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TH E yEa r End IS S U E DECEMBER 2012 VOLUME 7 ISSUE 12 9.95 Sandra L. TorreS d.B.a. excellence to the Third Power e3 How Brilliant Leaders Enable Encourage and Empower Followers Cyber Security as a Competitive Advantage for Credit Unions COnTEnTS Credit Union BUsiness dECEmBEr 2012 V O L U m E 7 I S S U E 12 4 6 8 Pov HepC-Cured.org Tim O Hara aChieving SkiLLS 14 LeaderShiP excellence to the Third Power e3 How Brilliant Leaders enable encourage and empower Followers Dr. Sandra L. Torres Busy Busy Busy Holly Herman Cu ConTenT 17 20 24 markeTing maTTerS Loan Growth Tony Rizzo SeCuriTy The 12 Weeks of Marketing Laura Enock email-Only Marketing Campaign successful for small CU Cyber security as a Competitive Advantage for Credit Unions Jeff Carter Cu SPoTLiTe Sharon Sweda 10 Cfo CurrenCy The Foundations of Portfolio Value Or economic Value Analysis Emily Hollis and Robert Perry service-Profit Chain in Motion Get it for the entire executive team www.creditunionbusiness.com subscription www.cubusiness.com December 2012 Credit Union BUSInESS 1 aBOUT US Publishing Team Tim O Hara Publisher tim cubusiness.com Joyce Moed Managing editor joyce creditunionbusiness.com Iliana Nord Operations Manager iliana cubizmag.com Patti Manzone Designer Homer Marshman Operations Manager T H E Y E AR E ND ISSUE DECEMBER 2012 VOLUME 7 ISSUE 12 9.95 Excellence to the Third Power E3 How Brilliant Leaders Enable Encourage and Empower Followers Cyber Security as a Competitive Advantage for Credit Unions Staff Writers Holly Herman Achieving Skills Emily Hollis CFO Currency Sharon Sweda CU SpotLite Subscriptions Credit Union BUSINESS is published monthly (12 issues per year) by CU Business Magazine inc. A one-year subscription costs 89. An online subscription form is available at www.cubusiness.com. Contributors Chris Burns-Fazzi Laura Enock John Levy Tony Rizzo Ken Schroeder Kirk Sherman Dr. Sandra L. Torres Contact Information Credit Union BUsiness Magazine P Box 2223 .O. Palm Beach FL 33480 (561) 282-6015 (561) 588-7711 (fax) info cubusiness.com Sales and advertising Bernie Fitzgerald Advertising executive Bernie cubusiness.com or 561-282-6015 1 Greg Halpern Advertising services Manager Greg cubusiness.com or 561-282-6015 4 2 Credit Union BUSInESS December 2012 www.cubusiness.com High impact marketing doesn t have to be complicated-- Introducing MEMBERS Inscope TM from CUNA Brokerage Services What is the formula for successful (and cost effective) marketing Identifying those members with the greatest potential and bringing them the right message... at the right time. CUNA Brokerage Services is pleased to introduce MEMBERS InscopeTM the most impactful data analytics solution in the industry. MEMBERS InscopeTM works with your existing member data. Applying over 500 unique variables this powerful tool unlocks the true depth of each member s financial profile identifying those members with the greatest propensity for investment and insurance services. The results are accessible on demand and immediately ready to be incorporated into your operations. MEMBERS InscopeTM is unmatched in the industry and only available through CUNA Brokerage Services. Put the power of profitability in your hands. Call 888.888.9716 or visit www.cunamutual.com cbsi today. 10003093-0812 2012 CUNA Mutual Group. All Rights Reserved. Partner. Plan. Thrive. FROM tiM I Publisher s POV approval by the Food and Drug Administration (FDA). However during Phase II Pharmasset was purchased by Gilead Sciences Inc. who after Phase II was completed pulled PSI 7977 (now called GS 7977) out of the trial preventing the study from moving forward. Unfortunately because of a delay in a medical procedure needed to qualify for the study Margaret missed the deadline to be included in the medical trial. But both she and her doctor were optimistic that once the miraculous results of this medical study were released the HCV cure would soon be available to her and everyone else suffering from the virus. After all this was the most significant and effective treatment in the history of HCV. When she found out that Gilead Sciences had no plans to move forward with Bristol-Myers and the Phase III trials necessary to get this cure FDA-approved and on the market Margaret realized that her life and the lives of millions of other people were hanging in the balance. She then decided she wasn t going to let this action go unnoticed. Margaret began a petition at Change.org urging Gilead Sciences to make this life-saving medication available to people around the world. I have become an advocate for this worthy cause and formed the HCV Coalition for The Cure to bring the nation s attention to this dire situation said Margaret. As part of her grassroots effort she talks on a daily basis to HCV activists and patients across the United States and around the world--some of whom were actually in these very trials. She also contacts celebrities politicians and other high-profile people in order to gain their support. I was moved by Gary s story and as I listened I thought about what I could do to help which lead me to thinking about what this time of year means to all of us. It is a time when each of us should think about what we can do to help those in need and I urge you to find a cause like Margaret s and help in any way you can. If you re interested in learning more about how you can help like signing Margaret s petition to Gilead Sciences as I did please go to www.HepC-Cured.org Meanwhile best wishes to all Sincerely was sitting at my desk recently thinking about what to write about in this month s column when I got a phone call from my old friend Gary Dudley President and co-founder of SWBC. Gary was calling to tell me about his wife Margaret who fifteen months ago learned that she was one of the millions of Americans infected with HCV. According to the World Health Organization (WHO) hepatitis is one of the world s most widespread and serious infectious conditions and hepatitis C (HCV) is one of the most devastating strains. HCV has few symptoms early on so it often goes undetected and left untreated it can progress into debilitating and fatal liver disease and liver cancer. In fact WHO cites that 80% of people do not exhibit any symptoms upon infection and don t find out they have HCV until it is in its later stages and has already done a lot of damage to the body. Margaret Dudley contracted Hepatitis C 14 years ago. Even though her diagnosis was daunting Margaret and her family stayed positive became advocates for HCV testing to spread the word about how important it is for people to be screened and began looking into treatment options. And that s where Margaret s story became more interesting. In January of 2011 two pharmaceutical companies Pharmasset Inc. and Bristol-Myers Squibb announced a collaborative agreement to test the effectiveness and safety of a once per day oral medication combining each of their most promising agents-- Bristol-Myers BMS-790052 an NS5A replication complex inhibitor and Pharmasset s PSI 7977 a nucleotide polymerase inhibitor. The goal of this collaboration was to find an all oral treatment for HCV During phase I and II of their collaborative medical trial results showed that the combination of these agents cured 100% of all chronically infected patients fairly quickly without any of the dangerous or devastating side effects of traditional treatments. Once word got out about the trial s success millions of people infected with HCV including Margaret thought their prayers had been answered and that their debilitating disease would soon be cured. The next steps to get this to market and in the hands of those in need--potentially saving hundreds of thousands of lives per year--was to continue on to Phase III of the trial and then file for 4 Credit Union BUSInESS December 2012 www.cubusiness.com aCHIEVIng SkILLS Busy Busy Busy hen you call someone do you ask if he or she is busy When someone calls you and asks that question how do you answer For many people being busy is a way of life. In fact they can t imagine not being busy. I ve even overheard people arguing with each other about who is busier. It seems that being busy is like a badge of honor and you win the gold medal if you are busier than everyone else. I once asked a co-worker what would happen if she ever finished her to-do list. She said that she wouldn t know who she was if that happened. She was using her to-do list and all that she had to do to define who she was. I miss so many opportunities when I fall into the busy trap. My head is down as I work on clearing things out and getting things done. I don t notice people around me. I don t take time to chat. I don t laugh. I feel stressed unfocused and I m not my friendliest self. W By Holly Herman are disturbing you or if it s a good time to talk say Yes I was just sitting here waiting for your call. If they ask if you are busy reply No not at all. See what reaction you get. Think about how rewarding it can be to give someone your full time and attention. Tip 4 Replace busy with I have a lot to do. Having a lot to do shows you are in control of what you are doing and that you are making choices about how you spend your time while being busy implies that your to-do list is controlling you. Which sounds more powerful Tip 5 Don t be a bore. Explaining to someone all the stuff you have to get done in great detail is only interesting to you. Spare your co-workers having to hear the list. What you have to do is not impressive what you get done is. Holly Herman is a former CEO of two credit unions Chief of Staff for National Credit Union Administration Chairman Johnson and currently an Achievement Coach helping individuals and organizations. She can be found at www.AchievingSkills.com or contact her at Holly AchievingSkills.com. Take a Minute Rght now and step Off the Busy Treadmill With Me. Tip 1 Think about what is keeping you busy what is on your to-do list and what has to be done. For each item demanding to get done within the next two hours ask yourself what would happen if you didn t get it done. If the consequences are not too great consider putting it aside for another time. Tip 2 Don t answer the phone unless you have time to talk. If you ve ever called someone who has no time to talk you know what I mean. Perhaps you feel bad that you bothered them or maybe you wonder why they answered the phone in the first place. Either way it s no way to build a relationship. Tip 3 When you do answer the phone and someone asks if they 6 Credit Union BUSInESS December 2012 www.cubusiness.com WITH C d t U all CU24 s d t k s ha g ATMs s st p vd v a d val t b s GET R s E G ll a MORE SURCHARGE-FREE ATMS Th la g st ati al dt d PIN d b t t k P s d t CEO A g t F d al C d t U Ch st fi ld VA MORE th CU Call Judy Lazzerini toll-free email visit MORE OUR MEMBERS GET CU COnTEnT The 12 Weeks of marketing Email-Only marketing Campaign Successful for Small CU E By Laura Enock credit union logo. For example one promotion offers a highquality flashlight another a pen set and yet another a water bottle. Ads within the body of the email are bright colorful and meaningful to members. The imagery is holiday-themed in the upcoming campaign but little else has changed since the last time the credit union ran this offer. The credit union recently rolled out a new Facebook page and this time will ask members to like the credit union on Facebook. One offer of the campaign allowed members to take advantage of any previous offer that they may have missed. How did CarePoint Credit Union get such a high percentage (50 percent) of member email addresses Some came in when members signed up for home banking. But their most effective email address collection tool is a pop up ad on the CU s website asking members to opt-in. 12 consecutive weeks of email offers may seem like a lot and there s always the possibility of members opting off the CU s email list. We did get some opt-outs during the campaign Saatela concedes. But not a significant number of them. Picking the promotions for each week takes time. So does getting the right disclosures tracking results validating members who signed up that week tallying who took up the offers etc. It s time consuming but no more so than the time it takes to create and monitor a series of print ads. The gifts that members earn for each promotion get mailed to them. This gives CarePoint FCU another opportunity to market other products and services to members in the form of ads and inserts. Amazingly the campaign had no hard dollar costs. Yes it is time consuming for employees but most campaigns at a small www.cubusiness.com mail marketing is quick inexpensive and easy to monitor. But can you set up a campaign that relies on email alone with no matching print pieces ads and other traditional marketing components Here s how one credit union did exactly that and so successfully that the campaign is slated to be repeated twice a year throughout the foreseeable future. Fantastic Fridays was the idea of John Saatela CEO of CarePoint FCU. It consists of a series of 12 one-week only offers. For three months members that opt-in (about half of the 9 000 members at CarePoint FCU have given the credit union their email addresses and permission to send them this type of offer) receive a different offer each week. The offer is valid from Friday through the following Thursday. Each of the 12 offers carries a unique reward. To get that reward members are required to take a specific action. For example switch to estatements sign up for bill pay or apply for an auto loan. One week the option is really easy take a survey. The response rate has been high overall and the credit union has benefited from increased member activity as well as excellent feedback through the survey. We wanted our members to take action now not next month Saatela says. That s why we kept the window of opportunity narrow. It s one week. Use it or lose it. Having one week to take advantage of an offer also creates a sense of urgency. It s difficult to restrict a campaign to a single week using direct mail but because email is instantaneous you know not only the day members receive it but also the time so there s no problem in limiting the response time. Rewards are either in the form of cash deposited to the member s account or small gift items that are imprinted with the 8 Credit Union BUSInESS December 2012 CU COnTEnT credit union are. The gifts sent to members cost well under 5 each but have a greater perceived value and each item has the CU s name website and phone number a potential opportunity for creating future business. One campaign in December will offer a friendship certificate. Most CarePoint FCU members are female nurses and the credit union has run successful friendship certificate programs in the past that offer cash rewards in the form of a bonus dividend when they refer a new member. If the new member submits a loan application the referring member can get additional money up to 300 that is deposited into the member s savings account. Since it costs 400 to 500 to acquire a new member and it costs even more to convince them to open a checking account or take out a loan it s a bargain In September Saatela attended a conference for healthcare credit unions. One speaker Holly Buchannan talked about selling financial services to women and mentioned that the 300 might seem like the member is selling out the new member for 300. Now the credit union offers both the new member and the referring member a gift certificate to a day spa. Saatela encourages other credit unions to try this type of email only campaign too. Plan the 12 weeks in advance and choose a slow time of year he says. We re running into crunch times with the holidays now. A committee at CarePoint Credit Union looks at the campaigns and one person on staff writes it up which takes a total of two hours for each of the 12 mailings. While some planning occurs up front it s not uncommon for a campaign to be finalized shortly before sending it. We can do this on the spur of the moment Saatela says. www.cubusiness.com Results have been impressive. Of the emails that have been sent out the credit union achieved an 18.9-percent readership rate. Additionally 11.3 percent open and click to the offer 27.7 percent read and respond to the survey offer 27.2 percent open and click thru to the Take Your Pick offer At the end of the day the credit union has reached their goal members are curious and excited when they see the next email. Each email gives members a hint about the following campaign thereby building both interest and momentum. With print you never know who opened your campaigns or what they do with it Saatela says. By using an email system such as Credit Union Toolbox (www.CreditUnionToolbox.com) any credit union can easily get a message out to members and generate a quick response. Laura Enock Managing Editor of Credit Union Toolbox and Founder of CUcontent.com provides credit unions nationwide with content for their websites newsletters email marketing and social media communications. Enock moderates the popular CreditUnionToolbox webinars on best practices and provides credit unions nationwide with social media marketing and PR support on a consulting basis. Contact her at laura cucontent.com or follow her on Twitter CUtoolbox. December 2012 Credit Union BUSInESS 9 CFO CUrrEnCy The Foundations of Portfolio Value Or Economic Value analysis T By Emily Hollis and Robert Perry o fully understand net economic value (NEV) analysis we must understand where the analysis comes from what it should be used for and where it comes up short. Like all value of capital analysis NEV analysis has its roots in fixed-income markets. Duration and convexity analysis of non-equity-based cash flows combined with the level of economic leverage gets us to a snapshot of risk that is in its simplest form correct at that moment in time. Some combinations of cash flows from assets and liabilities may carry more certainty than others while some may require empirical analysis to derive. In the end we are right back where we started Consider two portfolios of assets with liabilities and capital with duration estimates convexity estimates and leverage. described in Exhibit 1. NEV analysis attempts to measure the LEVEL and the SLOPE Portfolio 1 holds two-year assets while Portfolio 2 holds of the capital price line. It s important to know that NEV analysis 10-year assets. Both portfolios are funded with 1-year liabilities. is nothing more than this a specific measurement at a specific Portfolio 2 carries a leverage multiplier twice as high as Portpoint in time. It isn t a predictor of interest rates so the argufolio 1 since its capital is half the size. A standard NEV or portment that rates won t move up by 300 basis points (bps) is irfolio value analysis is presented below in Exhibit 2. The capital relevant. Parallel interest rate movements are needed to back price lines are presented graphically in Exhibit 3. into these effective durations effective duration volatilities and Clearly Portfolio 1 has a lower leverage multiplier and less mismatches. When considered in these terms it s easier to see duration from its assets. This makes the LEVEL of the capital why it s a helpful tool to use as a barometer for risk measurement especially when comparing portfolio-managed funds verExhibit 1 sus credit unions. Many other market participants (banks hedge funds and pensions) regularly use this type of analysis to show their simulated risk positions. Without these measurements financial institutions cannot use sophisticated tools to mitigate interest rate risk such as borrowing or hedging. 10 Credit Union BUSInESS December 2012 www.cubusiness.com CFO CUrrEnCy Exhibit 2 Exhibit 3 price line higher and the SLOPE of the capital price line flatter everyone should agree that Portfolio 1 carries less risk than Portfolio 2 for these reasons. This is the essence of NEV analysis in the credit union industry nothing more nothing less. If you were to measure the variance in the return on equity for these two portfolios over time you would come to the same concluwww.cubusiness.com sions. Portfolio 2 s ROE would exhibit higher month-to-month swings as interest rate changes impact its asset values more than Portfolio 1. In turn asset values impact its capital to a greater degree based on its higher gearing ratio or leverage multiplier. This simple example is at the root of the NCUA s NEV and NEV sensitivity analysis and given a standard set of assumptions Credit Union BUSInESS 11 December 2012 CFO CUrrEnCy credit unions with higher and flatter capital price lines should be and are considered less risky. Simulated NEV and NEV sensitivity analysis was never meant to be used as a measure of performance and actually lacks two of the key ingredients needed for performance simulations time and probabilities. Probabilities of large instantaneous rate moves are generally very low making the probability-weighted risk for that specific event also very low. If you consider this and the fact that the actual cost to hedge this type of deep out-of-themoney risk is fairly inexpensive you ll better understand how to use NEV analysis. Most institutions face many higher probability events on a daily basis that can and do impact earnings as well as the economic value of capital over time. Keeping an eye on the NEV sensitivity for large rate moves is a healthy exercise for assessing interest rate risk and is truly needed to actively and efficiently manage a sophisticated balance sheet but is no replacement for solid day-to-day balance sheet management. Emily Hollis CFA is a Partner with ALM First Financial Advisors LLC. Robert Perry a financial adviser with ALM First Financial Advisors is primarily responsible for developing objective ALM and investment strategies appropriate for client risk profiles. He also designs what-if analyses to test client balance sheet exposure to various scenarios and formulates suggested action plans to maximize client performance within preset risk parameters. Throughout his career of more than 24 years Robert has spoken at many conferences performed Board of Directors education and consulted with many financial institutions. His knowledge and financial management background have also made him a popular speaker on hedging with derivatives and bond swaps as well as statistics for financial professionals. 12 Credit Union BUSInESS December 2012 www.cubusiness.com LEadErSHIP excellence to the Third Power e How Brilliant Leaders Enable Encourage and Empower Followers By Dr. Sandra L. Torres 3 B rilliant leaders thrive on excellence and their success depends in part on how their followers perceive them. Leaders who are viewed as being exemplary can attain almost a cult-like following. These leaders can be found any place from a Nation s ruler to a scout troop leader and everywhere in between. The common element that bonds these great leaders is their ability to enable encourage and empower their followers. Therefore by very very loosely applying a mathematical concept to leadership E3 can mean Excellence (E) raised to the Third Power (3) which encompasses the variables of enabling encouraging and empowering. Any math whiz will immediately point out how exponentiation actually means multiplying three copies and excellence cannot be multiplied but let s think creatively and use it to take excellence in leadership to a higher power. If your goal is to become an exemplary organizational leader it is imperative that you embrace these three leadership characteristics. If you don t have a natural gift for enabling encouraging and empowering others to do their best and to make a difference then resolve to learn how to do it. These leadership practices are critical to your achievement of excellence. leaders have a choice they can hold onto their power and use it purely for selfish ends or they can give their power away to others. They further state that there are five leadership essentials of sharing power with others which are 1. Give power away - The key to unleashing an organization s potential to excel is putting the power in the hands of the people who perform the work. Thus leaders must trust and respect their constituents and they must know their people well enough to empower them appropriately. 2. Provide choices - Good leaders will remove or reduce unnecessary approval steps eliminate as many rules as possible increase people s flexibility regarding processes support the exercise of independent judgment encourage creative solutions to problems define jobs more broadly (as projects not tasks) provide the resources necessary for success and support freedom of organizational communication (both vertically and horizontally). enable Others to Act In today s world enabling followers most often applies to the social media phenomenon and the effort to obtain more recognition for a blog postings or tweets but in leadership terms it is more complex. According to The Leadership Challenge by James Kouzes and Barry Posner exemplary leaders accomplish great things by enabling others to take ownership of and responsibility for the organization s success. They maintain that 14 Credit Union BUSInESS December 2012 www.cubusiness.com LEadErSHIP 3. Develop competence - If people are to succeed in their new and increasing responsibilities they need to develop their capacities. Leaders must invest in developing their people s skills and competencies by investing in leadership development training. 4. Assign critical tasks - Empowerment should be genuinely significant and not merely a token acquiescence to the latest management fad. Moreover leaders should regularly inform their constituents regarding the organization s performance and the evolving challenges it faces. 5. Offer visible support - Leaders should assist their people in making connections and building strong relationships with others who can help them accomplish their tasks both inside and outside the organization. Shape a path to the future by using positive words. Leaders are urged to use positive words to promote a path of success and victories instead of division fear or strife. When leaders demonstrate diplomacy and professionalism in their words their attitudes towards diversity and change can impress and mobilize their team. Leaders who use encouraging words can increase the awareness of unlimited abilities skills and resources of their team. The Power of empowerment Leaders with the Lone Ranger mentality are doomed to fail. Successes that are sincerely celebrated with others are those that result from delegation and empowerment. Both delegation and empowerment are necessary and important components of being a leader. They are truly the only way to actually get anything accomplished. This can be very challenging for the leader who cannot let his or her direct reports have autonomy. All constituents must be made to feel involved and motivated. CEOs may feel they are giving up control if they delegate but actually this may have more to do with ego than concern for the task or project being executed properly. This mentality is counterproductive. The focus should be more on empowering others and letting them take ownership and commitment for decisions and less on the CEO s own needs. Andrew Carnegie was dead on when he said No man will make a great leader who wants to do it all himself or to get all the credit for doing it. Dr. Marshall Goldsmith in an article for the Harvard Credit Union BUSInESS 15 encourage One and All To encourage another individual is merely a simple act of kindness. The Leadership Challenge explains how true leaders encourage and motivate those they work with by helping them find their voice and making them feel like heroes. It describes this as encouraging the heart. This involves leaders recognizing individual achievements and also means celebrating the efforts of the entire group. When it comes to leading organizations the ability and willingness to encourage others to do quality work is the key to success. These leaders allow people to run with things responsibly and enthusiastically. At times the results can be extraordinary. Exemplary leaders use their words to encourage and inspire followers to immeasurable success. www.cubusiness.com December 2012 LEadErSHIP Business Review outlined several steps a leader can take to create an environment that empowers people. Givepowertothosewhohavedemonstratedthecapacityto handle the responsibility. Create a favorable environment in which people are encouraged to grow their skills. Don tsecond-guessothers decisionsandideasunlessit s absolutely necessary. This only undermines their confidence and keeps them from sharing future ideas with you. Givepeoplediscretionandautonomyovertheirtasksand resources. Leadership can take many forms but exemplary leaders who strive for excellence are those who enable people to achieve the task encourage others to reach their potential and empowed message will bring you success in and entrusting them to er them by believing in their abilities employee motivation as well as well and a positive performin buildingdeliver. productive workplace. For many leaders employee appreciation is part of their DNA but for others it can be a scarce commodity. in fact many organizations are offering leadership development training to lEADErSHiP ensure that leaders develop skills in this area. Take this Thanksgiving season to make your workplace the exception and use every opportunity to demonstrate your gratitude to your team. Author speaker and leadership Author speaker and leadership consultant Miami-based consultant MiDr. Torres has researched leadership practices around the ami-based Dr. world. More than 20 years of experience in the credit union Torres has researched leadership practices around the world. industry has made her an ardent believer and practitioner of More than 20 years of experience in the credit union industhe credit union philosophy people helping people. Leadertry has made her an ardent believer and practitioner of the ship Si offers bilingual leadership expertise via her writings credit union philosophy people helping people. Leadership training workshops and speaking engagements. Her specialSi offers bilingual leadership expertise via her writings trainty is women s leadership. Get to know her better by visiting ing workshops and speaking engagements. Her specialty is leadership-si.com. women s leadership. Get to know her better by visiting leadership-si.com. leaders need to say thank you in a genuine manner. Your team members will likely work much harder if they feel that what they re doing really makes a difference and that their efforts are noticed by those with power. Dedicated to developing leadership across cultures. Leadership Programs Develop Talent and Achieve Results Studies show that on average leadership development programs have a 20-40% significant impact on the following Personal Ability--Communication - Collaboration--Teamwork Productivity--Quality and Cost of Work Consider how an investment into coaching mentoring or training initiatives will result as a positive ROI on your organization s income statement. Dr. Sandra L. Torres Leadership authority and founder of Leadership Si (see) offers bilingual leadership expertise via her writing training programs workshops and speaking engagements. Become an extraordinary leader www.leadership-si.com November 2012 December 2012 Develop great leadership skills. For more information contact her at drsandi leadership-si.com 16 www.cubusiness.com Union BUSInESS Credit 21 Credit Union BUSiNESS www.cubusiness.com markETIng maTTErS Loan growth By Tony Rizzo strategies for success Turn Good ideas into solid Results Ask any credit union marketing professional what his or her goals are for 2013 and one word is sure to come up over and over again more loans. Ask what his or her strategies are for acquiring those loans and you are likely to get a wide variety of answers. In this article I will describe three credit union campaigns that successfully generated loans of various sizes. Along the way I ll examine the strategies that drove these results and some key principles that can help you generate significant profits for your credit union. program and applied some distinctive strategies to insure a successful outcome. Strategy 1 Narrow down your mailing list The credit union used its MCIF to identify members who had auto loans elsewhere and who could save a minimum of 30 a month by refinancing. By focusing their mailing list the credit union was able to reduce marketing costs while boosting response rates. Trade in your car payment (Figure 1) A personal targeted message gave specific information to encourage auto loan refinancing. This 865-million credit union realized that its current Strategy 2 Make a personal specific offer Further credit research enabled the credit union to offer a specific rate and quote monthly payments and annual savings to each targeted member. Rather than saying We can save you money the letter read Here is exactly how much we can save you in a year. Obviously this is a far more compelling offer. The results of the campaign were outstanding. With 2.1 million in new loans the credit union gained more than 78 000 of annual income. The initial goal of 47 new loans was more than doubled and the ROI for the program was 501%. Take out a new credit card Figure 1 (Figure 2) A multi-channel approach reversed a declining trajectory of credit card balances. A small credit union noticed that credit card penetration had been stagnant for almost 12 months and total portfolio balance was declining slightly each month. Eager to reverse this trend they developed a summer campaign with some simple but effective strategies. Strategy 1 Repeat yourself Rather than mailing a single piece the credit union developed a series of mailers with increasingly urgent calls to action. Each target household received three mailers over a six week period. Statement inserts and lobby banners added even more exposure for the campaign. members represented a sector with huge potential for increased revenues through auto loans. Because a relationship of trust already exists the likelihood of successful cross-selling increases dramatically. The credit union launched an auto loan recapture Strategy 2 Add a little temptation With tight competition for every dollar in loan or credit card Credit Union BUSInESS 17 www.cubusiness.com December 2012 markETIng maTTErS Figure 3 Figure 2 balances incentives can give you a competitive edge. While we don t recommend buying business in unprofitable account segments for this credit union a double reward point offer was a cost-effective way to increase responses. In addition to bringing in 27 new credit card accounts the campaign generated more than 1.4 million in indirect loan balances. Overall for every 1 spent 9.38 in new credit card balances was gained. Strategy 2 Use technology for easy tracking The use of personal and generic URLs made it easy to manage and track the process. Email alerts were automatically sent to staff members who contacted potential new members by phone or email. The targeted households in the direct mailing increased the CU s deposits loans and average profits. With a greater than 2 percent response rate the credit union achieved a return of 14.16 for every 1 it spent. Refer a Friend (Figure 3) A loan referral program serves a dual purpose bringing in new members and expanding the credit union s loan portfolio. If you re looking for new members and new loans your current members just might be the best place to start. This 400-million financial institution struggled with unrewarding prospecting efforts and complex referral programs in the past so they refocused on strategies that would make the program simple and effective. Strategy 1 Make it Easy to Respond Customized points of contact included personalized URLs with simple response forms pre-populated with the current member s name address and contact information. In addition to direct mail and email contacts loan officers provided referral cards at point of sale that included a generic URL that anyone could use. six Principles to Remember There is a big difference between a generic scattershot marketing approach and one that is targeted timely and personal. If you want to make the most of your marketing dollars and produce results that are both impressive and measurable use the six strategies outlined below to begin building an effective campaign. 1. Start with a tightly defined mailing list and leverage your data to focus on the most likely respondents. Try to identify members most likely to be interested in your offer and then communicate with them. It s a simple but essential first step. 2. Make sure your offer is personal and specific. Again the use of data is critically important. How much money can you save me What will my new payment be Why should I refinance my loan Answer these questions and you will get my business. 18 Credit Union BUSInESS December 2012 www.cubusiness.com markETIng maTTErS As you strategize for success in 2013 and beyond remember that paradoxically the end is often the best place to start. Think about your goals first and foremost what do you want to achieve Drill down to concrete numbers to clearly define your goals then work your way backward to identify the strategies that are most likely to 4. Sweeten the deal with an incentive wherever appropriate. De- work for you. Who will you target Who is most likely to respond velop offers--such as 90 days with no payments or extra credit What s the best way to communicate with them Refine your stratcard points--to encourage responses while being mindful not to egies even more as you begin to build the details of the campaign. Is an incentive a good idea Are there technologies that will make use this as your primary business driver. the process easier Which technology best delivers your message Most credit unions want to make new loans. Most market5. Make responding easy. Include a clear call to action and a simple response mechanism. Design your direct mail and emails ing professionals can come up with ideas for loan promotions so that the call to action is a prominent focus. Whatever action you but few understand the interplay between ideas and strategy. With a strategic approach to marketing you can turn ideas into want the recipient to take should be made clear and simple. results--and use those results to achieve greater success. 6. Use technology to gain responses and measure results. PURLs landing pages and QR codes make gathering electronic Tony Rizzo is the general manager and creative director of responses easy. Consumers are also becoming accustomed to in- MARQUIS Software Solutions. MARQUIS is the largest provider teracting with offers via smartphone so it s important to leverage of MCIF CRM solutions to credit unions world-wide with a longstanding reputation for excellence. that technology as well. 3. Don t be afraid to repeat yourself. Send a follow-up mailing. Use a series of email reminders. Broaden the scope of a campaign with inserts banners posters and other collateral. Multiple exposures help spread the word. 00000000 It s nice to pay less. Refinance your auto loan and save up to 200 on your payment. Dear Carson Could you use an extra 200 in your budget each month It s easier than you think. Smart Financial Credit Union has pre-approved you to refinance your auto loan and if we can t save you money we ll give you 100 You re pre-approved for a rate as low as 3% APR. With our low rates and terms up to 72 months you can have a brand new payment quickly and easily. The minimum loan amount is just 5 000. Why pay more than you need to Refinancing your auto loan is a smart move. There are no refinancing fees so your savings will start right away Just say Yes We re ready to handle all the details. Call us at 800.392.5084 (select option 2) or visit the secure personalized website below to take advantage of this offer. Questions Just call or stop by any branch. Double your loan volume by communicating with members who have loans at other financials. Our proven strategy will add loans to your portfolio today. ri-bureaureviewofmembers T loansoutsideofyourCU. orldclassdirectmaildesign W andproduction. 30 000 PLUS Pre-approved for 455 PLUS Monthly payment as low as 200 OR Monthly savings up to 100 800.555.5084 (select option 2) Savings guarantee www.personalURLforCarson.com You can choose to stop receiving prescreened offers of credit from this and other companies by calling toll-free 1-888-567-8688. See PRESCREEN & OPT-OUT NOTICE below for more information about prescreened offers. NOTICE SEE REVERSE SIDE FOR TERMS & CONDITIONS OF THIS PRE-QUALIFIED OFFER. Letter Template Tony Rizzo at 214.778.3037 tonyr gomarquis.com GoMARQUIS.com MARQ73-05-11-06202011 CU Ad www.cubusiness.com December 2012 Credit Union BUSInESS 19 SECUrITy Cyber Security as a Competitive advantage for Credit Unions few weeks ago Defense Secretary Leon E. Panetta warned that the United States is facing the possibility of a cyber-Pearl Harbor and has become increasingly vulnerable to foreign computer hackers who could dismantle the nation s power grid transportation system financial networks and government. The warning came in the middle of a two week time frame when cyber attacks on the biggest U.S. banks including JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) breached some of the nation s most advanced computer defenses and exposed the vulnerability of its infrastructure. For credit unions and community banks an attack does much more than cause customer inconvenience it could cripple electronic customer channels and prevent members from accessing their money or worse. The nature of these attacks was massive and sophisticated enough that even the largest financial institutions found it difficult to defend against the attacks which rendered their online banking services unresponsive and unusable for many hours. While this was certainly an inconvenience for customers the full extent of the damage may not be known for weeks or even months. 20 Credit Union BUSInESS A By Jeff Carter Chief Strategy Officer of EyeLock Corp. Mr. Panetta also argued against the idea that new legislation would be costly for business. The fact is that to fully provide the necessary protection in our democracy cyber security must be passed by the Congress he told his audience Business Executives for National Security. Without it we are and we will be vulnerable. With the current cyber security legislation stalled in Congress President Obama is weighing the option of issuing an executive order that would promote information sharing on cyber security between government and private industry. But this is simply a stop-gap measure not a solution and many will likely argue that the regulatory burden is already stifling. After the election the new administration needs to make this top priority for both job creation and national security. Many of the recent regulatory actions including the DoddFrank Act were intended for the good of the banking industry www.cubusiness.com December 2012 SECUrITy but have had adverse impacts on the credit union model. The industry should not wait for the next regulatory fix. The cyber security issue is only getting more complex and we need CEOs of the credit unions and community banks to take a leadership role in putting an end to this. One solution that will help pave the path to cyber security success secure identity authentication. Bill Wansley senior vice president of strategy and technology at the consulting firm Booz Allen Hamilton put forth a concept in American Banker urging the banking industry to adopt standards and common means of identifying customers. I believe this concept with small modifications for the community banking model could provide unique capabilities and strategic advantages simultaneously. Today with technology outpacing regulation and the banking industry s data and infrastructure constantly under threat of cyber attacks the time is right for credit unions to come together in a powerful show of force to formulate a comprehensive industry-wide approach for measuring monitoring and communicating threats and identifying members. Establishing a common identifier will allow credit unions to protect their greatest asset--their members--and quickly identify understand and share information about threats plan for different scenarios and build the necessary systems to effectively defend their interests. Currently at credit unions of all sizes the discussion of cyber risk is happening on three levels Boards discuss threats in the context of risk management and corporate reporting Senior executives determine the resources needed to mitigate risk and protect the firm s long-term performance and Technical teams develop new processes and integrate solutions to solidify their security operations. These are worthwhile conversations and third-party stakeholders will undoubtedly find the results beneficial. Only a common language that encompasses the identity of members technology and risk analytics along with business processes and engineering and human capital development will provide the multidimensional approach necessary to leverage the best in technology people and processes. Without a unified collaborative approach the costs will be high and timelines long. Firms will quickly fall prey to cyber espionage and attacks if they continue to use the old identity and security models. Wall Street is continuously bombarded by cyber aggressors attempting to steal or disrupt merger plans personal financial data or even the technology that keeps the New York Stock Exchange Nasdaq and brokerage firms running. Credit unions and community banks are already offering a service and business model that is unmatched in larger banks. Imagine the possibilities of a member network that was ultra-secure. Why would anyone want to bank at a place that continually charged high fees but was not secure or continually breached Credit unions should come together in an effective manner to create an ultra-secure truly members-only environment. This would provide the long-term risk mitigation required in today s environment while also creating a compelling member value and truly differentiated it from vulnerable banks. If you don t keep your members safe somebody else will. www.cubusiness.com December 2012 Credit Union BUSInESS 21 viSiT The markeTPLaCe Page aT www.CuBuSineSS.Com Marketplace Card Processing Payment Solutions Branch Services Coin Counters Coin Counters Branches still matter Bancography builds branching strategies Branch site analysis Current branch performance Branch network optimization Branch profitability Staffing review Sales goals www.bancography.com branch info bancography.com 205.252.6671 for adverTiSing informaTion Call GreG Halpern 561-282-6015 4 GreG Cubusiness.Com Marketplace Insurance Services Facilities & Design Lending A Nationwide Lender with the Expertise to Get Your Deal Closed Business Partners is a nationwide provider of commercial real estate lending services with years of experience funding loans. We provide financing for most property types in primary and secondary markets Loan amounts of 500K to 20MM Competitive rates Terms of 3 5 7 or 10 years 25 year amortization Up to 75% LTV of appraised value or purchase price of the loan amount Loan fees 1% Atlanta GA - Los Angeles CA - Chicago IL - Dallas TX - Denver CO - Stamford CT CU SPOTLITE fraud Prevention and Text alerts at Eli Lilly Federal Credit Union F By Sharon Sweda to 41 888. SEGs were increased to 26 and while membership growth flourished ELFCU continued to emphasize its electronic platform as well. Technological advances include mobile apps for Android and I-Phone users same or next day bill-pay person to person transfers through ZashPay remote deposit capture and many other mobile advances that keep Eli Lilly right in step or ahead of many alternative financial institutions where services come with high costs and user fees. Of course not all members participate in text-banking or electronic deposits and Eli Lilly doesn t lose sight of traditional services to keep step with their technological focus. They ve expanded branch hours and added branch locations as well as a 24-hour telephone assistance operator through an affiliation with TMG. Electronic access aside sometimes only a human will do. Golden-Bishop explains the proactive platform at ELFCU as she tells how the transition was communicated. It took four to six months for the conversion. We sent three communications to members. We first announced the change the second announcement included a copy of our terms and conditions and the third included our timeline for execution. We reissued all credit cards and the previous ones were effective until 7 00 a.m. May 6 2012 when new cards were activated she explains. ELFCU is all about member products and services. The newest perk Photo Card rolled out in December. Members download photos or pictures to personalize their credit card. Each is permitted one free photo change per year. Nifty products are fun but Eli Lilly recognizes its ability to keep an eye on consumer spending patterns as well. By tracking credit habits Golden-Bishop hopes to further promote and tailor services that fit. It is all about a better customer experience Golden-Bishop concludes. Sharon Sweda is a freelance writer who has worked in the real estate and finance industries for the past 28 years. Co tact Sharon at SharonSweda SwedaSweda.com to SpotLite your CU. www.cubusiness.com raud. Small word big problem and one that has increased 87 percent since 2010 at a cost of more than 6 billion annually. Prevention is tough but credit unions and other financial institutions are taking aggressive action to identify and thwart potential risk by combining the efforts of new technology and quick response. The credit department at Eli Lilly Federal Credit Union is one such institution. ELFCU recently made the decision to reinstitute credit card servicing after almost 10 years of outsourcing causing ELCFU to take deliberate measures to provide both security and seamless transition for its members. I was hired specifically to convert the program from its previously outsourced platform and to manage it as it moved forward said Susie Golden-Bishop credit card manager at ELFCU. So much had changed since ELFCU last managed their own credit card division and they recognized the need to hire someone with timely experience. In conjunction with the placement of a skilled facilitator ELFCU partnered with TMG Financial Services for a host of products to assure top-notch service. TMG offers great products and an incredibly secure safety net Golden-Bishop said. We recently added their mobile text alert for members when a transaction is flagged as suspicious. Texting is fast and enables members to confirm or decline a transaction almost immediately. In the past cardholders would not have gotten potential fraud information until they returned home to retrieve phone messages and credit privileges would have been frozen until clarification. Needless to say this new system creates a better experience for members. Credit card security is just one of many services that Eli Lilly-- twice voted Best Place to Work in Indiana --offers members of the credit union. In a continuing sluggish economy ELFCU sustains continued growth and their emphasis remains focused on a value-driven rates and fee structure. Growth is evidenced by ELFCU s addition of 3 536 members a 6.89-percent increase and brought overall membership 24 Credit Union BUSInESS December 2012 Managing Payments Driving Solutions We re Vantiv. Dedicated strategic professionals with 40 years of experience developing innovative payment processing solutions for financial institutions and merchants. We o er an extensive suite of debit credit prepaid ATM and merchant services to provide you with new sources of revenue. And we ll help protect your business with our comprehensive data security and fraud prevention solutions. Our people technology and partnerships are the Vantiv di erence. Let s discuss your future success. Let s Talk Payment Processing 866.622.2201 vantiv.com cubm Expect More. Copyright 2012 Vantiv. All rights reserved.