Franchisees - a new segment for Swedbank? : a qualitative study of how banks work with market segmentation

Abstract: The finance industry has been rather slow adopting a customer oriented approach and instead had more of a transaction oriented approach having largely undifferentiated markets. During the last two decades the world’s finance industry has been undergoing a process of transformation set off by the deregulations, internationalisation and technological change. The effects from these changes have made the companies providing financial services, such as banks, face new challenges regarding their role in the economy. Swedbank, one of the largest banks in Sweden, is now looking at how to segment their market in the best possible way in an attempt to find segments that they can serve better and in that way become more competitive. One potential new segment they have found is the increasingly more common franchise systems. This has lead to the following problem statement and purpose for this thesis: How do banks work with market segmentation? The main purpose with this study has been to develop a deeper understanding of how banks work with market segmentation by studying the example of the potential segment of franchisees and their franchisors. The subordinate purposes include learning what franchisees think about their situation and relation with banks, clarifying the market potential of franchise segment for banks, and to give suggestions of aspects that might be valuable to consider for banks when examining the potential for a new segment of franchisees and their franchisors. My aim was to create a better understanding of the phenomenon studied by interpretations and therefore chose a qualitative data collection and analysis method to be able to answer the problem statement and purposes for this study. Nine in-depth interviews, eight interviews with different franchisees and one interview with a respondent from Swedbank, was carried out. What I have found with this study is that up till now the segmentation by banks has not been very fine tuned using rather simple variables and methods. But seen that as the bank market is starting to adopt more of a relationship marketing perspective the banks’ view of segmentation might also be starting to change and develop. As this study of Swedbank’s work with establishing whether franchise systems can be a new segment for them show that banks seem to be moving from their simple break-down approach with size and industry variables towards more of a build-up approach seeing their customers as different and unique building up the segments. Still though, segmentation is not very natural and prioritised as it is for many other companies. Other conclusions that can be drawn from this study are that if banks are to create a segment with franchise systems and trying to attract them with various marketing packages they have to be aware that relationships seem to be very important for customers and something that might make them not changing bank even if being offered good solutions. Although not having much contact with their banks customers can be satisfied since relationships can be in either a passive or active relational mode. Consequently if wanting to be able to get good penetration with a package of bank products and services I believe it is important that the banks are offering these packages to the franchise systems already early in the franchisees’ start-up phase, either when new franchisees are added to the existing franchise system or when the whole franchise system is completely new otherwise it will be more difficult to attract franchisees with such a package offering. Another conclusion that can be made is that banks seem to have problems with spreading good solutions throughout the whole bank. By looking over their market segmentation banks might become better at this, as well as becoming more knowledgeable about the different segments. Lastly, the market potential for franchise segments for banks seems to be rather good since even though franchisees do not see themselves as different from other small companies having different needs some prerequisites makes them different and interesting.