Member Databases a ‘Gold Mine’

Mining member records helps CUs unearth a treasure trove of data.

December 19, 2011
KEYWORDS data , loan , market , segmentation
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Rich Weissman makes no bones about what he sees when looking at most credit union membership rosters.

“Credit unions don’t fully appreciate that their member databases are gold mines that can generate new sales, help acquire new members, and boost the bottom line.”

Weissman, president/CEO at DMA Corp., is talking about “matrix marketing,” the sci-ence—and art—of understanding the marketing insights to be gained by taking a closer look at data segments.

“Eighty percent of credit unions either don’t segment or use obsolete segmentation schemes,” he says. “There are hundreds of segments within a typical credit union’s membership.”

For instance, Weissman says members’ channel preferences constitute different segments—text, phone, website, ATM, teller, mobile device, and email. The medium matters because the messages must be geared toward individual members and their comfort zones.

“Credit unions often ask, ‘What about our current members versus seeking new markets?’” says Tony Rizzo, creative director and general manager at MARQUIS. “On the lending side, we can tell a credit union which members have loans or account balances elsewhere. We might say that for every $1 you have in member loans, there are $10 in loans to them elsewhere. That allows us to say that you could grow your loan portfolio up to 10 times without gaining even one new member.”

Market segmentation experts can tell clients where borrowers are and when they’re bor-rowing. “We can take a prospect list and see who has applied for credit within the past 24 hours,” says Rizzo. “Say Joe applies for an auto loan with Bank of America. We alert his credit union right away and send a letter to him telling him his credit union can offer a better deal. The gap between member action and credit union response is reduced to only a few hours.”

Weissman says the key to success with segmentation is attention to detail. “Most credit unions look for averages when segmenting members. But just as you wouldn’t apply your average FICO score to every member, you have to look at each member as an individual.”

MARQUIS creates a detailed profile of every member—something he says 99% of credit unions don’t do. “We look at deposits, fees, ATM and debit card use, preferred channels, and more,” Rizzo says. “What are the costs of serving each member?”

Cost is important because most members don’t contribute to profits, he continues. “Generally, the top 10% generate earnings. The rest aren’t profitable because the products they buy are unprofitable. Selling more doesn’t necessarily mean more profit.”

Only one or two products might actually be profitable, and the members who purchase those by default become a credit union’s best members.

“A supermarket’s most profitable items are bread and eggs,” Rizzo says. “People who buy those are the store’s best customers while, ironically, those who buy baskets full of other groceries can be a drain on the bottom line.”

Consider “profitability by generation,” Weissman says. “Many credit unions are profitable only because of baby boomers and their parents. When it comes to Generations X or Y, a credit union might offer something like free checking. But that doesn’t work.”

That’s because younger people typically are heavy transactors who carry low balances. “They cost money,” Rizzo says. “So, what’s a better way to approach them? A credit union in Minnesota began targeting Gen X and Y with auto loans. Members of that demographic do borrow, specifically for cars. The credit union turns a profit with that product—an example of reaching segments ripe for being approached with the right product.”

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