Customer Segmentation Guideline

Customer Segmentation Guideline

April 2022

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 Customer Segmentation Guideline

Acronyms
FCY - Foreign Currency

FDI - Foreign Direct Investment

ID - Identification Card

IFB - Interest Free Banking

MSME - Micro, Small and Medium Enterprise

NA - Not Applicable

POS - Point of Sale

RM - Relationship Manager

BI - Business Intelligence Publisher

SME - Small and Medium Enterprise

SMS - Short Message Service

USD - United States Dollar

USSD - Unstructured Supplementary Service Data

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Table of Contents
Acronyms ........................................................................................................................................................................... ii
List of figure and tables ............................................................................................................................................... iv
Chapter One: Customer Segmentation .................................................................................................................. 1
1.1. Introduction .................................................................................................................................................... 1
1.2. Purpose of Customer Segmentation ..................................................................................................... 1
1.3. Objectives of the Segmentation Review .............................................................................................. 2
1.4. Definition of Key Terms .............................................................................................................................. 3
1.5. Customer Segmentation Principles........................................................................................................ 3
1.6. Setting the Customer Segmentation Criteria ..................................................................................... 4
1.7. Experience of selected Domestic Banks on Customer Segmentation ...................................... 5
1.8. Proposed Customer Segments ................................................................................................................ 5
1.8.1. Customer Segmentation Definition .............................................................................................. 6
1.8.2. Proposed Customer Segmentation Criteria............................................................................... 9
1.9. Amhara Bank Customers Value Propositions.................................................................................. 12
1.10. Bank Customer Segment Method of Engagement .................................................................. 17
1.10.1. Corporate Customers Engagement Method ..................................................................... 17
1.10.2. MSME Customers Engagement Method............................................................................. 18
1.10.3. Retail Customers Engagement Method .............................................................................. 19
1.11. Customer Portfolio Management ................................................................................................... 20
1.12. Customer Segmentation Implementation Procedure ............................................................. 20
1.12.1. Segmentation of Retail Customer ......................................................................................... 20
1.12.2. Segmentation of SME Customers .......................................................................................... 21
1.12.3. Segmentation of Corporate and Commercial Customers ............................................ 21
1.12.4. Segmentation of IFB Customer Segment ........................................................................... 22
1.13. Re-Segmentation of Customers ...................................................................................................... 22
1.13.1. Graduation of Retail Customers ............................................................................................. 22
1.13.2. Graduation of MSME Customer ............................................................................................. 24
1.13.3. Graduation of Corporate and Commercial Customer .................................................... 25
1.13.4. Graduation of IFB Customer .................................................................................................... 26
1.14. General Guiding Principle of Customer Segmentation........................................................... 26

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 Customer Segmentation Guideline

List of figure and tables

Graph 1: Local Banks Customer Segmentation------------------------------------------------------------5

Figure 1: Amhara Bank Proposed Customer Segmentation………………………………….6

Table 1: Customer Segmentation Definition---------------------------------------------------------------6

Table 2: Proposed Customer Segmentation Criteria---------------------------------------------------12

Table 3: Amhara Bank Customers Value Propositions------------------------------------------------16

Table 4: Corporate customers’ methods of engagement---------------------------------------------17

Table 5: MSME customers’ methods of engagement--------------------------------------------------18

Table 6: Retail customers’ methods of engagement---------------------------------------------------19

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 Customer Segmentation Guideline

Chapter One: Customer Segmentation

1.1. Introduction

In a complex business-like banking, it is difficult to recognize groups of customers with

similar characteristics, business requirements and value. Therefore, understanding the
differences and segmenting customers correctly is the means to improve bank’s value
prepositions.
Amhara Bank has planned to give prominence for its customers and adapted customer
focus business model in the Bank’s strategic road map which is believed to bring a
competitive position and deepening its market share both local and regional. Thus, the
bank shall be segmented its customers into five level of segmentation (Retail, SME,
Corporate, Commercial and IFB) category to proactively grow its chosen market with
innovative value propositions.
Accordingly, segmentation shall be takes place to have clear and distinct customer
segmentation without ambiguity, determine the number of customers as well as the loan
and resources mobilization in each segment for eventual performance management, and
to propose values for customers based on segment needs.

This document contains customer segmentation guiding principles and customer

segmentation criteria of the Bank. The document will serve as a guideline to implement
the customer segmentation models stated in the Strategic Plan document of the Bank.

1.2. Purpose of Customer Segmentation

1.2.1. To enhance understanding of the business differential patterns among customers

based on their peculiar demand and banking habit.

1.2.2. To understand who our customers are and, more importantly, what their needs are
so that we can cater to their needs by providing tailored products and as a result

increase customer satisfaction and retention.

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 Customer Segmentation Guideline

1.2.3. To enhance the Bank’s capability to address markets from multiple dimensions
including criteria beyond account balance and demographics such as current and

future investment objectives, behaviors, interests, preferred communication

channel, product and service preferences, as well as adoption of value chain

banking approach in the case of corporate customer segments.

1.2.4. To ensure the Bank has better focus on product offerings and marketing efforts so

as to improve its competitiveness.

1.2.5. To ensure that the Bank has robust customer relationship management practice

that helps to improve customer retention, customer loyalty and customer

profitability.

1.2.6. To ensure that the Bank has enhanced customer portfolio management practice
that helps to optimize total customer value through cross-selling and up-selling

transactions and pricing.

1.3. Objectives of the Segmentation Review

The major objective of this document is to lay the foundation for customer focus
marketing practice in Amhara Bank by segmenting the Bank’s customer. Furthermore, the

following are specific objectives of this study:

1.3.1. To create understanding on the customer of Amhara Bank.

1.3.2. To reveal the criteria for segmentation and how to segment customers.

1.3.3. To segment the customer of Amhara Bank based on widely recognized

methodologies in the banking industry.

1.3.4. To create understanding on how to manage portfolio of our customers;

1.3.5. To enhance the customer segmentation implementation process.

1.3.6. To set foundations of value propositions for the segmented customers aiming to
retain existing customers and attracting new ones.

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1.4. Definition of Key Terms

1.4.1. Customer Segmentation: The practice of dividing Amhara Bank’s customers into
groups based on common characteristics; in order to maximize the value for
customers and the Bank.
1.4.2. Retail Customers: Retail customers are individual customers rather than business

customers that requires fulfilling their personal needs. Though the segment
broadly encompasses all individuals, the level of personalized retail banking

services offered depends on the relationship volume, mainly explained in terms of

deposits maintained with the Bank.

1.4.3. Corporate, Commercial and MSME Customers: Corporate, Commercial and

MSME customers are business customers rather than individual customers that
require fulfilling of their business expectations.
1.4.4. Platinum: is set the upper tier of Amhara Bank corporate customers with need
of new offerings and better values.
1.4.5. Gold: is a middle level of Amhara Bank’s corporate customers with price
sensitiveness and more likely to shift to competitor for better offers.
1.4.6. IFB Customers: are those customers in need of financial services that
consistent with shari’ah compliance and principles.
1.5. Customer Segmentation Principles

1.5.1. There Shall be clear customer segmentation definition and approaches.

1.5.2. The customer segmentation criteria Shall be actionable, in that they can be used

to define attractive and well-differentiated offerings.

1.5.3. Customers in each segment Shall have similar/closer demand patterns.

1.5.4. Implementation of the segmentation shall be largely carried out by information

system using the core-banking system in the short-run; and by CRM and BI in the
long-run.

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1.5.5. The bank shall use the segments extensively across its operations, not only for
reporting purposes but also to develop specific segment offerings and to

differentiate services, service levels, and communications.

1.5.6. Clients growing from segment to segment shall be monitored and changes to the

marketing segmentation, sales and value offers and service levels help leverage
this growth.

1.5.7. The customer segmentation exercise shall be conducted by an independent Work

Unit.

1.5.8. The segmentation process has to be audited so that it is carried out effectively and
the customers are grouped in the right segment.

1.5.9. The customer segment profile shall be reviewed and evaluated regularly on
quarterly basis; and when customers become eligible to graduate from one

segment to another they shall be duly transferred to the pertinent segment.

1.5.10. To ensure delivery of consistent customer experience, there must be a

mechanism that helps branches to uniquely identify customer segments.

1.6. Setting the Customer Segmentation Criteria

Customer segmentation analysis can be either retrospective or prospective. In the case of

retrospective customer analysis, the emphasis is on the existing customer base and the
segmentation depends on historical data that explains customers’ patronage behavior

such as relationship volume, relationship revenue, cost and profitability. On the other
hand, prospective customer analysis emphases on enhancing long term relationship with

selected group of customers who are thought to have the prospect for further growth.
Prospective customer segmentation can be based on earning potential. This is basically

the major criteria banks use when identifying retail customer segments such as
professionals (including medicals, engineers, and lawyers) and Executives. Same is also

used for business customer segmentation. For instance, SMEs are widely believed to be
the segment with the potential for growth in almost every market. The same appears to

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be the case in our case as well as micro, small and medium enterprises development is
among the major priorities of the government.

Hence, Amhara Bank shall adopt commonly used volume-based segmentation criteria
including:

 Deposit volume - can effectively be used to segment individual customers.

 Credit volume - can be used for segmenting business customers.

 Customer relationship profitability - same as above.

1.7. Experience of selected Domestic Banks on Customer Segmentation

Selected local banks’ practice in business customers’ segmentation is benchmarked. The

graphical presentation of the business customer segments of the banks is shown below.

Structure of Local Banks’ Customer Segmentation Experience

Awash Bank Commercial Bank of Ethiopia

Wholesale Retail Conventional IFB Credit FCY

Corporate Individual Customers

Business SME Business Premium Retail

Platinum

Gold

Silver

Graph 1. Local Banks customer segmentation chart

1.8. Proposed Customer Segments

Based on lessons drawn from customer segmentation practice of local banks, Amhara
Bank illustrated in the following graph:

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Figur 1. Amhara Bank's Proposed Customer Segments

Retail Business IFB

Royalty SME

Personal Commercial

Elite Corporate

1.8.1. Customer Segmentation Definition

Table 1. Customer segmentation definition

Key Proposed Sub- Segment Definitions and descriptions

Customer Segment
Segment

High Net Worth and Super rich individuals

 Individuals of high economic privilege and living standard
 Corporate Business/investment owners

Retail Royalty  Company Executives and Higher business leaders

Customers  Foreign Diplomats and Senior Expats

Personal Upper-affluent and Mass Affluent

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 Customer Segmentation Guideline

 Affluent employed professionals

 Entrepreneurs
 Professionals employed in middle and senior management
positions
 International staffs
 Business Developers and Consultants
 This includes self-employed professionals, high end artisans
 Lawyers, Doctors, IT consultants
 Structural builders, transporters, auto-workshop owners etc.

Mass Market and Economically active but less privileged

 Lower level employed professionals, artisans and self-employed
individuals in informal sectors
 Company employees
 Drivers
Elite  Artists and musicians
 Teachers
 Low-skilled artisans, micro-business owners, retirees, dependents
etc.
 Students
 Job seekers and laborers
Diaspora Ethiopian Diaspora
 People of Ethiopian origin who live and work abroad

Key
Proposed Sub-
Customer Segment Definitions and descriptions
Segment
Segment
Business operating on a very small scale
 Mostly Informal sector business operators
Micro-Enterprise  Small shops and kiosks, low value traders operating in informal
markets.
 Edirs, Equbs
MSME These are licensed businesses that employ a small number of
Customers workers and do not have a high volume of sales
 Small traders
Small-Enterprise  Sole proprietors
 Service providers
 Coffee shops
 Small restaurants

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 Cottage industries (leather etc.)

Medium sized enterprises with relatively high volume of sales
 Wholesalers
 Distributors
 Importers
Medium-Enterprise
 Farmers (medium scale)
 Guesthouses /small hotels
 Schools
 Clinics and pharmacies
Commercials

 Medium Domestic Trade and Service Companies

Commercial
Commercial  Medium Logistics and Distribution Companies
Customer
 Medium Commercial Farms and Manufacturing Industries
 Others not under Big and Medium Corporate categories
Big Corporate
 Multinational companies and Foreign Direct Investments
 International NGOS and Organizations
 Embassies and Government Agencies including government
Platinum
development enterprises
 Giant trading houses and Conglomerates
Corporate
 Top 50 Exporters of the Country
Customers
 Five-star Hotels and Airline Business entities
Medium Corporate
 Large Commercial Farms and Agro-processing Industries
Gold  Large Manufacturing Industries
 Large International Trade and Service Companies
 Large Domestic Trade and Service Companies

 IFB Banking Customer Segmentation process shall be similar to the Conventional

Banking with due consideration for Shariah Compliance and Principles

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Table 2: Proposed Customer Segmentation Criteria

1.8.2. Proposed Customer Segmentation Criteria

[Link]. Conventional Banking Customer Segmentation Criteria

Customer Segmentation Criteria
Initial Segmentation Phase Re-Segmentation Phase
Customer Segment Customer Sub- Initial Total Capital Value Criteria Priority (1st, 2nd, 3rd)
Segment Deposit 1st Priority 2nd Priority 3rd Priority
Royalty >3,000,000 Annual Annual Loan Granted
Average
Retail Customer 100,000– NA Average FCY
Personal Deposit
3,000,000
Contribution
Elite <100,000

Micro <=100,000 Annual

Annual
Small 100,001-1,500,000 Average FCY
NA Average Loan Granted
MSME Customer Contribution
Medium 1,500,001-3,500,000 Deposit

Annual Annual
Commercial Customers Commercial 3,500,001-7,500,000 Loan Granted Average FCY Average
NA
Contribution Deposit
7,500,001- Annual Annual
Gold NA
Corporate Customer 10,000,000 Loan Granted Average FCY Average
Platinum >10,000,000 Contribution Deposit
[Link]. Interest Free Banking Customer Segmentation ( with due consideration of Shariah Compliance and Principles)
Royalty >2,000,000 Annual
Annual
Retail Customer Personal 100,000–2,000,000 Average Average FCY Loan Granted
NA
Elite <100,000 Deposit Contribution

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 Customer Segmentation Guideline

Micro <=100,000 Annual Loan

MSME Customer Annual Average
Small 100,001-1,500,000 Average
NA Granted FCY Contribution
Deposit
Medium 1,500,001-3,500,000
Loan Annual
NA Annual Average
Commercial Customer Commercial 3,500,001-7,500,000 Average FCY
Granted Deposit
Contribution
Gold 7,500,001-10,000,000 Loan Annual
Annual Average
Corporate Customer Average FCY
Platinum >10,000,000 Granted Deposit
Contribution
[Link]. Conventional Banking Re-Segmentation Criteria Range
Commercial
Re-
S. No Corporate Segment Segment MSME Segment Retail Segment
Segmentation
Platinum Gold Commercial Medium Small Micro Royalty Personal Elite
Criteria
10,000,001- 5,000,001- 3,000,001- 100,001- 100,000-
1. Deposit Range >30,000,000 <=100,000 >3,000,000 <100,000
30,000,000 10,000,000 5,000,000 3,000,000 3,000,000

30,000,001- 15,000,001- 5,000,001- 500,001- 500,001-

2. Loan Range >100,000,000 <=500,000 >5,000,000 <=500,000
100,000,000 30,000,000 15,000,000 5,000,000 5,000,000

500,001- 250,000- 200,001- 100,001- 100,000-

4. FCY Range (USD) >1,000,000 <=100,000 >300,000 <100,000
1,000,000 500,000 250,000 200,000 300,000

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[Link]. IFB Banking Re-Segmentation Criteria Range

Commercial
Re- Corporate Segment MSME Segment Retail Segment
S. No Segmentation Segment
Platinum Gold Commercial Medium Small Micro Royalty Personal Elite
Criteria
5,000,001- 3,000,001- 1,000,001- 500,001- 100,000-
1 Deposit Range >10,000,000 <=500,000 >2,000,000 <100,000
10,000,000 5,000,000 3,000,000 1,000,000 2,000,000

15,000,001- 10,000,001- 5,000,0001- 500,001- 500,001-

2 Loan Range >30,000,000 <=500,000 >5,000,000 <=500,000
30,000,000 15,000,000 10,000,000 5,000,000 5,000,000

500,001- 250,000- 200,001- 100,001- 100,000-

3 FCY Range (USD) >1,000,000 <=100,000 >300,000 <100,000
1,000,000 500,000 250,000 200,000 300,000

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1.9. Amhara Bank Customers Value Propositions

Table 3: Amhara Bank Customers Value Propositions

Amhara Banking Customers Value Propositions

Customer Customers’ Value

Customer Segment Amhara Bank’s Value Propositions
Sub-Segment
 Exceptional, speedy,  Premium service
 Reliable, ease of use,  Design unique service ID
 Flexible, accessible, and  Zero balance account opening
 Purposeful service.  Prioritized credit facility and FCY allocation for
 Product status and feeling of travel and other purposes
superiority; appealing, excitement.  Tailored deposit products and payment
 Efficiency, services such as:
Retail  low-cost services;  Favorable saving interest rates
Royalty
Customer
 accessibility from anywhere and  Flexible account opening
anytime (cost savings)  Personal banking,
 Respect, status, and prestige  Well-furnished waiting area
 Excellent service,  Tailored digital banking,
 satisfaction;  Advisory services,
 Respect, and cost savings  Safe deposit box services,
 Tailored card banking

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 Convenience  Tailored deposit products and payment

 Service quality services
 Price  Tailored consumer loan
 Speed  Education loan
 Idea financing
 Event financing
Personal
 Medical loan
 Tailored digital banking
 Savings linked with credit
 Salary advance
 FCY allocation for travel and other purposes
 Tailored card banking

 Convenience (proximity of branches)  Preferential interest rate

 Reliability  Idea financing to encourage entrepreneurship
 Sense of stability  Advance salary credit facility
Elite
 Product innovation  Save and borrow
 Responsiveness  Tailored digital banking offering
 Group financing

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 Speed  Online banking

 Convenience  Representative office at FDI source countries
 Reliability  Tailored consumer loan
 Cost  Flexible saving and lending interest rates
Diaspora  Service Quality  Savings linked with credit
 Asset management
 Real estate financing
 Foreign exchange travel service
 Money transfer

 Convenience  Capacity Building and Business Development

Micro  Service quality Seminars
 Price  Discounted and free account maintenance
 Speed banking
Small  Efficient SME digital connect (Non-financial
solutions) platforms
SME Customer
 Access to quick lending for businesses and
self-employed individuals

Medium  Investment Solution

 Business Consultancy
 Transactional solutions
 Access to forex

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 Dedicated & Knowledgeable Relationship

Manager
 Pension Plan and Insurance
 24 Hours Contact Center
 Specialized products experts
 Alternate channel support
 Trade, Treasury & Lending
 Deposit Solution
 Loan Products
 Cash Management Solutions

 Confidentiality  Premium service

 Convenience  Design unique service ID
 Brand  Staff banking scheme
 Service quality (relationship  Cash management
Platinum
management)  Payroll administration service

Corporate Customer  Speed  Internet banking

 Personalized service

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 Superior investment returns  Value based pricing, working capital financing,

 Product innovation foreign exchange, financial advisory, e-banking
 Favorable engagement channels solutions and value chain financing
Gold
 Leasing financing
 Corporate investment and financing
consultancy
 Pre-shipment financing
 Value chain financing starting from ultimate
buyer (importer)
 Advisory services
 Online banking platform
 POS/alternative channels
 Loyalty programs

Commercial Customer Commercial  Credit products and flexible credit policy

 Foreign exchange bureau
 Foreign exchange facilities,
 Logistics: transport financing
 Large scale farmers: payroll handling through
door steep banking
 Tender, performance and advance payment
security and bid bonds

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1.10. Bank Customer Segment Method of Engagement

1.10.1. Corporate Customers Engagement Method

Table 4: Corporate and Commercial customers’ methods of engagement

Elements Platinum Gold Commercial

 Dedicated specialist relationship managers will manage relationships with customer

along the chosen part of the value chain
Mode of interaction
 Rigorous and integrated account planning
 Visit by executive Management

 Dedicated RMs  Relationship managers to serve as single

 Integrated teams based at large point of contact with optimal coverage

branches and head office ratios

Resource allocation  Product/sector specialists (to support  Special armored vehicles for door steep
RMs as required) banking

 Special armored vehicles for door

steep banking

Primary medium of  Face-to-face Personal calls

 Business centers Online services
interaction
 Email SMS
Frequency of interaction As required any time

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1.10.2. MSME Customers Engagement Method

Table 5: MSME customers’ methods of engagement

Element Methods

 Dedicated specialist relationship managers will manage relationships with the MSMEs
Mode of interaction
at cluster level.

 Branch based relationship team

Resource allocation
 Dedicated relationship team

 Face-to-face

 Personal visits and calls

Primary medium of
 Contact center
interaction
 Email
 SMS

Frequency of interaction  As required

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1.10.3. Retail Customers Engagement Method

Table 6: Retail customers’ methods of engagement

Elements Prime Star Basic

Resource allocation  Dedicated relationship  Relationship manager  Branch Team

manager  Agency banking team

Primary medium of  Face-to-face  Personal calls  Email (if available)

Interaction  Personal calls  Email  SMS

 Email  SMS  USSD Banking

 SMS

Frequency of interactions  General interaction - at  At least once every three  As required

least once a month months

 Issues resolution - as

required

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1.11. Customer Portfolio Management

It is evident that customer segmentation helps to understand the true customer demand
and banking habits. Thus, by segmenting customers into portfolios, an organization can

better understand the relative importance each customer represents to profitability. Such
an understanding will assist Amhara Bank not only in retaining valuable customers but

also in creating additional value with these customers through implementation of robust
relationship development.

Hence by refining offerings according to the needs of the customers, providing advisory
services and by making their everyday operations more efficient, the bank will assist its

customers in their journey towards growing their business. Throughout a customer’s life
cycle in the bank, some customers could grow from segment to segment. This shall be

properly monitored and changes to the marketing segmentation, sales, value offers and
service levels that help to leverage the growth of the bank.

The customer portfolio management practice is means of creating, developing and

enhancing customer segments as revenue engines. In principle, the very purpose of

customer portfolio management practice is to ensure sustainable customer base and

value generation capability of the Bank as a going-concern. Besides, the customer

portfolio management shall engage in development of further specialized customer

segments based on customer behavior patterns and new emerging banking service

interests or trends. Measured in key performance indicators, Customer portfolio targets

in driving value are portrayed herein below.

1.12. Customer Segmentation Implementation Procedure

1.12.1. Segmentation of Retail Customer

[Link]. When any individual customer applies for account opening, shall be informed
about the bank’s retail segments (Royalty, Personal and Elite) with the value
proposition offered by the Bank;

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 Customer Segmentation Guideline

[Link]. Any natural person applying for account opening shall be segmented as Retail
Customer;

[Link]. Any Retail customer account opening shall be recorded and checked as per
stated customer segmentation criteria;

[Link]. While opening account of retail customer, initial deposit is used as a base
criterion of segmentation;

[Link]. The Regional Office Managers shall regularly monitor the customer
segmentation process by reviewing the customer portfolio report every week.

1.12.2. Segmentation of SME Customers

[Link]. All business entities applying for account opening shall be segmented as SME

based on the stated criteria.

[Link]. Capital value on trade license is used as initial segmentation criteria while

opening an account for SME Customer.

[Link]. Irrespective of the initial deposit and trade license ‘Edirs and Equbs’ are

segmented as ‘Micro sub segment’.

[Link]. Needless to mention that any customer shall be segmented in only one

segment, irrespective of the number of customer accounts. That mean various

accounts opened in a single branch or in multiple branches by a single business

entity customer shall be segmented in only one deserving segment.

[Link]. The Regional Office Managers shall regularly monitor the customer

segmentation process by reviewing the customer portfolio report every week.

1.12.3. Segmentation of Corporate and Commercial Customers

[Link]. All business entities applying for account opening shall be segmented as

corporate based on the stated criteria.

[Link]. Capital value on trade license is used as initial segmentation criteria while
opening an account for corporate customer.

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 Customer Segmentation Guideline

[Link]. Organizations like International NGOs, Multi-National Companies, Foreign

Direct Investments, Embassies, Government Agencies, Government

Development enterprises and Airline Business are segmented as platinum

customer from the beginning.

[Link]. Needless to mention that any customer shall be segmented in only one
segment, irrespective of the number of customer accounts. That mean various

accounts opened in a single branch or in multiple branches by a single business

entity customer shall be segmented in only one deserving segment.

[Link]. The Regional Office Managers shall regularly monitor the customer
segmentation process by reviewing the customer portfolio report every week.

1.12.4. Segmentation of IFB Customer Segment

[Link]. The procedure for the segmentation of Retail Customer segment of the

conventional banking customers applied to the IFB Retail Banking customers

with due consideration of stated criteria for IFB segments.

[Link]. The procedure for the segmentation of MSME Customer segment of the
conventional banking customers applied to the IFB MSME Banking customers

with due consideration of stated criteria for IFB segments.

[Link]. The procedure for the segmentation of Corporate and Commercial Customer

segment of the conventional banking customers applied to the IFB Corporate

Banking customers with due consideration of stated criteria for IFB segments.

1.13. Re-Segmentation of Customers

1.13.1. Graduation of Retail Customers

[Link]. The customer graduation (up or down grading) shall be carried out based on

Annual Average deposit, Annual Average FCY contribution and Loan Book
/Loan Granted.

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[Link]. Annual Average Deposit is the one shall be given priority while graduating retail
customers.

[Link]. When the customer fulfils the first priority criteria of this segment which is
deposit, the graduation (up or down grading) shall be carried out based on the

Annual Average deposit.

[Link]. When the customer fulfils the second criteria of this segment which is FCY, the

graduation (up or down grading) shall be carried out based on the Annual
Average FCY contribution.

[Link]. When the customer fulfils the third criteria of this segment which is loan
granted (loan Book), the graduation (up or down grading) Shall be carried out

based on the loan granted.

[Link]. When the customer fails to fulfils all of the criteria (Deposit, FCY and Loan book),

the customer shall be segmented under the lower sub-segment of the retail
customer segment.

[Link]. When Retail sub-segment of ‘Elite’ fulfil one and/or all of the segmentation
criteria (Deposit, FCY contribution and Loan Granted) as per the priority

graduated to either ‘Personal’ or ‘Royalty’ and vice versa.

[Link]. When Retail sub-segment of ‘Personal’ fulfil one and/or all of the segmentation

criteria (Deposit, FCY contribution and Loan Granted) as per the priority
graduated to either ‘Royalty’ and vice versa.

[Link]. Retail customers couldn’t graduate to MSME or Corporate or Commercial

segment as retails are natural/individual person whereas MSME and Corporate

customers are legal person.

[Link]. When the customer fulfils all of the criteria (Deposit, FCY and Loan book), the
bank shall offer unique value proposition or incentives.

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1.13.2. Graduation of MSME Customer

[Link]. The customer graduation (up or down grading) shall be carried out based on
Annual Average deposit, Loan Book/ Loan Granted and Annual Average FCY

contribution.
[Link]. Annual Average Deposit is the one shall be given priority while graduating

MSME customers.
[Link]. When the customer fulfils the first priority criteria of this segment which is

deposit, the graduation (up or down grading) Shall be carried out based on the
Annual Average deposit.

[Link]. When the customer fulfils the second criteria of this segment which is Loan
Granted, the graduation (up or down grading) Shall be carried out based on

Loan Granted /Loan Book.

[Link]. When the customer fulfils the third criteria of this segment which is FCY

contribution, the graduation (up or down grading) Shall be carried out based
on Annual Average FCY contribution.

[Link]. When the customer fails to fulfils all of the criteria (Deposit, Loan book and
FCY), the customer Shall be segmented under the lower sub-segment of the

MSME customer segment.

[Link]. When MSME sub-segment of ‘Micro’ fulfil one and/or all of the segmentation

criteria (Deposit, Loan Granted and FCY contribution) as per the priority
graduated to either ‘Small’ or ‘Medium’ and vice versa.

[Link]. When MSME sub-segment of ‘Small’ fulfil one and/or all of the segmentation
criteria (Deposit, Loan Granted and FCY contribution) as per the priority

graduated to ‘Medium’ and vice versa.

[Link]. MSME customers shall be graduated to Corporate segment when fulfil the
stated requirement criteria of corporate customers’ segment.

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 Customer Segmentation Guideline

[Link]. When the customer fulfils all of the criteria (Deposit, FCY and Loan book), the
bank shall offer unique value proposition or incentives.

1.13.3. Graduation of Corporate and Commercial Customer

[Link]. The customer graduation (up or down grading) shall be carried out based on

Loan Book/ Loan Granted, Annual Average FCY contribution and Annual
Average deposit.

[Link]. Loan Granted or Loan Book is the one shall be given priority while graduating
corporate customers.

[Link]. When the customer fulfils the first priority criteria of this segment which is Loan
Granted, the graduation (up or down grading) shall be carried out based on

Loan Granted or Loan Book.

[Link]. When the customer fulfils the second criteria of this segment which is FCY

Contribution, the graduation (up or down grading) shall be carried out based
on Annual Average FCY contribution.

[Link]. When the customer fulfils the third criteria of this segment which is Deposit,
the graduation (up or down grading) Shall be carried out based on Annual

Average Deposit.
[Link]. When the customer fails to fulfils all of the criteria (Loan book, FCY contribution
and Deposit), the customer shall be segmented under the lower sub-segment
of the corporate customer segment or down-grade to MSME customer

segment.
[Link]. Irrespective of the stated criteria; Foreign Direct Investments, Multi-national

Companies, International NGOs and Organizations, Embassies, Government

Agencies and Government Development Enterprise of corporate customers’ is

not graduated to MSME. But graduation takes place within corporate segment
due to its peculiar nature and importance of the sectors.

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 Customer Segmentation Guideline

[Link]. When Commercial segment ‘Commercial’ fulfil one and/or all of the
segmentation criteria (Loan Granted, FCY contribution and Deposit) as per the

stated criteria, graduated to either ‘Gold’ or ‘Platinum’.

[Link]. When Corporate sub-segment ‘Gold’ fulfil one and/or all of the segmentation

criteria (Loan Granted, FCY contribution and Deposit) as per the stated criteria,
graduated to ‘Platinum’ and vice versa.

1.13.4. Graduation of IFB Customer

[Link]. The guiding principle for the graduation of Retail Customer segment of the

conventional banking customers applies for the IFB Retail Banking customers.
[Link]. The guiding principle for the graduation of MSME Customer segment of the

conventional banking customers applies for the IFB MSME Banking customers.
[Link]. The guiding principle for the graduation of Corporate Customer segment of the

conventional banking customers applies for the IFB Corporate Banking

customers.

1.14. General Guiding Principle of Customer Segmentation

1.14.1. Customer segmentation task shall be undertaken automatically and quarterly with

the system. But, if not segmentation graduation will be conducted annually and
manually.

1.14.2. When a customer graduated from one segment to another, the associated budget
will be transferred to graduated one. i.e. if MSME customer graduated to

Corporate segment, the expected budget will be reduced from MSME by that
deposit amount and number of customers, then added to corporate segment by

graduated amount and number.

1.14.3. With approval of CEO any new customer could be segmented to the highest sub-

segment of relevant segment based by evaluating the importance of the

customer.

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 Customer Segmentation Guideline

1.14.4. All regional offices are expected to check and follow segmentation activity of
branches under their regional office on end of the day. If there is a branch found

on BI, the regional office will inform to take corrective action.

1.14.5. Any customer segmentation graduation will be undertaken by regional office

manager in consultation with respective Chief.

Prepared by:
Ato Fentabil Fikadu ________________________________
Director – Branch Operation & Customer Experience Department

Endorsed by:
Ato Chanyalew Demissie ________________________________
Chief – Banking Operations Officer

Approved by:
Ato Henok Kebede ________________________________
Chief -Executive Office

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