Can credit unions overcome direct mail’s 2% problem?

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Two recent direct mail campaigns are showing credit unions can still make a splash in an old-fashioned marketing medium – provided they put a modern twist on it.

Overall use of direct mail is falling because of the costs required to launch such a campaign. Instead, management teams are turning to more efficient digital channels to promote their brands.

But that could be a mistake, experts said. If done well, direct mail campaigns can leave a memorable impression on consumers.

“I know digital is far less expensive and can be communicated more frequently,” said Doug Strickler, founder of Hot Inc., an Atlanta-based marketer. “People are so overwhelmed these days, whether it’s on their phone or their laptop … I know it seems old-school, but if it’s creative and thoughtful in its design and messaging, we are giant believers that direct mail can succeed.”

Massachusetts-based Hanscom Federal Credit Union, a $1.4 billion-asset institution, turned to this type of advertising last year to get the word out about its expansion into Littleton, Mass.

According to Amanda Delorme, database marketing manager, residents there are “very into green living and shopping locally,” so the credit union attempted to create a mailer that fit those values. Working with Hot Inc., the credit union came up with an over-sized mailer printed on seed paper that could be planted in the ground to grow flowers. While the mailer was intended to introduce locals to the credit union, those who brought it into the branch also received a $10 gift card to a local nursery.

Hanscom mailed the piece to all 4,925 homes in Littleton and in turn handed out 79 gift cards, a 1.6% response rate. That’s a reasonably solid result for a direct mail campaign, though not exceptional, according to several experts.

Delorme said because the branch only opened last June it’s tough to tie the campaign to new business, but by year-end deposit balances there were at $330,000 while loan balances stood at $378,000. The campaign also recently earned a Diamond Award from the CUNA Marketing and Business Development Council, though it placed in the “brand awareness” category rather than “direct mail.”

Jason Lindstrom, CEO of Portland, Maine-based Evergreen CU and chair of the CUNA council, noted that while his own credit union moved away from direct mail about five years ago in favor of digital channels, “there are credit unions that invest a lot of money into it,” though that number appears to be declining.

“We get close to a 20% open rate on all the emails we send out and it doesn’t cost us anything to put it together,” he said, noting that direct mail requires CUs to design the materials and spend money on postage “and the thing ends up in the packet of junk mail everybody throws away anyway.”

Breaking through

Strickler suggested direct mail offers credit unions a chance to break through in a way marketing via digital channels doesn’t. The catch is following up, he said.

“We didn’t do any follow-up with Hanscom, but typically you need three messages over X amount of time – maybe 10 to 12 weeks,” he said. “Your success rate of going above 2% [response rate] goes up significantly if you drop three pieces in the mail versus just one.”

Frank Allgood, relationships and results leader at Your Marketing Co., a South Carolina-based firm that works primarily with credit unions, noted that while direct mail usage overall is on the decline, “if fewer banks and credit unions are going the direct mail route, that is an opportunity you might be able to exploit – but you have to do it well.”

Despite the comparative ease of marketing via digital channels, Jen Joly, vice president of marketing and sales operations at Magid, a Minneapolis-based market research firm, suggested direct mail is actually experiencing a resurgence.

“Think about the mailbox versus the inbox – people’s inboxes are absolutely flooded,” she said, adding that with something tangible that comes in the mail, “it’s not so easy to ignore like you can do with your inbox.”

It’s also a medium where financial institutions with limited budgets – which may not be able to afford video or flashy digital marketing – can still make a splash.

“It’s an attractive tactic to deploy because of the cost of execution,” she said. “It’s hard to compete in the digital space unless you’ve got the money and resources to really make something flashy and attractive.”

The 2% problem

The key to a successful direct mail campaign is utilizing data to segment those communications so they wind up in the right consumers’ hands, Allgood said.

“There’s still this fear of sending something to a prospective member – that it’s just dollars wasted and they don’t really see the return on that – and a lot of it has to do with them not segmenting their list and the messaging is wrong,” he said.

That was part of the strategy of Whitefish, Mont.-based Whitefish Credit Union. While many organizations struggle to get past a 2% response rate to direct mail, the CU easily surpassed that by delving into member data to better target its mailers. That strategy earned it “category’s best” in the direct mail category at this year’s Diamond Awards.

The $1.4 billion-asset institution wanted to increase usage of its credit card, a no-frills offering with a low 7.9% fixed rate and no fees. Whitefish used data showing that many consumers ages 25 to 50 are more likely to carry a credit card balance, live in two-job households, have a need for access to credit and may be paying the national average interest rate after an introductory rate on another card expired.

Whitefish then pre-approved select members and split them into two groups at random, sending one group a high-tech video mailer in a padded envelope that contained a small screen and played a video when opened. The other group received a more traditional piece of direct mail.

The video mailer received a 6.8% response rate and resulted in $1.3 million in loans – well over the $400,000 the CU had targeted. The more traditional piece saw a 4.9% response, “which is still pretty high, and we attribute that to the targeting we did,” said Josh Wilson, vice president of marketing.

“If we sent an offer to somebody, we’re not blasting it out,” Wilson added. “That’s where a lot of institutions [run into problems]. They’re doing an every-door direct mail ... but if you do that often enough you become part of the noise and part of the trash that accumulates within your daily box. If you only send offers when they’re extremely relevant, they’re more likely to at least open it up, and that increases if you’re a member within that organization.”

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