How You Can Use Your Data To Level Your Marketplace

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According to statistics published in 2005 by CUNA, there are 9,237 credit unions in the United States. Twenty years ago, this number was 17,672. Despite this near-50% decrease over the past two decades, membership in credit unions had increased by nearly 60% (51.9 million in 1985 vs. 87.1 million to date).

The credit unions that have survived the last years are indeed growing. What they are not doing, however, is growing fast enough.

While credit unions continue to grow at this measured rate, the banking industry continues to consolidate. Super regional banks are merging with other super-regionals at an alarming pace. In fact, another round of industry consolidation appears to be on the horizon.

While the credit union community continues to look for ways to extend its reach outside of company employees and local marketplaces, mega-banks are launching national marketing campaigns geared at selling their loan products and other services to your members. While your credit union shops for ads in the local newspaper, these banks are using multi-million dollar advertising budgets to reach the eyes and ears of both your existing and potential members. Dollar for dollar, you do not stand a chance.

It's Time To Fight Back

Although credit unions do not have the buying power of big banks, they still have one powerful weapon at their disposal: data. And, with today's technology, acquiring, manipulating and utilizing this data is cheaper, faster and easier than ever before.

Big banks already know this. In fact, they use it every day in an effort to poach your members. They use their capital to purchase huge data systems and license entire databases containing information on millions of consumers.

Unlike television or radio advertising, however, there is no minimum price of entry. New Application Service Provider (ASP) model databases allow quick access to consumer data in a manner that is much more cost efficient than licensing an entire database. Software platforms are now available that allow a credit union to choose from and customize various creative templates for direct mail pieces, saving the cost of graphic design. Those same platforms can then combine selected data with selected creative material and send it to a mail house, where the campaign is executed, saving the credit union valuable man-hours.

Using data to compete with big banks, however, requires more than simply having access to it. You must then know what to do with it.

Data represents the thousands of personal and financial characteristics that make every consumer unique. Age, income, credit score, loan to value ratio (LTV), delinquency, revolving debt, and home market value are just a handful of these characteristics. This information is available on millions of consumers.

Let's say that you are the marketing manager of a regional credit union that offers membership to anyone living within a ten-county area. You have two simple goals: grow existing membership and strengthen ties with current members by cross-selling your mortgage loan products. In order to achieve these goals, you decide to begin a targeted direct mail campaign. However, you are unsure as to what data characteristics would best identify prospects that are most likely to respond. Here are a few things to consider:

Imagine your ideal member-now, imagine them as data. This is not nearly as hard as it may sound. First, ask yourself, "What does my typical member look like? Are they middle class? Are they young professionals or closer to retirement? Do they have children? What neighborhoods do they live in? Are they typically prime or non-prime borrowers?"

Next, translate these characteristics into data attributes. For example, if your typical members are middle aged, middle class families who live in modest neighborhoods and tend to fall on the non-prime side of borrowing, they may also be described as the following: Age: 35-50, Household Income: $70,000-$100,000, Market Value: $125,000-$175,000, FICO: 600-680.

Learn to do this, and you are already halfway to a successful marketing campaign.

Find out what they have, and sell them a better one. This may sound like cheating, but banks do this to you all of the time: use data to find out what financial products your members and prospects are buying and give them a better offer. It is true, that you will not be able to find out which lender your member bought his 30-year mortgage from. However, you already know if it wasn't you.

Credit unions, like banks, rely on selling loan products as an avenue for maintaining profitability. A member with a checking account is still highly likely to look outside of your credit union for a home loan, auto loan, etc. However, a member with a checking account and a home loan through your credit union will be much more likely to purchase an auto loan from you as well.

Additionally, data can be used to determine when a borrower is likely to begin shopping for a new loan. If a borrower has only three months remaining on a 60-month auto loan, that borrower may be in the market for a new automobile. If a homeowner is in the sixth year of a 7-year adjustable rate mortgage (ARM), he or she may be looking to either move or refinance.

Make Mistakes, But...

...Don't make them again. It is likely, if not certain, that your first direct marketing campaign will not reach its full potential. Some data points will be more effective in targeting good prospects than others. For example, if a campaign returns 50 qualified respondents from a targeted pool age 30-55, it is possible that all 50 could be between the ages of 30 and 45. Next time, save yourself the postage and eliminate the 46-55 age group from your pool.

Making mistakes is critical in direct marketing. Not making them again, however, is even more important. Create a system for measuring the success of your marketing campaign and use it often to achieve maximum results.

Banks, like credit unions, operate with the goal of increasing their customer bases in order to increase profits. To achieve this goal, they will avidly target your members until they have stolen them away. Through the intelligent, efficient use of data, however, credit unions have the chance to fight back. It is much more than a means for growth; it is a means for survival.

Richard Scolio is president of Chicago-based MarketerNet LLC, a provider of end-to-end direct marketing solutions to the credit union industry. He can be reached at rich.scolio

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