By Ray Birch
PHOENIX—A credit union doesn’t always need a full-blown educational campaign to improve cardholders’ spending habits. Sometimes, just a simple, common-sense message can do the trick.
Arizona Federal learned that lesson following a recent experiment in human behavior. The $1.5-billion CU partnered with Doorways To Dreams and the Urban Institute to test whether a simple “rule of thumb” message could influence the spending habits of cardholders who carry a balance.
CEO Ron Westad said the experiment was enlightening, both in what it taught the credit union about member behavior and what it showed the CU it can do with limited marketing or educational programs.
“The results indicated that rule of thumb messages can be effective in influencing cardholder behavior and that these messages can be delivered at a very low cost,” said Westad about the study that was conducted for six months during 2015. The study was funded by the Consumer Financial Protection Bureau.
The two rule of thumb messages used by AFCU were: “Don’t swipe the small stuff. Use cash when it’s under $20,” and “Credit keeps charging. It adds approximately 20% to the total.”
Similar Impact
Westad said both messages had similar effects, lowering cardholders’ average balances by around $100 a month, compared to balances prior to the study. The “don’t swipe the small stuff” message proved to be most effective. Those who received that message, on average, had $104 less in revolving debt and their balances were 2% lower than their baseline average.
“While I have to say that the member savings from the effort were modest, we learned that we could influence member behavior with a simple rule of thumb message,” said Westad. “We go through extensive marketing and financial education efforts for the benefit of our members, so we were interested in seeing if we could move member behavior materially through a shorter, targeted message. We learned that we could.”
Westad noted that the experiment has added another tool to its marketing arsenal—the shorter, targeted, less expensive marketing message.
Ron Westad
The messages were delivered to two separate study groups, one group receiving the “don’t swipe the small stuff” message, and the other the “credit keeps charging” note. Each study group had four control groups—one that received no message at all, one that received the message via e-mail, one that received the message via an online banking banner ad, and another that got the note via a refrigerator magnet mailed to their home.
Younger Cardholders Influenced
Westad said the experiment also revealed there was little difference in impact between the different methods of message delivery. However, the study showed that younger cardholders were more likely to be influenced by the messages.
By participating in the program, Arizona Federal also hoped to learn more about conducting a marketing study.
“We wanted to gain insight into the rigor and discipline of the analysis the Urban Institute was going to apply,” said Westad. “We benefitted from working with them side by side—we learned the questions to ask, how to isolate control groups, how not to contaminate a control group. Next time we want to do analysis on a marketing campaign we are better equipped to do that.”
But perhaps the biggest reason to do the study, said Westad, was helping members improve their finances.
“You might wonder why you would send a message to your members telling them to use their cards less,” said Westad. “But our mission is to improve the financial lives of our members. We want to grow our loan portfolio, but do that responsibly. We’d love to lower our members’ cost of debt, or—ultimately— help them become debt free.”