Do you know the value of your member data?

When credit unions begin to look at using member data to improve their marketing, there are a wide variety of options to which they can apply their data. As exciting as this is, it is also a little daunting for credit union leadership who aren’t quite sure how to evaluate the value of their member data when applied to marketing.    

There are several categories of marketing applications for credit union leadership to consider when they begin using their member data. Each category drives increased revenue (value of the member data) for the credit union; each targeting a different aspect of their members’ relationship with their institution. These applications not only have a unique set of activities to generate revenue but there are expenses associated with each that include technology and marketing.  In addition, there are organizational factors that impact leadership’s decision to ultimately use member data that we will address later.

For Justin Howard, President of Horizon FCU, an $81 million credit union, investing in the use of their member data is not a tough call. The real decision is how to leverage limited resources to take on a project with this scale and complexity.  “Ideally as a smaller credit union, I need to implement my data strategy at a set pace, where we can simplify our systems and expand the sales aspect of our organizational culture.” With this long-term perspective it’s critical to have a strategy; including objectives and success criteria for launching marketing programs using your member data.  Having a strategy with interim milestones will make going through the implementation process much easier.

Before getting started it’s important to validate the value of your member data relative to the cost of your implementation strategy.  This will begin to provide credit union leadership an estimate of the size of the marketing opportunity using member data. This estimate helps provide a set of assumptions for building a realistic member data strategy, with budget and personnel requirements. Generally speaking, the process for accessing the value of your member data comes from the following steps:

1. Determine the marketing options you will initially be using with your member data.
2. Estimate the new accounts that will be generated from these activities.  
3. Calculate the incremental revenue generated from these activities.
4. Identify challenges/expenses to implementing member data marketing; including the expenses for collecting/analyzing member data and for implementation of marketing campaigns.
5. Evaluate performance measures for your proposed member data marketing activities.

If you are working with a technology/marketing services partner they can provide you with an initial assessment structured like the one above before launching your member data project.  The detail can range from a back of the envelope assessment to one where they will download your member file to learn more about the specifics of your member base. Getting started on the process; the first step is to look at the various member data marketing options for your credit union.  

1. Member Data Marketing Options

Here are some areas where the application of member data can improve your marketing performance and as a consequence grow revenue.  

Member Cross-Selling Activities.  These marketing activities focus on generating additional revenue by increasing the number of accounts per member.  Some of the media these cross-selling activities use include; direct mail, email, online messaging, and branch selling by member facing personnel. Many credit unions have a cross-selling program specifically targeting new members, these are called onboarding programs. There are also ongoing behavior based programs that are automatically triggered by individual members’ banking actions.   

New member acquisition campaigns. The objective of this group of marketing activities is to bring new members to your institution.  For the most part these activities use the same media as cross-selling; however, many times a broadcast, print, or location based media (billboards) can be used in conjunction with more targeted media.  Targeting can be accomplished using member demographics, profitability or location.

Enhancing the Member Experience. These activities focus on increasing the loyalty of your members; with the objective of keeping them in place. This can be accomplished in a proactive manner by providing programs such as loyalty rewards programs or special promotions rewarding member loyalty. It is important that the messaging be consistent across all channels.   Being multi-channel provides members with a sense of trust and confidence that your institution is always listening to their feedback.  

Channel Performance Management.  In credit unions that have multiple channels for the distribution of sales and service; each channel’s effectiveness can be measured and strategy adjustments made across multiple dimensions using member data.  The parameters that are measured usually include; sales effectiveness, product productivity and the overall profitability of the channel.

Marketing Strategy.  Your marketing strategy is a section of the business plan.  It outlines your overall game plan for how you’ll find, attract and retain members to your credit union.  Your marketing strategy focuses on what you want to achieve for your credit union (goals) and the marketing applications. A marketing plan details how you’ll achieve those goals. While this strategy directs the more tactical marketing components above; we included it in this discussion because of the importance member data plays in pulling your marketing strategy together.  

2. Incremental accounts generated from your member data.

The more details you are able to identify from your member base the more accurately you will be able to estimate new accounts. For example; demographics, account type combinations or length of CU relationship can provide insights into possible future marketing campaigns; increasing the accuracy of your estimated number of accounts.  

There are several industry averages available that you can use as surrogates for information that is difficult to estimate. If possible you can improve the accuracy of these averages by adjusting them with information that you do know.

3. The incremental revenue generated from your member data.

Once you get a total count of all the types of estimated new accounts generated you can apply a calculation to determine the revenue that will be generated from these new accounts.  You can look at the opening balances and transactions (if applicable) of current accounts to use with the net operating spread of your institution as input into your revenue calculation.  If you are having trouble with this or any other of the five steps please feel free to send me an email (fkoechlein@EmpowerYourAnalytics.com) and I can walk you through the calculation.   

4. Expenses to implementing member data marketing programs.

For each category of member data marketing options there are expenses related to data collecting, analyzing and marketing activities.  In addition, there are additional considerations that impact your institutions ability to implement member data marketing that are not as easy to quantify, these include; available personnel resources, resident expertise and culture/organizational barriers. For now let’s just work with the factors we can quantify and look at the others later.

Data Collection/Analyzing.  These costs include those associated with the identification, collection, formatting, analyzing and finally the development of member data insights and marketing opportunity assessment and ranking. These costs can vary widely depending on the data you capture, how you warehouse the data and the tools you use to analyze your data.  

Since we are starting with the application of your member data to improve marketing this will limit the scope of the data that needs to be collected and analyzed.  This makes it easier to get your project started and you can always expand it at a later time after you’ve successfully launched your member data marketing. There are data marketing services available that will collect, format and provide prebuilt analytics at a reasonable cost (as well as run your marketing campaigns).  For example a $250 million asset size credit union can expect to pay $10,000 to $12,000 per year for this type of service.

Marketing Campaign Costs.  These costs include all your out-of-pocket marketing campaign expenses.  These can include expenses for email, snail mail/postcards, outbound calling, individualized online messaging and any other individual member media expense.  Since there is a lot of variation between the costs of media and the possible strategy to contact some members more than once during a campaign you can use a “plug” number until you develop specific campaigns. Once you have specifics your ad agency or marketing services company can provide you with some more definitive numbers.   

5. Performance measures for your member data marketing activities.

This is where we pull the information together from the first four steps and determine if using member data is a cost effective strategy for your institution.  To recap; so far we have decided on the types of marketing activities we will initially pursue with our member data; we have also assigned incremental revenue to these activities; and the expected cost to carry out these activities. With this information we can now create a performance measure by which to compare these data marketing activities to other new business activities conducted by your credit union. Traditional performance measures include a return on investment (the additional revenue as a percent of the costs incurred) and breakeven analysis.  

The breakeven analysis is more of a “reality check.”  With this measure we can look at the number of new accounts we will need in order to cover our expenses.  Breakeven in 18 months is typically a standard time period to use for this measure. If the number of accounts required to break even relative to the marketing options chosen seems too unrealistic two possibilities exist.  First, our assumptions might not be accurate or second, using member data with these applications might not be the right option for your institution.

Organizational Challenges to using your member data

There are instances where the use of member data as detailed above might not be the right strategy for your credit union.  The first instance is that your member base is not large enough to absorb the additional cost of implementing member data marketing.  Of course, it is not a black and white decision; using your member data can be done in degrees. For example, one possibility is to simply use available member data from your “core” system.  While this greatly limits your marketing options it can also significantly reduce your expenses.

There are also organization/cultural challenges for credit unions when they begin to use their member data to drive marketing. Any data analytics strategy without broad leadership support will almost always end up stuck in the mud. As Sarah Cooke, Principal at Cooke Consulting Solutions explains “Support means direction from the top down; having a strategy, being able to communicate that strategy to the organization and then identifying the right people to execute the strategy.”   It’s critical that project leaders/advocates ensure managers at all levels and in all departments fully understand the payoff, because implementing a marketing analytics strategy is a process that involves both scale and effort.

At many credit unions, for member data to become an integral part of their marketing requires a significant shift in their institution’s culture.  “This shift is driven by your associates viewing (and using) member data in marketing decision-making and it typically occurs as a slow evolution. I’ve seen credit unions 3 to 4 years into a data analytics strategy and they are still just scratching the surface” says Cooke.  

This means the credit unions who are currently not using member data will want to develop an implementation strategy that’s big in its long term potential, but one that provides interim milestones based on the reality of their available resources.  There is a danger in trying to build it all at once; missed target dates will have many on your team, questioning the validity of the strategy. Understanding these internal factors can help leadership better manage and meet their team’s expectations for building and using this new member data functionality and significantly increase their chances for success.