts to specific segments, leading to more effective customer engagement and improved satisfaction. By understanding the unique requirements of each segment, banks can create personalized experiences, enhancing their overall value proposition.

The other options do not adequately describe the concept of customer segmentation. For instance, creating promotional offers for all customers lacks the targeted approach that segmentation entails, which is aimed at addressing the specific needs of different groups. Developing universal banking products suggests a one-size-fits-all solution, which contradicts the essence of customer segmentation that seeks to cater to diverse customer preferences. Lastly, integrating customer feedback into service design is an important aspect of improving customer experience but does not specifically focus on the grouping of customers based on similar traits.