The Cost of Relationships

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Credit unions are spending thousands of dollars on high-tech member relationship management (MRM) tools with all the flashy bells and whistles and then don't understand why MRM isn't working for them.

The reason, MRM experts told The Credit Union Journal, is simple: MRM isn't just a piece of plug-and-play technology; it requires training and a strategy, both of which have to be implemented before the investment is made in the technology.

"The biggest problem is that credit unions get all hung up on the technology related to (MRM) when technology is not the issue," said Bob Lawhead, CEO of Raddon Financial Group. "There are a lot of firms out there selling (MRM) who don't really understand credit unions or financial services but do know that (MRM) is the big buzzword and they can make some bucks on it. A number of these firms are going out of business."

Member relationship management-or customer relationship management (CRM), as it's called in the non-CU world- is hot, and is touting as being able to allow a credit union use demographic and behavioral information about members in order to help predict what sort of products and services a particular member needs.

As was noted at one recent credit union conference, employing MRM software can be like "drinking from a fire hydrant" due to the amount of data that can be generated.

'Easy To Be Overwhelmed'

"It's easy for a credit union to become overwhelmed by MRM if they don't have a strategy in mind," said Tony Rizzo of Liberty Creative. "They need to have a goal. Are they looking to increase household profitablity, or wallet share, for example. We call it analysis paralysis. There are so many things you can do that a lot of times, you end up doing nothing with it. That's what we bring to the table: strategy. For example, a credit union can see which members' checking accounts used to be active, but now that activity has dropped by 50%. That's an indication the credit union needs to communicate with that member, find out what changed."

Indeed, Rizzo suggested that while most people think the primary goal of MRM is to determine the most likely product or service to cross sell to a given member, another one of its uses is attrition management. "Here's a member who was active, and now they're not-does this mean a phone call, a letter? Contact is needed, and a strategy for how that contact is made is needed," he explained. "You can also use this data to determine how much to spend on courting certain members."

Lawhead agreed. "The key is, you're taking all that data and you turn it into information. You're getting intel," he observed. "You have to start out by knowing what you're looking for. You're looking for profitability segment information. You want to know the delivery channel segment. You want to know the consumer segmentation, or the demographics. You want to know their relationships with the institution, what sort of loan relationship do they have, what sort of deposit relationship. And you want to know their behavioral segment, what sort of usage of the various products do they have. You have to identify all these different fields, first."

The next step is training. "If you've got a CRM system that pops up on the teller's screen (suggesting) the most likely product or service to cross sell, that teller has to know how to sell it," Lawhead advised. "You have to decide, are you going to actually script it for them right on the screen? You have to have the training in place first, or all the great data and predictions in the world aren't going to make a difference. This is why there are so few successes with CRM out there. Once you've identified the fields and done the training, then it's finally time to install the technology. The problem is, by the time most credit unions come to me, they've already gone out and bought the technology. I can work with any CRM system out there, but I often find that credit unions aren't buying the right systems for them because they haven't gone through those first two steps first."

Both Rizzo and Lawhead emphasized how important it is to be integrating all the different delivery channels in the MRM strategy. "This should drive across all channels. Your call center, your website, your direct mail and even what's printed on statements," Rizzo said. "This drives a lot of your communications, and it's across any touch point."

While Lawhead and Rizzo suggested most MRM sellers don't really understand what credit unions need, there is one MRM vendor who claims to understand credit unions intimately.

Corporate Enters Market

Credit Union Enterprises (CUE), a CUSO of Nebraska Corporate Central FCU, has created CUE 121: The Member Relationship Manager. CUE recently entered into a joint marketing agreement with Minnesota Corporate FCU to market the MRM product to CUs in Minnesota.

According to CUE, CUE 121 is the result of a collaboration between CRM experts and the credit union industry and was designed solely for the credit union market. CUE's Nancy O'Brien described the product as a blend of the "best of CRM technology and know-how with the specific features and needs of credit unions today."

O'Brien suggested that credit unions' top challenge in implementing a successful CRM strategy is "the need to change both the processes and culture of the organization," suggesting that CUE 121 was developed specifically to enable credit unions to compete with larger financial institutions by overcoming both the technology and training issues credit unions frequently have.

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