Tools of the Trade

Member Databases a ‘Gold Mine’

Mining member records helps CUs unearth a treasure trove of data.

December 19, 2011

Rich Weissman makes no bones about what he sees when looking at most credit union membership rosters.

“Credit unions don’t fully appreciate that their member databases are gold mines that can generate new sales, help acquire new members, and boost the bottom line.”

Weissman, president/CEO at DMA Corp., is talking about “matrix marketing,” the sci-ence—and art—of understanding the marketing insights to be gained by taking a closer look at data segments.

“Eighty percent of credit unions either don’t segment or use obsolete segmentation schemes,” he says. “There are hundreds of segments within a typical credit union’s membership.”

For instance, Weissman says members’ channel preferences constitute different segments—text, phone, website, ATM, teller, mobile device, and email. The medium matters because the messages must be geared toward individual members and their comfort zones.

“Credit unions often ask, ‘What about our current members versus seeking new markets?’” says Tony Rizzo, creative director and general manager at MARQUIS. “On the lending side, we can tell a credit union which members have loans or account balances elsewhere. We might say that for every $1 you have in member loans, there are $10 in loans to them elsewhere. That allows us to say that you could grow your loan portfolio up to 10 times without gaining even one new member.”

Market segmentation experts can tell clients where borrowers are and when they’re bor-rowing. “We can take a prospect list and see who has applied for credit within the past 24 hours,” says Rizzo. “Say Joe applies for an auto loan with Bank of America. We alert his credit union right away and send a letter to him telling him his credit union can offer a better deal. The gap between member action and credit union response is reduced to only a few hours.”

Weissman says the key to success with segmentation is attention to detail. “Most credit unions look for averages when segmenting members. But just as you wouldn’t apply your average FICO score to every member, you have to look at each member as an individual.”

MARQUIS creates a detailed profile of every member—something he says 99% of credit unions don’t do. “We look at deposits, fees, ATM and debit card use, preferred channels, and more,” Rizzo says. “What are the costs of serving each member?”

Cost is important because most members don’t contribute to profits, he continues. “Generally, the top 10% generate earnings. The rest aren’t profitable because the products they buy are unprofitable. Selling more doesn’t necessarily mean more profit.”

Only one or two products might actually be profitable, and the members who purchase those by default become a credit union’s best members.

“A supermarket’s most profitable items are bread and eggs,” Rizzo says. “People who buy those are the store’s best customers while, ironically, those who buy baskets full of other groceries can be a drain on the bottom line.”

Consider “profitability by generation,” Weissman says. “Many credit unions are profitable only because of baby boomers and their parents. When it comes to Generations X or Y, a credit union might offer something like free checking. But that doesn’t work.”

That’s because younger people typically are heavy transactors who carry low balances. “They cost money,” Rizzo says. “So, what’s a better way to approach them? A credit union in Minnesota began targeting Gen X and Y with auto loans. Members of that demographic do borrow, specifically for cars. The credit union turns a profit with that product—an example of reaching segments ripe for being approached with the right product.”

Next: Bad practices

Bad practices

Email is an area fraught with misconceptions, says Ron Daly, president/CEO at Digi-talMailer Inc. “Credit unions should look at how they do emails now and how they segment. Just blasting generic emails to everyone doesn’t work. What data are they using to differentiate the messages? Age? Location? A particular product and the demographic it most appeals to? They need messages that are almost custom-designed appeals.”

Daly tells credit union clients email isn’t free. “It’s not free because misconceived email can cause members to quit paying attention or become irritated at receiving messages they consider irrelevant. That’s when members don’t listen anymore—they see your emails as noise so you lose potential sales. That’s where email becomes very expensive.”

On the upside, Daly tells clients “data is everywhere and it’s pretty cheap. For example, one of our clients was planning to open two branches. Easily obtained data allowed the client to learn about area residents in terms of home and car ownership, level of education, and income. After determining which of the 33,000 nonmembers in the area were the best prospects, the credit union went after the top 6,000 using targeted marketing.”

Rizzo says credit unions make three mistakes with segmentation marketing:

1. Focusing on art rather than content. Don’t get mired in design and lose valuable time and energy.

2. Forgetting to track results. Don’t have the attitude that, “We got the marketing piece out; we’re done.” If you don’t track, you don’t know.

3. Rushing into social media. “I don’t see the business case that justifies expenditures on social media,” Daly says. “The concept of social media is to create community—a place to be social. Nobody wants to be social about money.”

What vendors deliver

Weissman says many credit unions are “overwhelmed” at the scope of matrix marketing. That’s why DMA stresses three things to clients:

  • We do the work for them. They don’t have to have the IT power. We do the setup, data analysis, program design, and operation.
  • We tell them this isn’t just another marketing campaign. It can lead to beneficial cultural change in terms of their member relationships and how they view profitability.
  • They must focus on the segment and the fundamentals of profitability. It’s not about squeezing every possible cent out of every member, it’s about establishing long-term, profitable relationships because you know how to approach your segments.


After looking at a credit union’s data, a vendor will come back with recommendations. “We’ll say, ‘Here’s your branch market, current and prospective,’ ” says Rizzo. “Where the credit union might put a circle around a branch to indicate market area, we might say ‘Your territory goes down to the river here and to the base of those hills there.’

“Here’s where your competitors are, here’s the potential loan market, and here’s your current share,” he says. “With figures like this, you can set realistic sales goals: ‘There’s a potential $400 million mortgage loan market; let’s go after X% of it.’”

Once a credit union better understands its segments, it can hone its messages. “We set up a template based on data the credit union gives us—images, greetings, salutations, language,” says Daly. “We tailor offers to recipients’ financial abilities. For instance, loan offers are based on how much credit would be available to a recipient and illustrated with a typical purchase that credit would allow.”

In another offer, a credit union sent 4,000 emails to members likely to want new cars. It said: “Move your current car loan to us and we’ll pay you $200.”

That offer generated 247 responses, says Daly, “so the next emails to car prospects em-phasized that offer. That was the “trigger.” You start down one path and see what people respond to the most—the trigger—then head down that path thereafter.”

True matrix marketing involves working your database to the nth degree and shedding stereotypes about members, Weissman says. “Understand how many segments you have, and let that understanding become the basis of your culture.”