Segmentation Sparks Growth and Member Loyalty

Data analysis tailors marketing messages to the most receptive members.

March 22, 2014

Data analytics is a long-term strategy, according to a white paper from The Members Group (TMG), Des Moines, Iowa.

Analysis aids segmentation, which has quickly become the magic word in credit card marketing.

The goal is to get the right offer to the right cardholder at the right time, in a manner that’s most profitable for the portfolio and creates long-term loyalty among cardholders.CU Directors Newsletter

Data analytics isn’t reinventing the wheel, but rather reshaping it among credit unions such as $1.7 billion asset Spokane (Wash.) Teachers Credit Union (STCU).

Russell Palmer, STCU’s card services manager, became a proponent of business intelligence while working at a national bank. But he entered his new position without an instinct for card management, which made him keener to understand the credit union’s portfolio.

“Data analytics was my answer to getting up to speed quickly, and it has worked extremely well,” Palmer says. “We’ve learned more about our cardholders and our portfolio than we’ve ever known.”

Among the questions Palmer asked:

  • Why did the credit union consider only FICO scores when extending credit line increases?
  • Why was the same amount extended to every cardholder?
  • Were some cardholders offended by the small-dollar extension?
  • Did others who received the extension use it in a way that put themselves or the credit union at risk?

With input from IQR Consulting, TMG’s data analytics partner, Palmer’s team looks at factors such as delinquencies and write-off histories to build out more robust exclusion criteria. Armed with data and predictive analytics, Palmer’s team secured leadership buy-in to nearly double the amount of credit line increases.

“We were able to show that extra line extensions were extremely calculated risks,” Palmer says.

After a 12-month period, growth of STCU’s credit card portfolio balances stood at around 18%, compared with the historical average of 7% annually.

This article initially appeared in Credit Union Directors Newsletter, which provides strategic insights for policy makers. Subscribers can choose to receive the print edition or PDF version.