Market segmentation is widely recognised as an integral part of strategic marketing (Doyle 1987; Harrison 1994; Minhas & Jacobs, 1996). It is a three-step process that entails identifying the market, selecting one or more sub-segments to serve and directing the marketing mix to each specific segment (Fahy & Jobber 2012). In the context of financial services marketing, it offers financial institutions the opportunity to divide the market into subsets of consumers based on similar needs and characteristics and identifying which segment(s) to serve with the firm’s marketing effort (Kotler & Keller 2008; Muhamad et al. 2012).

The understanding of the market for personal financial services is critical for financial service providers. Personal financial services are diverse (Minhas & Jacobs 1996) and may comprise bank savings, building society savings plans, pension schemes, insurance policies, mortgage bonds, real estate securities, shares, personal loans, and home loans. The types of personal financial services also vary according to the interest rate they attract, risk involved and rates of return (Meier, Kirchler, & Hubert 1999). Additionally, the purchase of personal financial services is quite complex for consumers to comprehend as decisions are not once-off in nature but rather tend to continue for many years (Burton 2001).

The market for financial services has also undergone tremendous transformations since the 1990s. According to Harrison (1994), the market for financial services in Britain, for example, was characterised by increased product proliferation and the importance of marketing in ensuring expansion and diversification before the 1980s. However, the deregulation of the financial market that occurred in the 1990s has significantly reduced legal restrictions allowing the rivalry among financial providers to intensify. The structural changes in the market for personal financial services are observable in factors such as increased competition, market saturation, recession, reduced demand for financial services, rising operational costs and diminishing profit margins (Ansell et al. 2007; Harrison 1994). The major drivers for these changes have been the deregulation of the market for financial services, technological advancements and changes in socio-economic conditions (Javalgi & Dion 1999; Meadows & Dibb 1998; Minhas & Jacobs 1996).

Structural changes occurring in the personal financial market have fundamental implications for financial consumer behaviour. In particular, while the rate of borrowing is on the rise, the rate of consumer savings has decreased significantly in most societies (Devaney et al. 2007; Yuh & Hanna 2010). For instance, the rate of personal savings has been reported to have declined drastically during the past decade for the vast majority of the British population (Burton 2001), American households (Devaney et al. 2007) and people in Botswana (Modisaatsone 2013). The declining level of personal savings in relation to debt poses a challenge to individuals, the financial system and the economy. When a majority of people in the society do not save at an early age, they will not be in a position to satisfy their consumption needs in the future, which is more likely to increase over-dependence on government at their retirement age (Burton 2001). A low level of household savings also has a great potential to negatively affect the process of accumulating resources that can be utilised for investment purposes in the financial system, which in turn diminishes capital stock in the economy (Elbadawi & Schmidt-Hebbel 1998; Haruna 2011; Prinsloo 2000; Radipotsane 2006). Thus, the importance of understanding consumers of financial services is long overdue, and the need to develop relevant market segmentation strategies concentrating on the needs of homogeneous groups within a larger, diverse financial market is on the rise (Coffey & Palm 1999; Harrison 1994; Loibl & Scharff 2010; Yuh & Hanna 2010). Furthermore, effective segmentation of the financial market leads to improved resource allocation, better identification of market opportunities and the development of superior marketing strategies (Kotler & Keller 2008).

Previous studies of segmentation place emphasis on two approaches: a priori and post hoc approach (Muhamad et al. 2012). In the a priori approach, the researcher selects a basis for segmentation and then uses common sense in classifying consumers into segments mostly relying on demographic characteristics. The post hoc approach divides the market into segments based on the extent to which responses obtained from the survey on specific characteristics are similar using sophisticated quantitative analytical techniques such as cluster analysis, perceptual mapping and discriminant analysis. The available studies based on the post hoc approach tend to segment the financial services market based on different combinations of demographic variables and psychographic characteristics (Ansell et al. 2007; Keller & Siegrist 2006; Minhas & Jacobs 1996) or demographic characteristics and desired benefits (Alfansi & Sargeant 2000). Other scholars have utilised factors that attempt to explain the psychographic nature of the customers such as perceptions (Harrison 1994), attitudes (Foscht et al. 2010; Fünfgeld & Wang 2009) and motivations (Muhamad et al. 2012) or grouped consumers based on their expected benefits from consuming the product such as desired utility, overall customer satisfaction and perceived value (Alfansi & Sargeant 2000; McDougall & Levesque 2000).

It is apparent from the review of the literature that the topic of segmentation of financial services has attracted considerable academic attention in both developing (Alfansi & Sargeant 2000; Muhamad et al. 2012) and developed countries (Ansell et al. 2007; Strandberg, Wahlberg & Óhman 2012). Although research into the strategic importance and approaches of market segmentation for personal financial services is well established in developed countries, the same cannot be said about developing countries (Alfansi & Sargeant 2000). As more and more studies are conducted on the various bases of market segmentation in the personal financial market in different contexts, the most effective bases that reflect the unique realities of those contexts tend to emerge.

Demographic variables of age (Burton 2001), income, profession (Friedman 1957), stage in the family life cycle (Albert & Modigliani 1963; Javalgi & Dion 1999) and social class have been widely used as the most traditional basis for segmenting the market for personal financial services. The use of demographics for segmentation in the context of understanding consumers of financial services corresponds with the life cycle model and the permanent income hypotheses. The life cycle model proposed by Albert and Modigliani (1963) contends that consumption and saving reflect an individual stage in the life cycle, while the permanent income hypotheses of Friedman (1957) are based on the premise that consumption is determined by long-term income. For instance, studies on age-based segmentation of market for financial services have shown that young people will save less while older people will save more (Albert & Modigliani 1963; Burton 2001; Javalgi & Dion 1999). Studies based on the family life cycle concept have demonstrated that the rating of attributes considered important when choosing financial institutions and the importance of financial services offered by financial institutions differ across the stages of the life cycle (Albert & Modigliani 1963; Javalgi & Dion 1999). In particular, individuals in the bachelor stage rated attributes such as located near home, overall quality of service, reputation and ease of qualifying for free cheque accounts by maintaining a minimum balance to be critical in making a decision to choose a financial institution; while those in the full-nest 1 stage rated attributes such as location, reputation, availability of mortgage loans, low interest rates on loans and giving good financial advice as very important.

Although traditional demographic characteristics can be useful in describing the financial market, it appears they are being heavily criticised within the literature (Foscht et al. 2010; Harrison 1994). Such bases have been criticised for providing little insight into the behaviour of the consumers of financial services as they are overly simplistic or descriptive (Harrison 1994). It has been argued that demographic characteristics can easily become inferior as a result of societal changes such as family structures or any changes in trends relating to social structures (Piercy et al. 2012) possibly leading to a mismatch between customers and financial offerings (Machauer & Morgner 2001). Additionally, demographic characteristics do not fully explore the potential of segmenting the market for financial services as most previous studies have used only one demographic variable at a time and results based on these studies are incapable of identifying the complete characteristics of sub-markets (Javalgi & Dion, 1999; Kotler & Armstrong 1999).

A major stream of research on the segmentation of consumers in the financial markets concentrates on psychographic characteristics such as personality, motivation, knowledge, attitudes, perceptions, lifestyles and values (Aaker 1997; Feng Lin 2002; Kotler et al. 2009; Muhamad et al. 2012). The premise of this approach of segmenting financial markets is the idea that there is heterogeneity that exists in terms of psychographic characteristics within a seemingly ‘homogenous’ group based on demographics and thus each segment would require a different mix of strategies to satisfy the individual needs of consumers (Feng Lin 2002; Muhamad et al. 2012). Consumers have been found to exhibit different motives, personalities, personal values and lifestyles even in the same demographic category (Kotler et al. 2009). Specifically, consumer personalities, values and lifestyles are indeed important indicators of product association because when consumers make a decision about a product, they also make an association of the product image with their own personality or image (Aaker 1997).

During the early stages of psychographic segmentation in financial services, Harrison (1994) identified four segments based on their perceptions about their knowledge of financial services and their degree of financial maturity. The identified segments were the financially confused, the apathetic minimalist, the cautious investor and the capital accumulators. The financially confused were characterised by low levels of perceived knowledge and financial maturity, future orientations for savings and short-term investment. On the other hand, the apathetic minimalists are financially mature, although their perceived knowledge of financial services is low, which then affected their motivation to use these services. The cautious investors perceived themselves to be financially knowledgeable, yet they displayed moderate levels of financial maturity by opting to use complex yet ‘safer’ saving options like insurance and pension funds and thereby having a long-term orientation to savings. The capital accumulators segment is characterised by high perceived levels of financial knowledge and financial maturity; thus, this segment was found to use savings options considered to be highly risky such as speculative share investments and low-rated bonds. Expanding on the earlier works, Foscht et al. (2010) identified four segments of consumers of financial services based on their level of interest, usage patterns, loyalty and behavioural intentions. Cluster 1 was found to be young people who are mainly interested in conservative forms of investments such as savings accounts and home loans, while cluster 2 had a relatively high interest in debit/credit cards and high-risk forms of investments. As in cluster 1, cluster 3 was found to be inclined towards more conservative forms of investments such as savings accounts despite their older age while cluster 4 showed more interest in high-risk forms of investment.

In a previous study, consumers of financial services related to Islamic banking were grouped into four segments, namely religious convictions, ethical observers, economic rational and a combination of economic and religious conviction based on their motives to buy these products (Muhamad et al. 2012). The religious conviction segment is highly motivated by the need to adhere to religious values in making decisions, the ethical observant segment consists of those who seek to ensure that their actions are morally acceptable and the economic rational segment make decisions based on personal benefits. Using attitudes towards financial matters, segments from a previous study were labelled as rational consumers, myopic consumers, anxious consumers, gut feeling consumers and anxious spenders (Fünfgeld & Wang 2009). The rational consumers are highly concerned with economic and financial matters. Myopic consumers are secure and not anxious when it comes to financial matters. Anxious savers need precautionary saving while anxious spenders feel insecure about financial matters. Gut feeling followers are spontaneous and trust their intuition in their financial decision making.

Despite the insight from the literature that discussed psychological segmentation in personal financial markets, the issue of personal saving has been rarely studied. With the exception of the study by Foscht et al. (2010), the key limitation of the previous studies is that they tend to focus on a single psychographic variable or a limited set of psychological variables in one study at a time. Thus, this approach does not provide adequate valuable insight into the understanding of the psychographic make-up of savers.

This approach segments customers according to benefits they seek when purchasing financial services, which is directly related to future purchase behaviour (Minhas & Jacobs 1996). Although the approach of segmenting consumers in the financial markets according to their desired benefits has attracted relatively limited attention from past studies, it is gradually recognised as an effective method for understanding consumers of financial services. Minhas and Jacobs (1996) also highlighted the need for segmenting the market looking at the benefits sought because it closes the knowledge gaps left by studies that focus on the demographic and psychographic segmentations. In particular, McDougall and Levesque (1994) identified two segments based on consumers’ desire for benefits being the performance and convenience segments. The performance segment describes consumers who desire the services of the bank to be performed right the first time, whereas the convenience segment identifies consumers who seek convenience in banking services such as convenient opening hours and accessible branch locations. In addition, three segments labelled as relationships, cost-sensitive and service focussed were identified on the basis of benefit variables sought in a bank (Alfansi & Sargeant 2000). The relationships focussed on segment placed more emphasis on the security of a banking relationship and were more likely to select a bank based on knowledge of the bank’s employees or the recommendation of a close friend. Cost-sensitive consumers are highly interested in promotional incentives, banking technology and convenience. Service-focussed consumers attach a high level of importance to core services such as bank reputation, the speed of delivery, accuracy of transactions as well as augmented services such as the quality of interaction with the staff.

Although studies on benefit segmentation offer valuable information on what savers look for within a bank, there is a need for some form of consistency concerning the range of benefits sought. The concern is that each study applies different types of benefits sought, yielding varied typologies of consumers of banking services and it remains unclear which are the most widespread benefits-based segments. This approach also does not adequately capture other important questions that are necessary to understand consumers of saving programmes such as who saves, why they save and whether saving is an important value among individuals. Such questions are usually addressed through psychological variables such as personality, motivation and personal values. Therefore, a more combined segmentation approach is required.

As shown in the reviewed literature, a considerable proportion of past studies relating to segmentation of financial markets have relied on one-dimensional bases of segmentation. As each base of segmentation has notable strengths and limitations, it therefore increasingly becomes logical for marketers to use the multi-dimensional approach that combines the various bases for segmentation in order to take advantage of the benefits that are associated with each base. The fundamental advantage of this approach is that it attempts to address and avoid weaknesses of relying on a single base of segmentation by combining different factors, which is critical in the development of effective marketing strategies (Harrison 1994; Piercy et al. 2012), and it increases the opportunities of ensuring the quality of market segmentation (Loibl & Scharff 2010; Wind 1978).

Relatively, limited studies relating to segmentation of financial markets have adopted the multi-dimensional segmentation relying on a combination of segmentation bases such as demographics and benefits, demographics and attitudes as well as demographics and financial sophistication. For example, a set of eight benefits were found to vary among different groups of consumers of financial services based on demographics such as occupation, education, gender and age (Minhas & Jacobs 1996). Benefits such as unlimited banking, accessible cash and advice were more appealing to young people who were either unemployed or occupy low-status jobs; and personal service was more attractive for those with fewer skills and education. Money management was a core benefit for those in the middle-age group with limited resources. Young, well-educated professionals, especially male professionals, were keen on full-service banking while investments were important for pensioners. Four segments emerged based on money attitudes and demographics, which were labelled as safe players, open books, money dummies and risk seekers (Keller & Siegrist 2006). The safe players are older than 65 and have positive attitudes towards personal financial security and saving. Safe players plan most financial matters carefully, keep proper records of their spending and perceive saving money as more important than spending. Open books are middle-aged and highly educated individuals who have low confidence and interest in financial matters, yet they tend to be keen to discuss their personal financial situations with others. Money dummies have attained vocational training and exhibited the lowest level of interest in stock markets, savings and financial security. Risk seekers have the highest levels of education, income, attitudes towards stock markets and are confident in handling money, but find financial security and saving money to be of less importance. Additionally, consumers of financial services were segmented on the basis of age and level of financial sophistication (Ansell et al. 2007). This yielded six segments labelled financially involved adults, moderately financially active adults, sophisticated early starters, financially moderate seniors, sophisticated middle agers and sophisticated late starters. These segments explained how the level of involvement with their personal finances differed among age groups.

The multi-dimensional approach of segmentation becomes critically important to academics and financial institutions as they seek to adopt more meaningful and reliable means of understanding personal financial markets. Therefore, in order to extend knowledge about market segmentation in the financial markets, a multi-dimensional segmentation approach has been adopted in this study. Specifically, the present study focusses on three demographic characteristics, namely, gender, age and income, and four psychographic characteristics, namely, personal values, attitudes, motives and perceived conditions of saving. Personal values represent enduring beliefs about the desirability of particular end states of existence (Kahle 1983). Attitudes are a function of beliefs and evaluations derived from feelings about consequences of a particular behaviour (Loibl & Scharff 2010). Motives are drives that compel people to act such as needs and desires (Devaney et al. 2007). Perceived conditions of savings related to people interpret problems associated with savings in the lens of market environment.

The present study offers a more comprehensive integration and a mix of variables from two segmentation bases usually applied (namely, demographic and psychographic). A consolidation of multiple variables is a justifiable attempt with important implications for research avenues such as who saves, why they save, how do attitudes predict saving behaviour, what conditions are associated with saving and is saving an important part of one’s life. Attitudes for saving money, saving motives and perceptions of financial knowledge have been studied as segmentation bases in personal financial markets in a single study at a time. However, personal values (also linked to psychographic variables) together with selected demographics have been rarely applied in studies of financial services and savers in particular and not considered in the context of Botswana.

Out of the 33 participants who were interviewed, 55% were male while 45% were female participants as presented in Table 1. A higher proportion of male in relation to female participants correspond to the general gender and labour statistics in Botswana (Central Statistics Office 2008). A majority of respondents within the male segment falls in the age category less than 30 years (39%), which is followed by those in the age group 30–39 years constituting 28% and in the age group 40–49 years constituting 22%. The male category is highly educated having attained either a bachelors (22%) or graduate degree (33%). The common income bracket for the male category is P15 000–P19 999 (22%). More than half of the male category is made up of those who are married (56%), have fewer than two children (20%) and are either employed or self-employed managers or work as professionals (44%). Within the female category, most participants were aged between 30 and 39 years (47%), followed by those less than 30 years (27%), with 33% having attained a diploma. The female category had a predominant representation of singles (60%), whose earnings range between P5000 and P9999 (40%). Most female participants were employed as professionals and managers (47%) and have two or fewer children (67%). For a more qualitative perspective of the characteristics of participants, see Appendixes 1 and 2.

The results relating to the personal values of male and female savers identified eight segments. Figure 1 shows that in the male category, there is a segment of young low-income earners (YoLI male segment). The YoLI male participants seemed to be saving in order to meet their personal values of satisfying basic necessities, having fun and generally enjoying life with some sense of belonging (family, religion, spirituality and caring for children). They mostly saved because they value the prospect of security and safety (own house, education, saving money, peace, retirement plans, the future), coupled with a sense of self-fulfilment (having a nice car, expensive clothes, assets accumulation, more money). Another segment of young high-income earners (YoHI male segment) place most emphasis on security and safety as well as a sense of accomplishment (career, farming, own business, health, personal freedom). To a lesser extent, the YoHI male segment also values satisfying basic necessities. The third segment of older low-income earners (OLI male segment) value satisfying basic necessities, security and safety and a sense of belonging. The fourth segment consists of older high-income earners (OHI male segment) who value security and safety (property ownership, saving money, education and good health) and a sense of belonging (family, children and education). To a lesser extent, the OHI male segment values self-fulfilment, a sense of accomplishment, as well as having fun and generally enjoying life. The most prominent values in the male category are security and safety (YoLI male, YoHI male and OHI male segments), self-fulfilment (YoLI male segment) and a sense of belonging (OHI male segment).

Similarly, four segments emerged in the female category. In this category, younger low-income earners (YoLI female segment) mostly value a sense of belonging, while security and safety is valued to a lesser extent. Another segment of younger high-income earners (YoHI female segment) was found to mostly value a sense of accomplishment. On the other hand, the older high-income earners (OHI female) segment mostly values a sense of accomplishment. To a lesser degree, the OHI female segment values a sense of belonging, self-fulfilment, and safety and security. The fourth segment of old low-income earners (OLI female segment) values safety and security, a sense of belonging and self-fulfilment. The most prominent values in the female category are a sense of accomplishment (OHI female segment) and a sense of belonging (YoLI female segment).

Overall, segments that are sizeable and stand out based on a combination of personal values, age, gender and income are the OHI male, OHI female, YoLI male, YoLI female and YoHI male segments. The OLI male, OLI female and YoHI female segments are poorly represented and are therefore small segments.

Six segments emerged on motives for saving. Four of these segments are in the male category. The results in Figure 2 reflect that in the male category, YoLI male segment seems to be motivated to save primarily by social needs. Accompanying needs of lesser motivation are safety needs (retirement, medical expenses, emergencies, unforeseen circumstances), self-esteem (education, personal goal, entertainment) and self-actualisation (own a firm, opportunity exploitation). The only motivation factor that drives the YoHI male segment to save is safety, and while this is also the only driving motivation factor for the OLI male segment, it is less emphasised in the latter segment. Lastly, the OHI male segment is motivated to save mostly by safety needs and social needs. While self-esteem and self-actualisation are also motivating factors for this segment, their importance is less emphasised.

In the female category, only two segments emerged, being the YoLI female and OHI female groups. The YoLI female segment is primarily motivated to save by safety needs. Social needs (children, education, future and family) and self-esteem needs are also motivational factors but to a lesser degree. In the OHI female segment, safety needs emerged as the key motivating factor with self-actualisation being less influential.

Overall, the segments that stand out and are sizeable based on the combination of motives for savings, age, gender and income are OHI male, YoLI male, YoHI male, OHI female and YoLI female segments. The OLI male segment is poorly represented.

In Figure 3, eight segments are identified based on the attitudes of savers. The YoLI male segment mostly believes that saving is a long-term investment. Even though it is to a lesser degree, they also believe that saving is a postponement of gratification that should be driven by some purpose and is to be cultivated at a young age. This segment further expressed mixed emotions about saving, showing that it is impossible while some perceive it as important. The YoHI male segment thinks that saving is security and that it is satisfying. To the OHI male segment, saving represents some commitment, and to a lesser extent, it also represents an investment, postponement of gratification and security. The OHI male segment also thinks that saving is important and should be encouraged at a young age, albeit with little emphasis on these latter beliefs.

In the female category, the YoLI segment believes that saving provides a sense of security. Some additional beliefs are that saving is a long-term investment, which requires personal responsibility that should be started at a young age. While the YoHI female segment had low representation, it perceives saving as a personal responsibility. The OLI female segment believes that saving is important and that is has a long-term orientation. On the other hand, the OHI female segment mostly believes that saving provides security and requires commitment. This segment holds several additional beliefs indicating that saving should be long term, encouraged at a young age and it represents postponement of immediate gratification. This segment also attaches mixed emotions towards saving denoting that it is impossible, not beneficial, while some evaluate it as exciting.

Overall, there are four significant segments based on the attitude of savers, age, gender and income, namely, the OHI male, OHI female, YoHI male and YoLI male segments. The other segments of OLI male, OLI female, YoLI female and YoHI female participants were poorly represented.

In Figure 4, eight segments are identified based on perceived conditions affecting savings. The YoLI male segment mostly perceives psychological variables such as youthfulness, current consumption and lack of financial literacy as fundamental for the poor saving culture. The YoHI male segment considers demographic and psychological variables such as lack of income and lack of financial literacy as instrumental in shaping saving behaviour. For the OLI male segment, factors that are perceived as instrumental in shaping saving behaviour include lack of financial literacy, high bank changes and social impressions about the value of subsistence farming. The OHI male segment seems to hold varied perceptions about the critical factors that influence saving. In particular, the OHI male segment reveals that saving is affected by a combination of factors such as lack of income, current consumption, lack of marketing communication and limited returns for saving.

In the female category, the YoLI female segment perceives marketing education and current consumption as key hindrances for saving while the OHI female segment perceives current consumption and limited returns as inhibitors of saving. For the OLI female segment, factors such as lack of income, lack of financial literacy, limited returns and lack of family training (socialisation) on saving are considered key inhibitors of saving.

All in all, five sizeable segments identified were the OHI male, OHI female, YoLI male, YoLI female and YoHI male segments. The other three segments of OLI male, OLI female and YoHI female were poorly represented and therefore not sizeable.