Business Client Segmentation in Banking Using Self-Organizing Maps

Mirjana Pejić Bach (), Juković Sandro (), Ksenija Dumicic and Šarlija Nataša ()
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Juković Sandro: IT Solutions Manager Erste&Steiermärkische Bank
Šarlija Nataša: Faculty of Economics in Osijek, University of Osijek

South East European Journal of Economics and Business, 2014, vol. 8, issue 2, 32-41

Abstract: Segmentation in banking for the business client market is traditionally based on size measured in terms of income and the number of employees, and on statistical clustering methods (e.g. hierarchical clustering, k-means). The goal of the paper is to demonstrate that self-organizing maps (SOM) effectively extend the pool of possible criteria for segmentation of the business client market with more relevant criteria, including behavioral, demographic, personal, operational, situational, and cross-selling products. In order to attain the goal of the paper, the dataset on business clients of several banks in Croatia, which, besides size, incorporates a number of different criteria, is analyzed using the SOM-Ward clustering algorithm of Viscovery SOMine software. The SOM-Ward algorithm extracted three segments that differ with respect to the attributes of foreign trade operations (import/export), annual income, origin of capital, important bank selection criteria, views on the loan selection and the industry. The analyzed segments can be used by banks for deciding on the direction of further marketing activities.

Keywords: self-organizing maps; segmentation; banking; neural networks; data mining (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:seejeb:v:8:y:2014:i:2:p:10:n:3

DOI: 10.2478/jeb-2013-0007

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