Delve into a Hot Market: Current Members

Joe Gillen, Pinnacle Financial Strategies
April 21, 2005

While many credit union managers stress the need for new members, it’s far more costly to acquire a new member than to retain and increase product use among current members. In fact, it takes 10 new members to make up the value of one lost existing member. The most effective way to increase profits is to consistently focus on uncovering, and attending to, current members’ needs and wants.

What credit unions may not know is that many members find that financial institutions don't focus on their needs or offer personalized service, even though these institutions have access to more personal data than most service providers. As a result, financial institutions experience lower levels of consumer satisfaction and loyalty relative to other industries. A credit union’s best member may not be giving the credit union all of its business.

Identify Valuable Members

To determine which members are the most profitable, credit unions must evaluate all aspects of the member at the account, individual, and household levels. By examining the products and services members use and the costs they create, credit unions can evaluate which member households on which to focus.

Many times, members who may appear unprofitable just haven’t been approached with the right services to suit their needs. When evaluating members, consider all aspects of demographics, such as family size, number of children, home location, and work location. By ignoring any aspect of a member’s lifestyle, a credit union could be missing out on a valuable extension of a member’s products and service use.

To grow and protect the bottom line, it’s important to:

· Retain more members
· Identify profitable members
· Convert more members to profitability
· Manage the member life cycle

Build Relationships

Credit unions strive to do what’s best for each member. Evaluating members helps credit unions provide valuable service and advice to members. Once a credit union has identified which members are the most profitable and which have room for growth, the key to capitalizing on that knowledge is relationship management.

Consistent and personalized member interaction makes members feel valued. As a result, members may become more active users of the credit union and more loyal to it. Developing relationships with members will make credit union employees better equipped to recognize and provide needed service solutions.

Return on Investment

While consistent interaction may seem labor intensive and costly at first glance, it’s a productive strategy for the credit union in the long run. Properly targeted marketing and communications efforts allow credit unions to maximize their return on investment.

Research shows that 10% of credit union members generate 150% of revenue for the institution. Many credit unions aren’t maximizing the profit potential of most of their member base. By adopting a member-centric business plan, credit unions will increase their revenue.

This article first appeared in Credit Union Magazine at www.creditunionmagazine.com. Joe Gillen is CEO of Pinnacle Financial Strategies, a Houston-based company that works with financial institutions. For more information, call 713-868-3333 or visit www.pinnaclefinancialstrategies.com.