Uncovering the Secret Within: Using Member Data to Strengthen Your Bottom Line.

Presented by

Tricia Donohue – The Marketing Mix

Maria Del Amo – Cathedral Corporation

Steve Miller – Cathedral Corporation

July 10, 2013

Relevance is Key

Relevance is the single largest lever on response in individualized direct marketing.

“We are drowning in data but starving for knowledge”.

John Naisbitt

Account & Member Relative Value

Meaningful Data Appends

Laser-Focused Retention

Maximizing Potential

New Client Development

Checking Bundling

Member Triage Activities

Logical Member Growth Strategy

+

Guerilla Prospecting

De-Marketing

New Key Perspectives & High-Impact Strategies:

New Key Perspectives

Account & Member Relative Value

Meaningful Appended Data

Behavior-based using

commonly available fields

Balance

Interest Rate

NSF Fees

Core Fees

POS Income

Transaction Activity

LifestageAvailable Wallet

Age Income

Key Perspective: Account & Member Value• Adding a value viewpoint significantly enhances decision-

making• Behavior-based approach uncovers actionable strategies

to improve the bottom line

Key Perspective: Meaningful Data AppendsP$YCLE : Segmentation system that groups consumers into 58 segments based on assets & a wide variety of financial behavior.

Income Producing Assets (IPA): Conservative estimate of liquid assets held by the client. Based on a correlation with HHs P$CYLE code.

Gap-To-Tap: Difference between a client’s IPA & the deposit/investment balances they hold with your organization

Account & Member Relative Value

Meaningful Data Appends

Laser-Focused Retention

Maximizing Potential

New Client Development

Checking Bundling

Logical Member Growth Strategy

+

Priority Strategies:

Priority Strategies: Laser-Focused Retention

• Top 10% most valuable clients account for 80-90% of net income; Top 20% for 100% +

• 30% to 50% of these clients are completely unknown to branch/call center staff

• Average annual attrition for this group is 10-15%

Avg Value All Clients Avg Value All Clients = $388= $388

Avg Value Top Decile Avg Value Top Decile = $4,237= $4,237

# Top Decile Clients # Top Decile Clients = 1,216= 1,216

Annual Top Decile % Annual Top Decile % Attrition = 13%Attrition = 13%

Annual Top Decile $ Annual Top Decile $ Attrition = $670,000Attrition = $670,000

Year 2: Year 2: Reduced Reduced

Attrition to Attrition to 9% = $206K in 9% = $206K in

Revenue Revenue ImprovementImprovement

Year 1: Year 1: Reduced Reduced

Attrition to Attrition to 10.5% = $129K 10.5% = $129K in Net Revenue in Net Revenue ImprovementImprovement

Priority Strategies: Laser-Focused Retention: Case Study

Priority Strategy: Laser-Focused Retention: Case Study• Group “frozen” & tracked each year• Top Decile indicator on member record• Commitment from field staff to be very familiar with this

group• Over-sampled in yearly satisfaction surveys• Multi-pronged communications plan: direct mail, email,

phone• Results: Decreased attrition & enhanced bottom line (See

results on previous slide)

Priority Strategy: Maximizing Wallet Share

• All low value/small position clients are not created equal

• You are likely missing 30-40% of total wallet – even from the most valuable clients

Priority Strategy: Maximizing Wallet Share: Case Study

Assets = $625 MillionAssets = $625 Million

Estimated Total Estimated Total Opportunity: 3,962 Opportunity: 3,962 Clients with $640 Clients with $640 Million Gap-To-TapMillion Gap-To-Tap

Final Based on Large Final Based on Large Wallet/Low Risk: Wallet/Low Risk:

1,125 Clients with 1,125 Clients with $396 Million Gap-To-$396 Million Gap-To-

TapTap

Priority Strategy: Maximizing Wallet Share: Case Study• Branch-specific VIP Priority Prospects identified

• Special “under the radar” promotions developed & consistently delivered via direct marketing (mail, email, phone) over a 12-month period

• Results: $19,700,000 deposited in promo accounts – 76% new money

Priority Strategy: New Client Development

• For the past 5-8 years, many organizations have been more focused on getting the getting the next new member than expanding the ones they just won!

• 90 days after acquisition, 75% of new clients have only a single service

Priority Strategy: New Client Development: Case Study• 1,237 new consumer clients acquired in the

period analyzed• After 90 days, 86% had only 1 service; after 6

months, 78% still had only 1 service• Average consumer client performance ratio = 38%

Net Income of New Clients ÷ Net Income of

All Clients = Performance

Ratio

Priority Strategy: New Client Development: Case Study

Estimated Annual # Estimated Annual # of New Clients = of New Clients =

4,9004,900

Average Annual Average Annual Consumer Account Consumer Account Net Income = $285Net Income = $285

Estimated % Single Estimated % Single Service New Clients = Service New Clients =

80%80%

Priority Strategy: New Client Development: Case Study• New consumer clients assigned to three top-level

categories:

• Specific offers designed for each group based on onboarding path.

• Results: After 12 months, 16% of former 1-service clients owned two or more services -- revenue improvement = $169,048

Yes Checking

No Checking

Large Gap-To-Tap

Priority Strategy: Checking Trifecta

• Key to achieving strong non-interest income for Checking accounts – presence of priority add-on services:– Direct Deposit

– POS

– Bill Pay

• Often as important as selling another service to overall value

Priority Strategy: Checking Trifecta: Case Study

# of Consumer # of Consumer Checking Clients = Checking Clients =

6,4796,479

Almost 40% missing Almost 40% missing either Direct Deposit either Direct Deposit

or Debit Activityor Debit Activity

Average NII for Average NII for Checking Checking

exponentially higher exponentially higher when key add-ons when key add-ons

presentpresent

Priority Strategy: Checking Trifecta

• Sales associates incented for “out-of-the-gate” bundling of Direct Deposit & Debit Card for new Checking clients

• Low-cost communications to current Checking Clients with cash coupons executed throughout the year + quarterly targeted calling blitzes

• Results: Average NII increased by 11% -- adding over $100,000 annually

Priority Strategy: Logical Member Development

Senior Management Directive:

“Grow the Franchise!”“What am I

working towards?

“And how do I get there?

Priority Strategy: Logical Development: Case Study

Define the ultimate or Define the ultimate or “Omega” client“Omega” client

Establish minimal Establish minimal number of number of

development levelsdevelopment levels

Assign clients to Assign clients to various levels leading various levels leading

to Omega statusto Omega status

Ensure that Ensure that progression = progression =

improvement in improvement in profitabilityprofitability

Priority Strategy: Logical Development: Case Study• Omega level present on all customer

“touchpoints”– Branch distribution frozen and followed for 12 months

• Additional analysis focuses growth efforts on members most likely to move up

• Direct marketing strategies identified for each level

• Results: % of clients in Levels 3+ increased from 27% to 31%

Account & Member Relative Value

Meaningful Data Appends

Laser-Focused Retention

Maximizing Potential

New Client Development

Checking Bundling

Member Triage Activities

Logical Member Growth Strategy

+

Guerilla Prospecting

De-Marketing

Secondary Strategies:

Priority Strategy: Member Triage Activities

• Most clients exhibit tell-tale behavior prior to closing an account or ending a relationship

• More cost-effective to discover/manage potential client attrition than execute lost client win-back strategies

Potential Member

Risk

Potential Member

Risk

Potential Account

Risk

Potential Account

Risk

Secondary Strategy: Guerilla Prospecting

• Uncover & focus on neighborhoods where you are successful at the desired behavior…

Clients with Home Equity Prospects in That Area…

Secondary Strategy: De-Marketing

• Embrace the truth that you can’t – and shouldn’t – invest in all members

• Identify & isolate long-term members who are low value/balance and low potential

• Find low-cost communications alternatives

• Allocate resources to members where possible return is greater

“The purpose of computing is insight not numbers”.

R.W. Hamming

Data Modeling

• Transforms your member information into stronger relationships that drive business growth through personalized print and digital media services. – Provide high-impact client insight– Align with cost-effective communication programs to fully

leverage this new intelligence– Drive your data with little impact on your internal resources

• Business results provide the case for doing the work • Bottom line improvements are the objective

Thank You!

Cathedral Corporation is the NAFCU Services Preferred Partner for Variable Data Driven Solutions for Printed and Electronic Financial Services Communications. Learn more at www.nafcu.org/cathedral or visit us in the Preferred Partner Pavilion, Booth #30.