Who’s Your Most Profitable Member? It May Not Be Who You Think It Is
WRITTEN BY MARIA
Guest post written by Maria Del Amo-Lombardo, Director, New Market Development at Cathedral Corporation
This is a thought-provoking question and one that we pose to our customers all the time. There are several ways to measure your most profitable members. One of the most obvious ways is to look at overdraft or NSF fees on a monthly basis and see which members get hit the hardest by them. Sure, you are getting income from this, but what do these members really look like? Do they hold a small share account or have a single product with you? Is this the member segment that has had no interest in other products or services but generates a significant number of calls to your call center? Looking at all of these factors may lead you to wonder how profitable of a member segment this really is.
Another way to measure profitability is to consider the entire account relationship. What about members with larger share accounts, checking accounts, and loans? These members have shown the potential to use a variety of your products. Will you consider them profitable members?
The reality is that the old 80/20 rule applies here. 80% of your profits come from 20% of your members. The 80% are eroding your profits because of their low deposits, little incremental business, and your continued support of them. But see this as not a problem, but as an opportunity to incubate more profitable members. It’s worth the effort – increasing your profitable members by 5% could grow net income by nearly 40%.
