Counting On Tellers To Drive Income? That’s A Mistake, Says Analyst

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COLUMBUS, Ohio — Counting on tellers to drive long-term income is a short-term mistake with long-term consequences, according to one person.

Jeff Rendel, president of Rising Above Enterprises, said credit unions have cut all they can during the recession, and that cost-cutting has reached its limit. Many are now seeking to bolster the bottom line by driving income long-term. But the strategy has a flaw, he told the Ohio CU League's annual meeting.

Rendel explained that CUs' number-one goal right now should be to ensure the right people are in the right positions. With cross-selling existing members to deepen relationships one of the biggest growth opportunities, Rendel said credit unions have to have skilled sales personnel.

Real Skills Needed

The head of the Corona, Calif.-based consulting firm said that relying on tellers for cross sales is a big mistake. "Credit unions will drive income through focused sales from focused sales professionals; someone who has the skills and truly understands what it takes to sell a product or service."

Just because staff work the front line does not mean they are the right individuals to sell, insisted Rendel. "I encourage credit unions to look into training the right people to give them the skills they need to effectively cross sell. If you don't have the right people, bring them in. That does not mean terminating employees, just finding a better fit for them somewhere else in the credit union."

According to Rendel, effective sellers are experts on products and services, have strong consultative skills, and are excellent closers.

While credit unions need to evaluate employee sales ability, they also need to look closely at the membership to determine who is profitable and who is not. "We know there are some members carrying others."

A Fee For Unprofitable Members

Rendel suggested charging fees to unprofitable members. He also recommended gaining an understanding of the profitability of the current membership to see how well the credit union will perform into the future, and to allow it to make changes, if needed. While Rendel said there are many ways to evaluate members' profitability, he outlined a formula (see left) for gauging "member lifetime value." The "m" in the formula represents the margin or profit per member, "r" equals member retention rate, and "i" stands for cost of capital.

Using the example of a credit union whose profit per member is $171.82 and cost of funds 2.13%, when the retention rate is 85% the membership lifetime value (MLV) is $852.58, which translates into 4.96 years of profitability, Rendel stated. If the retention rate is 90%, MLV increases to $1,274.84 and 7.42 years. With a 95% retention rate, the formula shows MLV jumps to $2,289.33 and 13.32 years. "You may find you have ten years of profitability in your membership, or you might have only six months."

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