No two members are the same: Member lifetime value, accurate predictions, and the importance of data
Your members are your local doctors and school teachers. They are the businesswoman walking down the side walk and the guy up the street stepping off his motorcycle. They are the husband and wife on the driving range and the high school student operating the ball collector that the couple is aiming at. As a credit union, your members are a smorgasbord of individuals, each of whom consists of a unique combination of demographic, psychographic, financial, and lifestyle attributes. It is this distinct combination that paints the picture of a real human, a member of your Credit Union with real emotions, behaviors, and tendencies. Simply put, no two members are the same!
The backbone of the Credit Union world and the differentiator from the “banking competitor” is the member-first mentality. Members first, profits second. It is this slogan that the entire industry was built on and is what appeals to over 100 million Americans today. But what if the two variables, members and profits, could go hand-in-hand? What if a better member experience could in turn be more cost-efficient? What if understanding, and appreciating, member differences could increase loyalty and revenue? Guess what – it can and it does.
Member Lifetime Value (MLV) is the best of the two worlds. It is a recognition that no two individuals are created equal and that gaining a thorough understanding of the variations among your members allows each Credit Union to gauge how much to properly invest in each one; bettering experiences and more efficiently allocating time, money, and resources. By definition, it is “the prediction of net profits attributed to the entire future relationship with an individual member”. In practice, it is an understanding of how to, and when to, properly interact with the human.
New digital technologies allow Credit Unions to approach members with accuracy and precision. But knowing how to advertise a HELOC on Instagram or emailing out a “1.99% APR auto loan” deal is much different than knowing who to target, when to hit them, and with what specific offer(s) they would be most interested in at that given time. This difference is exactly how member experience and profitability go hand-in-hand. By focusing on the member need and timing rather than the immediate channel results, you, as a Credit Union, have a higher chance of getting individuals to invest in a loan, stay a member longer, and generate more referrals. In fact, returns can include 2x lead conversion rate, 4x campaign engagement rate, 1/3 total spend, and 5x lead generated volume.
Here’s the catch: your MLV game plan is only as good as the accuracy of your predictions. You may think Jane Doe needs mortgage refinancing and John Smith looks like he could be in the market for a new car, but a Credit Union’s ROI is directly correlated with the accuracy of their game plan. Whether prospecting, cross and up-selling, or campaigning to avoid member churn, MLV and member-experience-profit-generating game plans stem (or at least should) from predictions. Predictions can be theoretical and “hunch”-based (in this case my fingers are crossed for you) or data-driven and model generated. As the sophisticated organizations are investing in, predictive modeling, built upon massive amounts of data create the most accurate and efficient action. It’s not rocket science… it’s data science!
Time to bring it all full circle.
As mentioned above, your members are real humans with real emotions, behaviors, and tendencies. They are a unique combination of demographic, psychographic, financial, and lifestyle attributes. Investing in data associated with these attributes allows for a better understanding of your members, both individually and collectively. A better (data-focused) understanding of the member can generate more accurate predictions and models which creates customized MLV game plans. Projects and campaigns that are accurately timed, appropriately communicated, and tailored to the individual lead to better member experiences and increased profitability. All of this can happen because no two members are the same, so don’t market to them as if they are.