Cut operational costs and still increase revenue

Cutting costs and improving efficiencies to grow operating income is imperative in a recession economy. Credit unions can take proactive steps to help marketing and sales teams be both more efficient and achieve better returns.

The key is to focus on existing members. Financial institutions can generate a 70% return on initiatives targeting existing members versus 10% when targeting new members, reports PWC. The firm says that “In a time where every bank is focused on revenue growth in a constrained and competitive environment, making smart choices with limited resources can provide a fast track to higher-margin growth.”

Why is this a winning strategy? First, it increases your primary relationships. Consumers report that during the COVID 19 pandemic, non-primary financial institutions did a better job of responding to their needs and 36 million consumers are considering switching their primary financial institution, according to PWC’s 2021 Digital Banking survey. The pandemic forced credit unions and banks to accelerate digital transformation plans to serve remote members and customers.

Yet, market share for regional and community financial institutions decreased in 2021. With pressure from large banks holding their strong market share, there are more competitors and choices that can provide digital financial experiences and products. Mid-market credit unions need to concentrate on growing business with existing members to prevent attrition and win primary institution relationships.

Secondly, growing wallet share by adding new products often shifts your income from that member from transactional income to fee income. By growing member wallet share by adding new products such as loans and investment products, fee income increases.

Third, it increases your return on the cost of member acquisition. It is common knowledge that member acquisition costs are higher for new members than for growing business with existing members. By its very nature, this strategy is a cost saving measure. And it yields more effective returns than efforts to win new members.

And last, but not least, focusing on existing members improves operational efficiencies for sales and marketing teams. A targeted approach that makes personalized offers to individual members based upon what they are most likely to need, is far more effective than a blanket approach.

Use First Party Data to Grow Wallet Share from Current Members

In order to grow wallet share from your existing members, you need to use first party data. The good news is that this is data you already have about your members. However, you need to make it useable by combining data from sources across your financial institution to get a complete 360 view of each member and use this wholistic data for analytics.

With AI-powered analytics, you can determine what is the “next best product” to offer each member based upon their transactional behaviors, an enhanced member 360 profile, and advanced propensity models and algorithms. Advanced predictive analytics mine your first party data and layer in other factors—such as geographic location, changes in financial channel use by a member, indicators of changes in employment or life altering events (like having a baby or retiring), an understanding of combined products and average wallet share per household—to calculate which of your products and services each member is most likely to need next.

Even two members having similar demographics (age, neighborhood, marital status, income range), who you might otherwise target together in the same campaign, often have very different needs that are revealed by mining transactional data. For example, the first member may have regular gas station charges, and auto maintenance transactions, indicating that he commutes and, depending upon other factors in the advanced analytical model, he might likely need an auto loan. On the other hand, his neighbor may have public transportation transactions, such as bus or rail company charges, or ride share expenses, indicating that she is not commuting by private automobile and less likely to need an auto loan.

Timing is everything when approaching a member with an offer. If he just changed jobs and you missed the window of opportunity to offer an IRA product, your member most likely has settled into a 401(k) with a new employer. Having fresh, near real-time insights empowers your marketing and sales teams to act when the opportunity is hot. Core reporting and dashboards reporting past performance do not deliver this type of actionable insight. Data analytics enhances offer timing for better return.

PWC reports that members are more likely to expand their relationship with an institution when a previous transaction is still fresh in their minds. Conversely, the greater the time between a transaction and a new offer, the lower the conversion rate. At approximately nine months, the conversion rate of offers extended to existing members is the same as that of new members. For this reason, it is critical for lowering member acquisition costs for your financial institution to have fresh timely insights for acting before the 9-month mark.

Using these insights revealed at scale for each of your members empowers targeted personalized messaging and approaches for your marketing and sales teams, which is more efficient and yields better returns. With this approach, your marketing and sales teams have data-driven, targeted strategies for growing wallet share resulting in higher returns.

It’s the tailored messaging in the targeted campaign that meets both the financial and emotional needs of the member, and that can improve the members’ perceptions of your credit union and the likelihood of conversion, according to PWC. We know that younger members are not impressed by physical branch locations or offerings. Consumers are accustomed to personalized offers from retail, and now they expect this of their financial institution. This personalized, customized approach, enabled by data analytics, will grow wallet share and increase your primary accounts.

Further, data analytics can provide insights on predicted lifetime member value, identifying who will be your most valuable members over time, so that your team can focus resources on growing those relationships. Returns on spending aimed at improving the lifetime value of existing members can reach 70%, versus 10% returns on spending directed to new member acquisition. Insights from data analytics empowers mid-market financial institutions to dig deeper into their local roots (act upon their local knowledge using personalized offers) and find ways to make their branch presence meaningful to a profitable segment of members. This local data, first party data, is not something that large financial institutions have. If harnessed, it can be a game changer for mid-market community institutions to grow market share.

During this high inflation or recession-like economy, credit unions can make marketing and sales operations more efficient and cut costs, while yielding higher returns. The key is using advanced predictive data analytics to mine first party data to provide insights for targeted, personalized offers that compel existing members to consciously offer up a greater share of their wallet to your credit union.

Katie Horvath

Katie Horvath

Katie Horvath is the Chief Marketing Officer of Aunalytics, Inc., a leading data management and analytics company delivering Insights-as-a-Service for mid-market businesses. Web: Details