Member Segmentation Gives Competitive Edge to Credit Unions

The demands on credit union marketers are more challenging every day. Competition from banks and others is greater than ever, and marketing budgets are not necessarily growing with the increased competition. To be successful, credit unions need to effectively stretch marketing dollars while maximizing member relationships, increasing wallet share and reducing attrition of the most profitable members. To be successful, credit unions must develop a segmentation strategy. “Segmentation,” is a daunting word for some marketers, but if broken down into simple steps, it is easily achievable for any credit union. Market segmentation divides members into groups with similar product or service needs, allowing it to be targeted with a tailored mix of products, pricing, promotion, and distribution. In short, credit unions can communicate the right product to the right member at the right time. The first step is to understand your member database and to look for similarities. Segmentation can be as complex as matching variables of psychographic preferences, channel use, product ownership and more.or as simple as demographics and product ownership. Early in the planning phase of segmentation it is important to understand that market segments must meet certain criteria. For segments to be practical, they must be: * Measurable: We can identify the size and purchase power of the segment. * Accessible: It is feasible to reach the segment * Substantial: The segment must be large enough to generate a profitable volume. * Unique: Each market segment must have unique needs and respond differently to a given marketing mix. * Durable: A segment must be relatively stable to minimize the expense of frequent changes. Good market segmentation will result in segment members who are similar across multiple measured variables within the segment, and as different as possible between the segments. Member markets can be segmented by the following principal characteristics: * Geographic (region, population density, size of metropolitan area, climate) * Demographic (age, gender, income, generation, education, marital status, social class, occupation) * Psychographic (lifestyle, activities, interests, values, opinions, perceptions, attitudes, personality) * Behavioral (usage rate, benefits sought, brand loyalty, price sensitivity, occasions, readiness to buy) An institution will use each characteristic and set of data differently, depending on their strategic goals. Let’s look at how you can use each of these market segments to maximize marketing efforts. Geographic Effective geographic segmentation would focus an offer for debit cards, low-cost checking and online banking to a geographic area with a high concentration of twenty-somethings. Or it may send an offer for CDs and investment products to a very established residential area. You can also use geographic segmentation to attract new relationships similar to your best members. First, by your own calculations or with the use of an MCIF system, identify your most profitable members. It is a reasonable conclusion that their neighbors are of a similar financial situation. Demographic Demographic segmentation is possibly the most common method of simple segmentation. An institution with a focus on equity lines of credit can target homeowners with incomes in excess of $40,000. Or, knowing that Millennials, the generation of members born between 1977 and 1995, are responsible for 70% of all new business start-ups, it would be reasonable to target a commercial lending “starter package” message to this high-impact generation. You can also use demographic segmentation to target member’s life cycles. A member’s life cycle is determined by their age, income, marital status and presence of children. By understanding various life cycles; it’s easy to see how each has unique financial needs. Psychographic Psychographics provide a glimpse into how people manage their lives and their free-time interests. You might identify “young professional on the fast-track” as a prime market segment for credit card sales. You may also focus on conservative consumers who want to shield their savings by marketing five-year CDs to them. Identifying members with an “active” lifestyle can help you with auto lending, home equity lines of credit and credit cards. Behavioral By looking at statistical trends in your member-base and within your financial services market space, you can model the behavioral characteristics of members before they make a product purchase. You can use this statistical model with data from your MCIF or core data processor to target your existing members or non-members in your communities who display the desired behavioral characteristics. Through this modeling method, you can determine a member’s readiness to buy or even their risk of attrition. Whatever segmentation process or level of sophistication best fits your strategy, you will be able to deliver a message that is significantly more impactful and that will better differentiate your institution from the competition. You will also be able to provide more strategic offers to those members who are most likely to act upon them.ultimately extending your marketing dollars, increasing your share-of-wallet and reducing your attrition rate.