Seven Ways to Get the Most from Your Database

Nick Bengel, Credit Union Magazine
May 7, 2007

Many credit union managers say, "I know who my members are. They're military personnel, teachers, college students, etc." They define members by their select employee groups or the people they see the most at branches.

But do they know:

• How many members are single-service-only members?
• What is their members' average household income?
• How much members' houses are worth?
• How members transact business with you--in person, via automated teller machine (ATM), online, or all of the above?
• Who are your most active members?

The answer to these questions are right in the member information you already have.

Database marketing, simply put, is a way to understand your members' needs and behaviors. It's as much an art as it is a science.

The first rule of database marketing: Use the database! Many credit unions don't know what a gold mine of data they have. Whether you use your core system or something more tailored toward marketing such as Touché® Analyzer, the goal is always the same: understand your member.

Here are seven ways to get the most from your database:

1. Address hygiene.

The key to any database is the accuracy of the data that goes into it. You must have good address information for your members. But not all member data is entered the same way. In Aberdeen Proving Ground Federal Credit Union's database there are 20 different ways to spell "Baltimore." There are many service bureaus or core processors that can take your address files, reformat them, and correct the addresses to U.S. Postal Service standards.

2. Segment.

Not all members are created equal. Two members with similar accounts can be totally different. To increase your success you have to divide members into segments, usually based on demographics, such as age and income. Or segment them by behavior (i.e., online members vs. those who use branches or ATMs).

3. Profitability analysis.

Which member is more profitable: one with five share certificates who visits the branch once a week or the member with a checking account who uses a debit card, bounces three checks a year, and never goes to the branch?

The latter member is more profitable but we rarely thank them for their business. Also, credit unions can identify such members and provide needed budgetary advice.

A profitability analysis can be simple (i.e., account balance times rate plus fees), or a fully allocated analysis run by the accounting department. Either way, you'll have an idea of which members truly drive your profitability.

4. Profiles.

Profiles of products or member segments allow you to spot trends or catch problems before they get worse. Product profiles can be as simple as total balances, total accounts, household penetration, and retention rates. Member profiles can show you account use, average income, age information, or cross-sell potential. You are limited only by the data you have available. Benchmarking data from the Credit Union National Association or Raddon Financial Group is helpful.

5. Tracking and measurement.

No marketing campaign is complete without a full analysis of the results. Review not only how many members responded, but why they responded and what you could do differently next time. Don't forget about indirect responses: If you're mailing for an auto loan promotion, did any members take out home equity loans instead?

6. New money.

You've had wonderful growth with a great share certificate promotion. But how much of that money is churning and how much is new? Use transaction data to track the movement of money between accounts, or monitor the monthly change in total deposit balances. For example, say a member opened a new certificate and had a $10,000 balance with your credit union last month. If they have a $15,000 balance this month, you can reasonably assume $5,000 is new money.

7. Next best product.

Use your database to determine product/service use in each member segment. Then, using a profile of those members, find other members within the segment that are similar (i.e., same age, income, balances, etc.). This is their Next Best Product. Branch staff now can use this information, or you can tailor a marketing piece to this group.

Nick Bengel is research and development director for Aberdeen (Md.) Proving Ground Federal Credit Union. This story appeared on www.creditunionmagazine.com and is reprinted with permission.