BOSTON—While 10% of clients often account for up to 90% of an organization’s net income, one person pointed out that as much as 50% of an institution’s most valuable clients may be unknown to branch staff.
The reason, said Tricia Donohue, a principal at The Marketing Mix, does not lie with branch staff but is instead a reflection of how easy FIs have made it to avoid visiting the branch. The challenge lies in retaining those members, as the average annual attrition rate for the most profitable segment can be between 10-15%, said Donohue, who spoke here during NAFCU’s Annual Convention. “Identifying your most valuable clients and letting (staff) know who they are is key to the bottom line.”
With retention so crucial, Donohue stressed the importance of what she called the “checking trifecta”—that is, direct deposit, point of sale and bill pay.
“As far as non-interest income, these are often as important as selling another service, when it comes to adding overall value.”
Depending on the member, she added, it is often more important for CUs to make sure that they use at least two of those services, rather than selling them another account (with the exception of mortgages). “The real sweet spot is when you add direct deposit.”
She added that members with direct deposit and overdraft opt-in tend to use the overdraft protection more frequently because they know they are already paying for the service.
De-Marketing’ Some Members
Donohue noted that there’s no real correlation between bill pay and net interest income, but bill pay helps keep members sticky.
CUs need to recognize that they won’t receive the full value from every member, said Donohue, who advised thinking about “de-marketing,” because not every member needs every mailing. She advised finding low-cost communication alternatives for less profitable members and allocating greater resources to those members who are more profitable or display behaviors that indicate they may hold the potential for greater profitability.
“I’m not taking about service, because everybody deserves quality service,” she emphasized. “But take your dollars and look at where you’re going to get the best return on your investment, and de-market.”
