Market Segmentation Practices and Customer Satisfaction for Credit Services Among Commercial Banks in Kenya

Abstract

Market segmentation refers to subdividing a market along some commonality, similarity, or kinship where members of the segment share something common. Marketers have over time recognized that the target audiences of a certain product are not all alike as their tastes and preferences differ greatly in terms of demographics, attitudes, needs, location and social affiliations. This study sought to investigate credit market segmentation practices and customer satisfaction in the banking industry in Kenya. The objectives of the study were to: Establish the market segmentation practices for credit services adopted by commercial banks in Kenya; establish the factors that influence market segmentation for credit services by commercial banks in Kenya; establish the effects of market segmentation practices on customer satisfaction for credit services among commercial banks in Kenya. The target population for the study was all commercial banks operating in Kenya as at December 20 l2.Since the population of the study was small and easily accessible because all banks have an office within Nairobi region, this study included all banks in the study hence a census study. Primary data was used for the purpose of this study. The data was collected using a semi structured questionnaire consisting of both open ended and closed questions. The closed ended questions was coded and analyzed quantitatively, based on percentages and frequencies and presented in tables and charts. The respondents were asked whether the Bank has divided its credit market into portions with similar characteristics the respondents agreed a small extent. On whether the bank uses Geographic boundaries in segmenting its credit market the respondents agreed to a little extent. On the amount of money applied for the respondents agreed to a moderate extent. About the ability of the applicant to repay the respondents agreed to a little extent. On the lifestyle of the applicant the respondents agreed to a little extent. Finally on credit market segmentation have led to increased customer acquisition by the Bank the respondents agreed to a little extent. From the study findings, the researcher concludes that the Bank has segmented its customer markets based on the amount of loan applied by the customers and its credit market based on the needs of customers. The study further concludes that the purpose for which the loan and the amount of money applied for are the major factor considered by the bank while segmenting its credit markets. The study also recommends that segmentation can be used by Commercial banks in Kenya 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 Banks. The study faced both time and financial limitations. The duration that the study was to be conducted was limited hence exhaustive and extremely comprehensive research could not be carried out. However the researcher countered this limitation by carrying out the research across all the departments and management levels in the banks to enable a generalization of the study findings. The study recommends that a similar study to be done on effects of credit market segmentation practices on customer satisfaction in the all financial institutions in Kenya