Products

Member Databases a ‘Gold Mine’

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

December 19, 2011
KEYWORDS data , loan , market , segmentation
/ PRINT / ShareShare / Text Size +

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.”

Next: Bad practices

Post a comment to this story

heroes

What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive