The Impact of Customer Segmentation on the Performance of Banks: the Case of Awash Bank
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Date
2025-05-19
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A.A.U
Abstract
This study investigated the effect of customer segmentation strategies on the performance of
banks, with a particular focus on Awash Bank. The general objective was to assess how various
segmentation approaches beyond the traditional demographic methods impact customer
satisfaction, loyalty, retention and overall performance. To achieve this, the research adopted a
quantitative approach, employing a descriptive and explanatory research design. The study
attempted to consider various dimensions of customer segmentation, ranging from behavioral,
psychographic, demographic, geographical, and technological segmentation. From the findings
of the data analysis, it is safe to conclude that behavioral segmentation has relatively the most
impact on the performance of the Bank, followed in sequence by geographical, psychographic,
and behavioral segmentation. Specifically, the unstandardized beta coefficients for these
segments were found to be statistically significant, indicating that employment of those
segmentation techniques has strong correspondence with improved bank performance. In
contrast, demographic and technological segmentation have relatively limited impacted
compared to other dimensions of segmentation signaling a more integrated customer
segmentation approach which combines multiple dimensions of segmentation. The study revealed
that customer segmentation approach which integrates the various dimensions of customer
behaviors, preferences and choices has direct correlation with the performance of banks and
banks well beyond demographic segmentation need to focus as well on behavioral,
psychographic, and geographical segmentations as derivers of performance improvement. The
approach would allow banks to tailor their products, services, and promotions more effectively,
leading to better customer interaction, satisfaction, and overall growth. Banks also need to are
investment in revisiting their customer segmentation approaches through ongoing data analysis
so that they can better understand the evolving customer choice and behavioral tendencies to
deliver their products and services in a more effective and productive manner.
Keywords: Customer segmentation, commercial, bank performance, regression analysis