LAKE MARY, Fla.—When it comes to onboarding new members, it isn’t just about identifying those likely to buy new products and services. Instead, it needs to be about identifying members who will be profitable contributors to the credit union, according to one analyst.
As part of CUToday.info’s year-long series called “100 Million Members: Now What,” Chris Braccia, director of product management with D+H, shares his thoughts in this Q&A examining why credit unions have been so good at adding new members, but not getting walletshare from those members.
Chris Braccia, D+H
CUToday.info: Why are credit unions so good at signing up new members, but then not capturing wallet share from those new members? Is there a flaw in the process? Training? Culture?
Braccia: Credit unions are always very focused on account acquisition, as it is the most difficult business challenge. Their budgets tend to be centered on the origination of new accounts, yet often times, the follow-up onboarding programs do not receive the same resource allocations, time or attention. Mass marketing communications typically generate responses from new members, but with analytical tools, credit unions should be focusing their efforts not simply on members likely to buy additional products and services, but on members who are also likely to be profitable.
Based on their heritage, credit unions are clearly focused on delivering fast, accurate and secure transactions to their members. Much of their branch and self-service infrastructure has been optimized in this regard. However, credit unions need to transform their branch and front-line personnel beyond transactional service excellence into a consultative sales culture. More and more of our credit union clients have made this leap, and we see steady progress of more on the way. An effective consultative sales culture builds on the credit union’s excellence in processing transactions, moving to an interaction model where credit union personnel uncover needs for leveraging analytics for targeted cross sales.
CUToday.info: In your experience, is the 80/20 rule still a rule (80% of members not profitable)? Do you have any insights into what the “80” is costing the average credit union?
Braccia: The majority of new members are, in fact, still not profitable in most credit unions. The degree to which the bottom 80% drag profits varies based on a variety of factors – product pricing, transaction volumes, channel usage, etc. The more important issue, in my opinion, is the percentage of single-service households. Many institutions have between 45% and 55% single-service households. Credit unions need to analyze the data to realize how many are households that have a single loan relationship together with a low-balance/low-transaction share draft account that was required to originate the loan.
Credit unions are sitting on a goldmine of organic growth opportunity. Many of these households have the potential to become a profitable household. With the proper analytics, the credit union can identify those members with the most profitability potential.
CUToday.info: Are credit unions capturing the data they need to have a full understanding of individual member profitability? Or do they have the data they need and it’s not either A) understood, or B) utilized?
Braccia: Many credit unions do not have the data necessary to understand their members and uncover opportunities. That is why they need to embrace business analytics and utilize third-party data sources to augment what they have in their core systems. Once a credit union aggregates all third-party systems, overlays behavioral models and adds profit assumptions, it can extract the information needed to affect the member interactions at the point of sale (branch, web, call center, phone). Successful credit unions today must commit to business analytics with dedicated staff who understand database research.
CUToday.info: What can be done to improve wallet share capture among new members? Existing members?
Braccia: Effective onboarding and or “reboarding” campaigns utilize business analytics to target members’ propensities to profitably use specific products and services, with monthly and/or weekly offers being delivered to the targeted new or single-service households. These interactions or messages can be delivered through traditional channels like the branch staff, call center, mail and e-mail, as well as self-service channels including – Internet banking, bill pay, mobile, VRU, ATM, etc.
By combining external business intelligence with their CRM and other front-office systems, credit unions can make improvements in cross-sales and profitability because the analytics will provide credit union staff with targeted product suggestions that have the greatest propensity for use by the member. Only products and services that will have a net positive impact will be offered based on the profile of the member.
Many institutions use profiling techniques to gain a better understanding of those members who have multiple products, high share of wallet and good profitability. Once the profile is established, the credit union can use the findings to identify members with similar profiles and target those based on the data. These profiling techniques coupled with powerful behavioral models are essential to develop segmentation schemes that will improve the share of wallet.
CUToday.info: What can be done to better align marketing, IT and management to address this issue?
Braccia: Credit unions today must drive execution of their strategic plan to the functional areas of information technology, marketing, retail delivery and the management team. The alignment of the overall financial goals can then be driven to the respective functional areas within the credit union supported by data analytics. The IT function can then support these functional business goals with the appropriate tools and processes for both analysis and execution.