Spending $1.25 To Capture $1? Consultant Urges CUs Reexamine Approaches
"You should have a P&L on every one of your members."
If nothing else, recommends Joe Prunty, president of CoreProfit Solutions, credit unions should learn
It's knowledge that would make for much better decision-making in a variety of applications, he said, stressing
Prunty defined behavior-based profitability as the use of detailed, transaction-level data about member interactions
Prunty said the components of overall profitability for a credit union are revenue, minus the cost of generating
"When you measure member profitability, you get an accurate picture of what members and groups of members are
According to Prunty, there are two important things a CU can do to increase its profits, or retained earnings: increase
One key is retention. He cited a Gartner G2 study that said it costs more to acquire a new customer than to retain a
"Since you can't retain everyone, make sure you retain the most profitable ones," he said, noting that without even
In short, a credit union needs to know who is contributing what.
If you study profitability, it is important to understand what other financial institutions will be targeting these
A credit union should study the behavior of its members so it will know why they use the channels they use, he
For instance, Prunty noted it is better to mail 2,000 letters to a targeted group selected on its likely response, than it is
Key factors of segmentation include the number and types of products owned, interest rates charged and/or paid, fees
"Multiple share draft accounts, sitting unused, is a drain on profitability, as is selling good products to bad people,"
It is impossible to figure out SEG profitability without household value. Behavior of the member, analyzed in detail,
Every credit union knows that branches and phone centers are the most expensive channels for members to use. But
"You can get folks to do things differently," said Prunty. "So why not pay a member to change his or her behavior?"
Prunty's argument, and he drew on several examples, was that it pays to reward members for costing the credit union