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THE c rEdIT c a r d IS S U E January 2013 VOLuME 8 ISSuE 1 9.95 It s Time for Credit Unions to Put Insurance Aisles in Their Stores Industry Information A Step Toward Mitigating Loan Risk & Building Relationships Growing Younger How Accentra CU Successfully Courts 18-35 Year Olds cONTENTS Credit Union BUsiness jaNUarY 2013 V O L U M E 8 I S S U E 1 3 6 8 Pov Free Advertising Tim O Hara AChIevIng SkIllS 20 23 member reTenTIon Member Relationship Management . . . Today Steve Jost CU ConTenT Thank You Holly Herman CU UPdATe Avoid Creating an Atmosphere of negativity Growing Younger Laura Enock How Accentra CU successfully Courts 18-35 Year Olds industry information A step Toward Mitigating Loan Risk & Building Relationships IBISWorld Industry Analysts Agata Kaczanowska and Lauren Setar 28 32 mArkeTIng mATTerS Top 10 Methods To Track Your Marketing Performance. Tony Rizzo CU SPoTlITe Sharon Sweda 12 15 17 leAderShIP Leadership Resolutions to Keep in 2013 Ten Resolutions for the 21st Century Leader Dr. Sandra L. Torres InnovATIon Having Heart it s Time for Credit Unions to Put insurance Aisles in Their stores Jeffrey Cheskey President & CEO Insuritas Cfo CUrrenCy Get it for the entire executive team www.creditunionbusiness.com subscription What is a Black swan event is Your Financial institution Ready for the next One Emily Hollis www.cubusiness.com January 2013 credit Union BUSINESS 1 aBOUT US Publishing Team Tim O Hara Publisher tim cubusiness.com Steve Magnuson editorial Director steve creditunionbusiness.com Iliana Nord Operations Manager iliana cubizmag.com Patti Manzone Designer Homer Marshman Circulations Manager THE C REDIT C ARD IS SUE JANUARY 2013 VOLUME 8 ISSUE 1 9.95 It s Time for Credit Unions to Put Insurance Aisles in Their Stores Industry Information A Step Toward Mitigating Loan Risk & Building Relationships Staff Writers Holly Herman Achieving Skills Emily Hollis CFO Currency Sharon Sweda CU SpotLite Growing Younger How Accentra CU Successfully Courts 18-35 Year Olds 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 Jeffrey Cheskey Laura Enock Steve Jost Agata Kaczanowka and Lauren Setar Tony Rizzo 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 January 2013 www.cubusiness.com FROM TiM Publisher s POV new Year Meets new CUB editorial Director steve Magnuson I ve been very proud of each and every issue of Credit Union BUSINESS going back to Volume 1 Issue 1 in July 2006 but I have a feeling things are going to get even more interesting around here now that Steve Magnuson has taken over the helm as our new Editorial Director. Following a career of publishing major business book titles--as well as many non business books fiction and nonfiction--for such major publishing firms as Random House HarperCollins Crown Publishers and Sterling Publishing Co. where he served in senior publishing positions Steven E. Steve Magnuson has joined Credit Union BUSINESS magazine as Editorial Director beginning with this issue. Steve is a seasoned publishing executive who will bring new insight to both CU BUSINESS and the credit union trade publishing industry as a whole. His body of work reads like a who s who in business titles. Steve has published such recognizable business authors as Peter Drucker Suze Orman and Deepak Chopra. The mission of Credit Union BUSINESS has always been to become the Forbes or Steve Magnuson Fortune magazine for our growing audience of more than 8 000 credit union professionals. I know that Steve Magnuson has the talent energy and professionalism to carry us toward our goal of being the dominant provider of BUSINESS information to the top decision-makers within the credit union industry We re always looking for new information and should you have any ideas or suggestions for our editorial content please feel free to contact Steve. His email address is steve cubusiness.com. 4 credit Union BUSINESS From the i wish i d thought of that file Free Advertising A couple of weeks ago my wife and I stopped at a Sunoco station to fill up our car s gas tank while on an out-of-town visit. I turned on the pump and was watching the dollars fly by when I noticed a neat stack of papers carefully piled on top of the gas pump. I grabbed the top sheet of paper turned it over and much to my surprise saw that it was a bumper sticker featuring the bright blue and yellow Sunoco logo. My first thought was What a stupid idea--who would ever put one of these on their car Well it seems as though quite a few people would I now see those blue and yellow stickers everywhere every day and on every kind of vehicle--cars pickup trucks service vehicles and even on the back of a few semi truck trailers You might want to consider investing a few of your CU s marketing dollars on logo stickers and pile them up throughout all branches Thanks for reading January 2013 www.cubusiness.com acHIEVING SkILLS Avoid Creating an Atmosphere of Negativity Thank You By Holly Herman I recently attended a panel discussion and was reminded of the power of appreciation. The panel consisted of people who represented charitable foundations. When asked what was the most important fund raising lesson they ve learned the panelists unanimously answered Remember to thank your contributors Wow It s so simple and yet so powerful. How many times do you say thank you each day week or month How do you show your appreciation to those around you How do you show appreciation to your members Appreciation can become second nature for you although just as with any habit learning must begin with deliberate action. Incorporate at least one of these tips in your everyday practice. a hand written note is so unusual that your gesture is sure to be noticed and remembered. Tip 2 Practice. Set a goal to verbally appreciate at least five people each day (more if you can) and make sure to be specific in your thanks. A simple thank you is nice but a thank you with specifics gets remembered. Tip 3 Appreciation journal. Write down five things that you are thankful for at the end of each day. This is a powerful way to ensure a positive attitude. Tip 4 Social media. Retweet a good tweet. Thank someone who is following you. Comment on a Facebook post. Congratulate someone on a new job through LinkedIn. Thank someone who has connected with you. You will get noticed. Tip 1 Snail Mail. Always try to send a hand written thank you note to any colleague who buys you lunch dinner drinks Tip 5 Personalize. Go the extra mile at least once a week. or gives you a great lead or bit of advice. Nowadays receiving It may mean bringing in treats for your staff sending a colleague 6 credit Union BUSINESS January 2013 www.cubusiness.com acHIEVING SkILLS their favorite candy or clipping a newspaper article that you your habits When was the last time you told your boss they are know someone might be interested in. Get creative taking a few great to work for Appreciation can happen from the top down side to side or from the bottom up. moments to do something extra will show that you care. Tip 6 Reconnect. Is there someone you haven t talked to in awhile Pick up the phone or send an email just to say you were thinking about them. It s a great way to build and maintain your network. How do you show your appreciation What are some of 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. www.cubusiness.com January 2013 credit Union BUSINESS 7 cU UPdaTE A Step Toward Mitigating Loan Risk & Building Relationships By IBISWorld Industry Analysts Agata Kaczanowska and Lauren Setar Industry Information 8 credit Union BUSINESS January 2013 www.cubusiness.com cU UPdaTE lthough lending risk should be a major concern for credit unions especially in small-business loan departments few credit unions provide their employees with the appropriate tools to properly build and diversify their lending portfolios. The time that employees have to assess business loans is increasingly limited as competition with other financial institutions such as big banks escalates. Having appropriate industry and risk information at hand allows employees to quickly and easily undertake fundamental risk analysis and facilitates the kind of leadership skills that helps build and strengthen member loyalty. Many lenders turn to industry research reports which offer quick accurate and easy to understand analyses of most clients operating environment instead of using an informal search method--like Google--to identify growth potential and trends within a given market. Using existing unbiased industry analysis as a starting point for risk mitigation business development and customer service helps credit unions save time and money while assisting them in making better business and lending decisions. A Having good risk information facilitates business loan evaluation as well. credit unions can use risk scores assigned to each industry to identify the level of industryrelated risk for a specific company. able to credit unions looking to diversify their small-business lending portfolios. Having good risk information facilitates business loan evaluation as well. Credit unions can use risk scores assigned to each industry to identify the level of industry-related risk for a specific company. For example IBISWorld Risk scores are calculated based on an industry s current and expected operating environment. These scores which were developed in collaboration with the Risk Management Association (RMA) combine the three components of risk structural growth and sensitivity risk. Structural risk is calculated using an industry s fundamental operating environment like barriers to entry competition and technological change while growth risk is based on changes in revenue and sensitivity risk is tied to an industry s external drivers. Risk scores take the guesswork out of evaluating risk for a specific industry and when used with company statements and evaluations present a more complete picture to loan evaluation officers. Risk Mitigation Using risk scores to balance and diversify loan portfolios Credit unions mitigate risk through loan portfolio diversification. To achieve diversification they need to know all of the factors that tie individual businesses together which is especially critical when managing small portfolios where each additional loan can lead to portfolio imbalance. By knowing how similar businesses are performing along with their upstream and downstream counterparts credits unions can ensure that their loan portfolios are not too heavily dependent on single supply chains which is an indicator of low portfolio diversification and heightened risk. Industry reports highlight not only situations that individual companies face within their own industry and supply chain but also spotlight outside factors that can tie diverse businesses together. Business environment reports can become key external drivers of industry performance. Understanding the external causes that affect an entire industry will make it easier for credit unions to study unsystematic risk or risk that occurs within industries that react similarly to outside factors such as environmental or regulatory trends by connecting those industries that share these key external drivers. This information is also invaluwww.cubusiness.com Business Development Reaching new Markets With industry Research as a Guide Industry research helps credit unions better understand what is in their existing lending portfolios and gives them the information they ll need to achieve their growth potential. Most credit unions focus on specific areas of interest but CUs can use industry research to reach new markets by allowing them to quickly identify potential lending opportunities by matchcredit Union BUSINESS 9 January 2013 cU UPdaTE Customer service Understanding the Market That Clients Operate Within Industry research allows companies to take advantage of opportunities within their clients space by identifying key success factors growth drivers and growing markets or product segments. Credit unions look at industry research to understand market conditions when they investigate a borrower s ability to repay a loan. Credit unions are able to assess whether or not borrowers are taking the necessary steps to remain competitive and successful. To help clients prepare for the challenges an industry faces industry research can provide valuable information on market size and competition as well as assist in drafting business plans pitch books benchmarking forecasting business valuations litigation support and due diligence. Using industry research allows credit unions to better understand any industry and its potential for success or failure. In many cases this research also reviews an industry s key success factors and drivers to explain how successful businesses operate. ing lending criteria with industry performance. CUs can use industry research to screen for industries exhibiting a certain average profit capital intensity risk competitiveness technological change etc. Time spent researching new markets and potential loans is critical especially to small credit unions with limited personnel and industry research provides an efficient solution to quickly understanding markets helping CUs target the appropriate markets for business lending portfolio diversification. Portfolio managers use industry research to identify risky sectors or potential supply chain issues. For example if retail risk scores rise CU loan officers may be advised to avoid that sector and focus their portfolios on areas with less risk. Portfolio managers can analyze additional risks that can influence the probability of default once they have identified the industries that a client buys from and sells to. A portfolio manager with several loans to auto parts retailers for example should be aware of other industries that affect the auto parts retailer supply chain such as auto manufacturing and auto parts wholesalers. Industries that supply auto parts manufacturers such as iron and steel manufacturers and metal stamping companies also influence risk. When a portfolio manager analyzes the overall supply-chain risk he can highlight those industries with risky suppliers and customers and avoid potential defaults in his portfolio. 10 credit Union BUSINESS Consistency Using the same tool across lending roles and activities Using a single resource for industry research gives a credit union a consistent baseline across departments and staff which streamline the loan process by minimizing errors and eliminating research redundancy. In other words there s no guesswork and all employees have immediate access to the same information and fully understand the sources that their colleagues used to compile research. Why industry Matters Several studies have found that industry effects contribute directly and significantly to the success of an individual business. According to a paper authored by Schmalensee in 1985 industry effects account for 20% of the overall fluctuations in January 2013 www.cubusiness.com cU UPdaTE business-segment profitability. This statistic was verified through comprehensive data and enhanced statistical analysis by McGahan and Porter at Harvard University in 1997 which study ended up with a similar figure of 19% (please refer to the individual studies for specific results). Therefore credit unions using industry research are able to efficiently diversify their portfolios with unbiased information by viewing loans within the scope of industry research. Considering that this can affect performance by 19-20% industry research can significantly affect each business s performance and their ability to repay your loan. Harnessing industry data and business environment statistics enables small lending institutions to mitigate risk through improved portfolio diversification and client retention. Industry research including risk information allows employees to examine industries in a prompt precise and simple manner to in order to better understand their clients operating environment. Credit unions use industry analysis to save time and money while observing risk enhancing business development and improving customer service. About IBISWorld Inc. Recognized as the nation s most trusted independent source of industry and market research IBISWorld offers a comprehensive database of unique analysis and information on every US industry. With an extensive online portfolio valued for its depth and scope the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles IBISWorld serves a range of business professional service and government organizations through more than 10 locations worldwide. For more information visit http www.ibisworld.com or call 1-800-330-3772. www.cubusiness.com January 2013 credit Union BUSINESS 11 LEadErSHIP Leadership resolutions to keep in 2013 Ten resolutions for the 21st century Leader T By Dr. Sandra L. Torres here s a new dynamic that 21st century leaders need to recognize and accept. Today s leaders need to do more than just resolve to be better leaders. They need to execute their New Year s resolutions and follow them through until the next New Year arrives and the cycle begins anew. Leaders will also need to carry out their resolutions in very specific ways in order to live and maintain the paradigm that will keep them on that road to leadership greatness. Leaders who recognize the specific differentiators and resolve to develop new techniques to take advantage of them will be the ones who thrive and land on top of the heap in 2013. The principal focus will not be on the leader but on the people being led. This is the one factor that will ensure a leader s success. As people have a much higher level of complexity than any process or policy resolutions for the coming year will then need to be pointed specifically towards people. Three leadership practices that will form the foundation for successful relationships with followers are the ability to listen with empathy assert with clarity and act with integrity. Providing a leader already possesses these characteristics the path to forming and adhering to resolutions for the New Year should be effortless. Below are ten resolutions gathered from various leadership experts that I believe are a fantastic starting point for leaders who are serious about excelling as a 21st Century leader 1. Become a trustworthy mentor. Mentorship is a critical component of your development as a leader. The essence of effective mentoring is developing a trusting relationship between the mentor and mentee. 2. Provide leadership development for your group. This will allow your team to reflect on the values and characteristics necessary to define themselves as leaders the difficulties they are facing and the long-term impact they hope to have. 3. Develop a high sense of cultural sensitivity. It has never been more important to get global experience. In the future cultural sensitivity will be a more important characteristic for leaders than pure intellectual ability. Having a global mindset and the ability to collaborate effectively across cultures are essential qualities for aspiring leaders of all organizations. 12 credit Union BUSINESS January 2013 www.cubusiness.com LEadErSHIP 4. Enable encourage and empower teammates. Give them the freedom to make decisions on their own and do not disable them by micro-managing. Encourage creative ideas such as reducing workloads job sharing or help to remove the stigma of remote by allowing some staff to telecommute. 5. Inspire every single day by leading with real purpose. Inspirational leaders feel passionately about the vision and mission of the organization and have the ability to enlist others in their dreams. They are also able to share that passion in a way that enables others to feel passionate as well. 6. Celebrate your success with your employees. Always allow time some time to pause and appreciate your accomplishments and those of your team. Celebrating with those who have contributed in helping you achieve a milestone makes it even more special. 7. Be a role model. Modeling the way is simply the leader doing what he or she expects the followers to do. Create standards of excellence and then set an example for others to follow. The Golden Rule always rules 8. Connect with those you lead. Smart leaders spend their time starting or advancing conversations not avoiding or ending them. The more you engage others the better leader you ll become. It s nearly impossible to engender the type of confidence trust and loyalty a leader must possess without being fully engaged. Embrace technology and be the first to recognize that smartphones and tablet devices can be used not only for exploring new opportunities but also for interacting with employees. 9. Reduce meeting time. Some organizational leaders seem to thrive on meetings not considering the effect on their Mentorship is a critical component of your development as a leader. The essence of effective mentoring is developing a trusting relationship between the mentor and mentee. team s productivity. While meetings may make some people feel they are moving the ball forward the best leaders know better. Good leaders want the team on the playing field and not in a meeting room. 10. Champion change. Leaders can become even more effective innovators by working on their ability to foster change. There s no value in innovation measures that maintain the status quo. Innovation and change together can provide your team with the great ideas that propel organizations in a new direction. Also leaders that eliminate fear from the workplace by encouraging open dialogues and the flow of good or bad news show compassion tolerance and empathy are embracing this new leadership paradigm. These are people who receive joy from leading and being a leader. This sense of enjoyment which can also be fun will spread like wildfire to all who cross their path. These leaders will have a compelling powerful and irresistible effect on those whose lives they touch. Finally leaders should understand that good leadership behaviors begin at home. Resolutions which focus on family reflect www.cubusiness.com January 2013 credit Union BUSINESS 13 LEadErSHIP on career resolutions and will align their home and work life. Everything involving people suddenly becomes easier. Remember leadership is not about personality it s about behavior--an observable set of skills and abilities. Therefore this New Year those responsible for others should embrace their inner guidance abilities and indeed be resolute in embracing the new dynamics of the 21st century leader. Happy New Year and Lead Well lEADErSHiP ensure that leaders develop skills in this area. Take this Thanksgiving season to make your workplace theCentury and use evTen Resolutions for the 21st exception Leader ery opportunity to a trustworthy mentor. 1. Become demonstrate your 2. Provide leadership development for gratitude to your your group. team. 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 and leadership consultant that Author speaker a difference and Miami-based Dr. Torres hasefforts are noticed around the their researched leadership practices by world. More than 20 years of experience in the credit union those with power. industry has made her an ardent believer and practitioner of the credit union philosophy people helping people. Leadered message will bring you success in employee motivation as ship Si offers bilingual leadership expertise via her writings well as in building a positive productive workplace.Her specialtraining workshops and speaking engagements. ty isFor many leadership. Get to appreciation is part visiting women s leaders employee know her better by of their DNA but for others it can be a scarce commodity. in fact many leadership-si.com. organizations are offering leadership development training to 3. Develop a high sense of cultural sensitivity. Author speaker encourage and empower 4. enable and leadership teammates. consultant Mi5. inspire every single day by leading with ami-based Dr. real purpose. Torres has researched leadership practices around the world. More 6. Celebrateof experience in with yourunion industhan 20 years your success the credit employees. try has made her an ardent believer and practitioner of the credit7. Be philosophy people helping people. Leadership union a role model. Si offers bilingual leadership expertise via her writings train8. Connect with those you lead. ing workshops and speaking engagements. Her specialty is 9. Reduce meeting time. women s leadership. Get to know her better by visiting lead10. Champion change. ership-si.com. 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 November2013 January 2012 Develop great leadership skills. For more information contact her at drsandi leadership-si.com 14 www.cubusiness.com Union BUSINESS credit 21 Credit Union BUSiNESS www.cubusiness.com INNOVaTION It s Time for credit Unions to Put Insurance aisles in Their Stores F By Jeffrey Cheskey President & CEO Insuritas We all know that credit unions typically rate near the top of the trusted advisor scale while insurance agents and carriers don t do nearly as well. And we all know that insurance is the only financial product that 100% of your members purchase every year year in and year out. It is an opportunity Credit Unions cannot afford to miss. or decades credit unions have treated insurance products as the redheaded stepchild to their core business. Pressure on net-interest margins the need for fee income that comes from helping members not dunning them the focus on member retention by increasing products per household and the major jump in on-line banking utilization rates are all factors causing a few innovative Credit Union CEO s nationally to rethink insurance. Phil Tischer the COO of Fairwinds Credit Union put it best The one financial product that 100% of our members purchase every year year in and year out is insurance. Our goal at Fairwinds Insurance is to have a permanent insurance aisle in our stores so our members know that when they need insurance Fairwinds Credit Union s Insurance Agency can provide for all their insurance needs. The elephant in the Room (aka Branch) Ask your teenagers where they would go to buy insurance. Now take a moment to imagine their response. As I write this I don t remember how much GEICO spends on advertising direct to consumers--let s just say there are a lot of zero s involved-- and like any good business model that is trying to help consumers as they vote with their digital wallets they are offering members a chance to buy insurance online. Credit Unions enjoy a member base with more than 40% of members visiting their web sites an average of 6.8 times per month--and consumers report insurance is the leading financial product shopped online. Credit Union insurance Reboot In the summer of 2011 Deloitte published a research paper The Voice of the Personal Lines Consumer which offered a startling insight Four in ten members surveyed reported that they use an agent because they don t trust insurers to deal with them fairly--AND--another four in ten surveyed reported that they bought direct because they don t trust insurance agents to objectively represent their interests. Have you ever seen a better illustration of an opportunity ripe for competitive incursion And who in America is better positioned to offer a trusted and transparent shopping experience for a financial product that every consumer in America has to purchase every year . . . can anyone spell CREDIT UNIONS Caution insurance Aisles Under Construction Here A small but enlightened group of credit union leadership sees this convergence and understands the brand equity and brand trust that their credit unions offer to consumers looking for financial products and services. These same leaders are pioneering efforts to provide pricing and product transparency and realize that if they treat insurance with the same commitment and focus as deposits and loan products they can arbitrage the credit Union BUSINESS 15 www.cubusiness.com January 2013 INNOVaTION and outsourced management of insurance agencies for financial institutions nationally. In 2004 Jack Henry & Associates the nation s leading bank core processing company purchased BIS. (JKHY NASDAQ). In 2008 Mr. Chesky led a group of private investors in a buyout of BIS from Jack Henry and renamed the company Insuritas. Mr. Chesky also pioneered the development of the nation s leading management consulting practice for insurance agency integration strategies for bank acquired insurance agencies post acquisition called the Agency Integration Management Group. Mr. Chesky has over 20 years experience in the banking and insurance fields. Over that time he has served as a Senior Vice President of one of the nation s 100 largest insurance agencies Director of Institutional Investment Management at Mass Mutual Insurance Company and Vice President of mortgage lending at both Fleet Bank and Bank of New England. Contact Info Jeffrey Chesky President & CEO Mr. Chesky was Founder & President of Banc Insurance Insuritas jchesky insuritas.com Services Inc. where he pioneered the design installation consumer anxiety and deep-seated distrust created by insurance agents and carriers. Credit Unions are perfectly positioned to establish themselves as distributors of auto home and small business insurance for consumers nationally. This convergence of events is driving the realignment of traditional insurance distribution models and provides inevitable opportunity. In 2013 we ll start to read more and more about insurance aisles being designed built and managed inside credit unions as credit union executives begin to realize that every time they approve a loan they create an insurance need and that members will welcome the opportunity to purchase insurance coverage from providers they trust. Insurance carriers will begin to recognize the power in the CU brand their trusted role as financial advisors and their sophisticated technology platforms all of which point to credit unions as having the best new shelves on which to display their insurance products. 16 credit Union BUSINESS January 2013 www.cubusiness.com cFO cUrrENcY What Is a Black Swan Event Is Your Financial Institution ready for the Next One By Emily Hollis CFA Partner T The Black swan Theory he black swan theory or theory of black swan events is a metaphor used in describing random surprising events that create some major effect which with the benefit of hindsight are often inappropriately rationalized after the fact. Nicholas Taleb a former derivatives professor of risk engineering at New York University s Polytechnic Institute developed the theory using ideas drawn from an analogy about how early European visitors to Australia never imagining that swans could be any color but white observed black swans. Taleb applied the black swan concept to risk management in his best-selling book The Black Swan The Impact of the Highly Improbable which describes how the world is severely affected by these rare difficult to predict events. The black swan theory only applies to unexpected events of large magnitude and consequence and their dominant role in history. These events considered extreme outliers collectively play vastly larger roles than regular occurrences. Black swan events have three primary attributes 1. They fall beyond the realm of regular expectation 2. They create an extreme impact 3. Human nature makes us concoct explanations for their occurrence after the fact in order to make them seem predictable History shows that black swan events while rare have had significant influence in shaping the world we live in. Examples include World War I the Great Depression the development of personal computers the rise of the Internet the September 11 attacks and the collapse of Bear Sterns and Lehman Brothers in 2008. A real black swan event cannot be anticipated and is unprecedented surprising and catastrophic. The mortgage meltdown was a black swan event because very few saw it coming. Plus there was widespread denial that it was occurring even after it happened when it was too late to stop. With the benefit of www.cubusiness.com January 2013 credit Union BUSINESS 17 cFO cUrrENcY hindsight we now understand that the meltdown was inevitable and somewhat predictable we did not manage the risk. There were some investors who did predict the black swan event in 2008 and capitalized on it. The Big Short by Michael Lewis is a great read. In it Lewis analyzes how a few smart relatively unknown investors began betting against mortgagebacked securities and banks. These investors made billions of dollars for themselves and their investors because they were able to predict this black swan event. 2008 crisis. Government focus on entitlement generally feeds risk denial. At no time in our history have more positions of power been assigned to people who don t take risks and so don t truly understand them. No regulator will know more about the hidden risks of an enterprise than the engineer who developed the vehicles that greatly contribute to the risks. Even in our industry regulators were on site at corporate credit unions but clearly didn t understand the vehicles that they were examining. Prepare For a Black swan by Learning From Risk not Avoiding it Mr. Taleb wrote an article for the Wall Street Journal called Learning to Love Volatility (Nov. 16 2012). In it he discusses the concept of creating institutions that gain from volatility variability stress and disorder. While this may seem counterintuitive Taleb explains stifling natural fluctuations masks real problems causing the explosions to be both delayed and more intense when they do take place. The analogy he uses is when you deprive your bones of stress they become brittle. Institutions learn from both uncertainty and error. Take the example of pricing derivatives practitioners in trial-and-error mode drawing continuous feedback from the real markets developed them. Trial and error beats academic knowledge hands down. Black swan events and enterprise Risk Management Matthew Le Merle writing in the autumn 2011 issue of strategy business magazine (published by Booz & Co.) suggests using disrupter analysis to help assess the risks of future catastrophic events. He writes that enterprise risk management typically does not evaluate the implications of rare events and suggests that part of risk management should include creating a disrupter list--a list of potential black swan events about which management would ask what happens to the company if the events occurred. This is similar to scenario planning. He recommends casting a very wide net when cataloging potential catastrophic events and your financial institution should evaluate the relative impact and consequences of each given catastrophe. Black swan events and Regulation I worry that enhanced government regulation and restriction will not prevent future black swan events. When the government provides a safety net it should be designed to help people take more entrepreneurial risks not to turn them into dependents. Case in point Politicians encouraged GSEs to buy subprime mortgages to help Americans purchase homes but this fed the What Does This Have to Do With The Credit Union industry Nowadays events that are dubbed black swan events are really just rare events that have devastating consequences because we have failed to manage risk. Let s face it a black swan event caused the failure of many corporate credit unions. As I read what these experts have written it appears that apart from the 18 credit Union BUSINESS January 2013 www.cubusiness.com cFO cUrrENcY enormous debt and other factors. We need to build more resilient processes that will be better able to withstand the effects of black swan events because they are likely to continue coming at a more rapid pace. In our industry heightened regulatory scrutiny requires additional testing in the form of net economic value analyses and enterprise risk management. But these tests should not be used simply as ways to appease examiners they are the fundamentals that can and should stimulate discussions on risk given catastrophic events. Sometimes events occur that we know will happen but which we--examiners and practitioners alike--either deny or simply fail to manage. Changing our approach is the first step to preventing risk. If we become more cognizant of outlier risk black swan events will once again become rare phenomena. Emily Hollis CFA is a partner with ALM First Financial Advisors LLC. Sometimes events occur that we know will happen but which we--examiners and practitioners alike--either deny or simply fail to manage. changing our approach is the first step to preventing risk. big corporates our industry has historically performed fairly well partly because credit unions are good at managing risk. However the structure of the world is fundamentally different that it was 20 years ago due to increased interconnectedness and complexity a prolonged period of low interest rates www.cubusiness.com January 2013 credit Union BUSINESS 19 MeMBeR rETENTION Member relationship Management . . . Today H By Steve Jost information gathering and poor product messaging. Ultimately the challenge remains How can you execute strategies by utilizing all available information and deploy it to specific resources in a seamless way that allows an organization to achieve their product cross sell and member relationship goals as well as how can we measure performance. Competition is fierce and strategic growth is critical given the current economic climate. Today s CU members often have multiple financial institution relationships with a variety of options at their disposal. Growth strategies vary from organization to organization but are usually based on new member acquisition and existing member retention. All strategies share the same organic growth goal of expanding their financial relationship with members by cross-selling additional relevant products and services and improving overall member service. Becoming a member centric and sales driven organization requires that business philosophy and process change wrap around the right MRM solution. Many of today s success- istorically Credit Unions have viewed Member Relationship Management (MRM) as a product rather than a process and MRM solutions were considered IT initiatives. Credit Unions looked to their core solution providers for help which proved challenging since the primary design and focus of a core solution is transaction processing. Core solutions are designed to capture member data open member accounts view and report credit bureau information and provide basic marketing and report writing features. Some core providers have also created basic systems for contact management monitoring product sales and tracking employee sales incentive programs. User navigation isn t a primary consideration for these unsophisticated solutions and front line users often have to manually capture data on cumbersome spreadsheets in order to track and report accurately which can require toggling between multiple screens. In addition to being inefficient and time consuming the entire process often yields inconsistent 20 credit Union BUSINESS January 2013 www.cubusiness.com MeMBeR rETENTION ful sales driven Credit Unions have emphasized both process change and building strong sales and service cultures to their Sales and Marketing teams. Mountain America Credit Union ( 3 billion) in West Jordon UT and Rivermark Community Credit Union ( 550 million) in Beaverton OR have realized significant success by focusing on this new trend. Some Credit Unions embed these strategies solely in Marketing while others treat it as a separate entity tightly intertwined with the other member facing operational groups. Nonetheless the goal remains the same manage monitor and execute cross sale and service initiatives. Cross-selling the right product at the right time is critical. Life events--college marriage children retirement etc.--are important trigger points and extremely useful in targeting new business opportunities. Typically this event-based information is captured during new member and loan application processing. But simply capturing the information is not sufficient. It is crucial that this information can be quickly and easily accessed for successful cross-selling business rule analysis and targeted marketing. For front line employee success member information must be automatically presented to the employee without their having to hunt through different screens and fields or having to toggle over to a separate system altogether. Product talking points should be highlighted simplified and easily accessible to bolster employee confidence and encourage relevant conversation with CU members about additional products and services. Information must be consistently presented throughout the entire organization call center teller operations lending departments new account openings etc. to insure maximum success. Members expect employees to know something about them and often look to employees to make product and service recommendations that best fit their needs. The ability to track and assist on service issues is also of paramount importance. Cross-selling a new Debit Card when there is an unresolved checking account overdraft issue is not a high probability sales opportunity. Knowing that an outstanding issue is being resolved when an employee interacts with members increases member confidence in his relationship with both the individual employee and the organization. This stronger relationship increases the likelihood that members will take advantage of additional product offerings and is the glue that bonds long term member retention. Once the strategy tools and culture are in place every aspect of the process needs to be monitored to determine the success rate of referrals turning into sales the retention of a newly sold product over time and which employees could benefit from additional coaching or training. Knowing that four new checking accounts have opened is a relatively meaningless piece of information unless you also know how many qualified opportunities were presented and how long it took to close the sales. Key Performance Indicators (KPIs) need to be established measured and analyzed. A KPI for sales opportunities might reveal that for every 10 qualified sales opportunities presented to each Member Service Associate 6 must turn into a referral. For referrals a KPI could state that of every 10 referrals 8 need to close. For customer support a KPI could insist that all e-statement referrals be acted on within two hours. KPIs give insight into how employees are adapting to the process and if a KPI goal is missed you need to understand why. Either the KPI has been set too high and needs to be adjusted or individual employee performance is poor. If the average Member Service Associate is generating 8 new product referrals daily while a specific Associate is only generating 3 the discrepancy should be researched and understood. It might mean that the Associate is being presented with a below average amount of sales opportunities per day based on branch location member qualifications etc. or it could indicate an Associate s level of discomfort with selling a specific product or products in general. Unless performance can be measured and monitored it is extremely difficult to determine whether discrepancies are due to individual Associate comfort levels their overall training and or coaching or simply a reduced number of available opportunities. Defined KPIs must be in place to insure all opportunities are acted upon and followed through in a timely manner. Manual checks and balances combined with process guesswork produce inefficient results and must be eliminated. If a member initiates an inquiry or a Member Services Associate generates a new auto loan referral timing is critical. The member is clearly in the market now and if no immediate action is taken they are more likely to shop the loan around or rely on the auto dealer to provide funding. If analysis determines that a member was a prime candidate for an auto loan and the opportunity was www.cubusiness.com January 2013 credit Union BUSINESS 21 MeMBeR rETENTION missed or ignored revenue is lost and member glue is weakened. The lead must be identified validated and acted upon quickly. Opportunity is lost when any part of the process breaks down. Sales incentive programs are another popular CU initiative. Referral and sales goals are tied to front line employee compensation and evaluation. Inaccurate and time-consuming manual tracking of both is an ongoing problem for many CUs. CUs continue to rely on spreadsheets and emails for tracking which require Management review before incentives can be paid. This cumbersome and time-consuming validation process wastes time and means incentives are often paid out incorrectly adding unnecessary costs to Credit Unions. Accuracy automation and timeliness are critical to building an efficient process. Having the right MRM system makes incentive program tracking effortless and virtually flawless. Implementing a streamlined and effective MRM is a pivotal step for all CUs striving to gain a competitive advantage over other financial institutions. Maximizing sales enhancing service and executing marketing strategies will enable any organization to perform at significantly higher levels. Synthesizing the efforts of all employees--from front line employees to upper management--is the one of the best guarantees of success. Strategies of retention growth acquisition and cost management are broken into executable functions that can be implemented automated tracked and reported. Most importantly MRM allows Credit Unions to maximize every opportunity and reinforce campaign goals. With a strong MRM in place the service and selling process is seamlessly automated and the strategies goals and expectations of the organization are bundled together in a user friendly and easy to maintain package. Steve Jost is with GoNet USA. Their product Solonis is the premier MRM solution for credit unions. Their customers range in size from 200M to 5B in assets. Steve can be reached at (623) 241-5301 or steve.jost gonetusa.com. 22 credit Union BUSINESS January 2013 www.cubusiness.com cU cONTENT Growing Younger How accentra cU Successfully courts 18-35 Year Olds By Laura Enock www.cubusiness.com January 2013 credit Union BUSINESS 23 cU cONTENT hen Thom Moffitt joined Accentra Credit Union as Marketing Director in March 2012 his predecessor had been at the credit union for over 30 years. While marketing had been handled consistently well up to that point the credit union saw hiring a new director as an opportunity to move its marketing in a new direction. Moffitt began evaluating Accentra s existing membership and found that the average member age was 47 which is lower than national average. He discovered an even bigger surprise when he broke the membership down by age group and saw that the largest group consisted of 20-30 year olds. That s exactly the demographic we wanted to hit Moffitt said. They re our target audience. We made a specific and targeted move to look at the 18-35 year old as the focus demographic. At the time the credit union was spending a large amount on traditional ad media--newspapers and AM radio--but that s not where the 18-35 year old market was. W Moffitt began evaluating accentra s existing membership and found that the average member age was 47 which is lower than national average. He discovered an even bigger surprise when he broke the membership down by age group and saw that the largest group consisted of 20-30 year olds. Last June Moffitt began conducting focus groups to find out what younger members wanted and how they could be reached. It was difficult to find people in this demographic who had the time to come in for six focus groups Moffitt said. He quickly learned that 18-22 year olds most of whom were students had more time in the summer. So from June through August they conducted one and a half-hour long focus groups twice per month with eight participants. The credit union offered a 100 visa gift card to those who participated in at least four of the six sessions. All of the participants attended at least 5 sessions with half of the participants attending all six. Each time the group met they focused on one of six topics personal financial habits brand loyalty targeted services how they viewed the credit union s website how they re using online banking phone apps and what services best meet their needs. Using the findings of the focus groups Moffitt launched an intensive billboard campaign halved the marketing dollars spent on newspaper advertising and completely changed their ad designs. In the past everything had been very text-heavy explained Moffitt. Ads talked about rates home loans and regulations which made sense for a target audience of established families but we were only reaching an older generation. Moffitt created a hipper more modern campaign. Using the tagline A brand you can live with Moffitt showed images of young people tattooed with the Accentra CU logo. It was a novel idea and was very well received. He tested the concept in September which got an excellent buzz going and then started a new member campaign on Facebook along with billboard ads. On Facebook members could enter a contest in one of ten different categories that included a photo contest written expressions of local pride and stories of positive experiences that members have had at Accentra. The Facebook campaign offered ten 50 gift-card prizes one for each category. At the conclusion of the campaign anyone who opened a new account plus all 10 contest winners were entered into a drawing for a free iPad 2. When the contest started Accentra had 99 likes on Facebook. Four weeks later at the end of the campaign the credit union had 272 likes . The credit union then focused on building up its list of member email addresses by reaching out to members with information on financial literacy. It s just another way we can give back to our community Moffitt says. In addition to the 24 credit Union BUSINESS January 2013 www.cubusiness.com cU cONTENT successful campaign the activity on the Facebook page is impressive anything from the credit union with a photo that could be shared--even holiday staff photos--went viral and were copied at least 120 times. The Halloween picture was shared even more with 137 views and virally with 281 views. A total of 455 people saw the credit union s posting. Accentra also participated in advertising at the local high school on a new digital sign located inside the school s gymnasium and was one of only six companies to do so. Accentra s marketing got very visual once it began targeting a younger audience. And it s working. Prior to the new marketing campaign monthly growth averaged around 25 new members in the smaller branch and 100 new members in the larger branch. In the first month of their new campaign Accentra s membership grew by 12 over that average in the larger branch and by 26 over the average in the smaller branch. We almost doubled the average monthly new members in our smaller branch Moffitt said. Even more telling 60% of total new membership was within the targeted 18-35 demographic. Members often mentioned both the Facebook campaign and billboard ads when asked why they thought of joining the credit union so Moffitt knew it had been successful. The power of local focus groups shouldn t be downplayed. It s one thing to have statewide and general information on demographics Moffitt explains. It s another thing to have access to local focus groups where you can get real information and opinions from the people you re targeting. In fact local responses to some questions differed from the readily available state and federal information. For example national statistics show that being green is important to young people but seven out of the eight people in the focus group had no special interest in anything green. Out of the 8 focus group participants two were not members but one non-member joined the credit union as a result of the focus group. So the credit union began shaping their message to appeal to local young adults. For example a small Facebook posting read as follows The Truth About e-statements We here at Accentra Credit Union don t want you to get e-statements because they save trees or time. That s why YOU want to get e-statements. We want you to get them because they save us money on postage and paper. Our owners get every penny we save which is just how they like it. Why can we be so honest about that Because we re not a bank. We re a credit union. Your account with us makes you an owner. So don t let the bank owners profit off of you let YOU profit off of you. www.cubusiness.com January 2013 credit Union BUSINESS 25 cU cONTENT board members have even shown up in Moffitt s office to say they like what he s doing To reach younger members Accentra began a First campaign. Images showed young people in their first home with their first car moving out for the first time starting a new family and with their first child. A TV and radio campaign created to explore these images went over very well. For the cost of running two newspaper ads Moffitt negotiated a media deal that gave Accentra a 30 second spot in each of the recent college bowl games as well as 100 random inserts into other cable television programming for a total of 150 local spots. Moffitt recommends subscribing to Wired magazine as a resource to keep up-todate on what s trending in technology and culture. additionally Moffitt encourages people to frequent websites such as Lifehacker.com and mashable.com. Currently the credit union is following up on their early success by rolling out an integrated message and moving away from the tattoo design while expanding on the brand you can live with theme. One such example is that the credit union now uses teller envelopes that have a series of five designs that include tag lines such as The Brand You Can Grow With or The Brand You Can Do Business With . We re looking at each one as an opportunity to get our message out Moffitt says. We were buying stock envelopes which just had our logo. We called the company and asked about integrating our message. I set it up on their template and they printed it for us. It s a great way to take initiative with a vendor and ask for something that isn t even being offered All the envelopes are in full color and fit right in with the ads they re already running. Moffitt printed up 100 000 pieces about a one-year supply. The cost of customizing the envelopes was about what the credit union was paying for one month of newspaper advertising so it was very affordable. Has there been any backlash Moffitt expected some negative reaction to the tattoo ads but felt it wasn t so offensive that members would leave the credit union. I felt that the number of members who might have been offended wouldn t have been significant enough to outweigh the positive he mused. An overwhelming number of new members said they loved it and couldn t believe it came from a credit union. So even for the naysayers the association was a good one once they saw its positive impact on new membership. Moffitt prepared the phone center for dealing with negative responses but they received very few complaints. no Team As with many credit unions Moffitt is a one-man marketing shop. Previously most marketing had been outsourced. Now Moffitt does the graphic design himself and uses outside vendors to produce the TV and radio ads. 98 % of what we re doing is in-house Moffitt says. Moffitt recommends subscribing to Wired magazine as a resource to keep up-to-date on what s trending in technology and culture. Additionally Moffitt encourages people to frequent websites such as Lifehacker.com and mashable.com. How has the budget changed Because Moffitt reduced spending across the board the increased costs for billboards a subscription to Credit Union Toolbox (important for reaching a younger membership through digital marketing) and ads on the digital sign in the high school gym were still within budget. How about Accentra s board They ve always been very supportive of our new marketing approach especially the tattoo campaign. But since we ve been able to back it up with numbers the board has been especially encouraging. Several Message for credit unions Moffitt urges credit unions not to be afraid of stepping way outside their traditional box. I also recommend that credit unions look into new products that are available. We recently signed up for Credit Union Toolbox. It s a new product and a more recent addition for us but I m already seeing some great benefits 26 credit Union BUSINESS January 2013 www.cubusiness.com cU cONTENT Moffitt says. A large segment of Accentra s members are online--out of 12 000 members 3 000 are using online banking. To leverage these names Accentra took their email list of 3 500 members and imported it directly into Credit Union Toolbox. Now he can target by demographic put out digital newsletters or promote rate specials that are tied into a local dealership in a way they couldn t have done before. Banzai which brings financial literacy to the schools is another resource Moffitt recommends. Banzai does most of the work by contacting schools directly and branding educational materials with the credit union s logo. The only cost to the credit union is the price of classroom materials so it s a cost effective way to get in front of high school students. This is especially important as Accentra CU plans to open a local High School branch in the fall of 2013. If he had to do it again Moffitt would have made the Facebook contest less all encompassing. We tried to make it broad because there s obviously a lot of benefit in holding on to existing older members and we didn t want them to think we were abandoning them. A lot of time went into planning such a widely focused campaign which wasn t justified by the outcome. The learning curve is an important part of the process that you don t necessarily realize while you re living through it. And he is quick to point out that he doesn t have all the answers. Even though I m a marketing team of one it s great to have someone at the credit union to bounce ideas off of. Moffitt takes new ideas to the call center representative who is close to retirement as often as he does to new younger tellers. Turns out it s a brand you can live with at any age. 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 individual credit unions with social media marketing and PR support on a consulting basis. Contact her at laura cucontent.com or follow her on Twitter CUtoolbox. 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 January 2013 credit Union BUSINESS 27 MarkETING MaTTErS Top 10 Methods To Track Your Marketing Performance. By Tony Rizzo ith 2013 already under way it s important that chief executives know what they want to get out of marketing in the coming year. All CEOs want more loans and bigger numbers--that s nothing new--but as the year continues to unfold it s important that you set expectations for marketing performance. Setting expectations means clearly articulating goals beyond general loan and number targets by creating systems that will accurately measure specific marketing results. If you do you will more likely realize successful marketing departxment campaigns. Below is a list of the top 10 items to track for various marketing campaigns executed throughout the year. You don t need to track all of them just the ones you feel are most aligned with your corporate goals. 3. Psychographic and demographic segment performance. This type of tracking is not as important a measure for single campaigns but the information it yields over the course of an entire year is invaluable. In looking at response rates from both a psychographic and demographic standpoint the marketing department can begin to not only craft messages that are more meaningful to responders but also helps allocate direct marketing dollars to those specific segments that are most likely to respond. For example if you find that members who respond most to ongoing campaigns are closest to the branch have tenure between three and five years with incomes between 50 000 and 100 000 and are in a psychographic category of upwardly mobile subsequent targeted campaigns will become easier to ex1. Pre-campaign ROI in breakeven estimate. This fundamental analysis sets the tone for what you expect from ecute and less expensive to run. each marketing dollar spent. It should take into account not only 4. Location and personal performance. the basics of rate transfer cost and budget but also an estimate One of the many benefits of a CRM or MCI program is the abilof net interest income and expenses as well as the lifetime value ity to tie sales directly to individual staff members. This informaof the relationship. Completing this analysis should also give you tion is especially valuable if your institution is moving towards a precise breakeven on the marketing expenditure. Personally I becoming more sales directed. Identifying who is selling what look for breakeven given a response rate of less than 1%. can help establish more appropriate compensation programs pinpoint training needs and modify messages offers and prod2. Post campaign direct and indirect response. This simple analysis reconciles the expectations of the campaign ucts which benefits both your staff and the organization. By anwith the reality of the results. A direct response as the name im- alyzing location performance for example you ll better underplies is a direct response to the offer made. In other words you stand what products perform best in individual locations which promoted auto loans to members and members purchased auto can lead to better product promotions by specific location and loans. An indirect response is a measurement of overall lift with facilitate the allocation of marketing dollars across the branch netregards to the side of the balance sheet being promoted. For exam- work. You will quickly learn who your real salespeople are once ple you promote auto loans and a segment of members purchase you start tracking individual personnel performance campaign by home equity lines of credit. While some executives don t believe in campaign. You can better reward your top performers who can be the value of the indirect response I believe that marketing of any used in turn to model lower performing employees to increase kind provides lift and movement. Therefore it s important to look their job performance. W at all marketing expenditures and how they impact overall sales. 28 credit Union BUSINESS January 2013 www.cubusiness.com MarkETING MaTTErS 5. Cross-sell trends Analyzing cross-sale trends is another important tracking tool and is a benchmark you can use to measure how well member services interacts with members. If a member contacts your institution to purchase an auto loan while you re running a promotion for example cross-sale analysis will show what additional products and services were sold at the time of sale. Marketers can use this information to create more inclusive product messages that will benefit all members who purchase from your institution. 6. Electronic click behavior and conversion. Most CUs use email to communicate with members and tracking click through balance tracking and unsubscribe rates campaign by campaign is standard procedure. But delving more deeply into the behavior activity of an email campaign can result in valuable new business. Let s examine click through behavior as an example. If you re promoting mortgages and the member clicks multiple times on the application or rate page you can send a behaviorbased email offering an incentive to act now while simultaneously sending an automated call notification to your call center for immediate follow-up. Conversion is another often overlooked aspect of email marketing. A conversion is simply a sale. By linking email response back to the MCIF the marketing department can quantify sales made specifically from the email effort. track performance has never been easier. I m often asked which incentives perform best. While I can offer a number of attribute combinations to increase response rate it s important that institutions test to determine what works best for its membership. This is particularly true whenever you undertake any large-scale marketing effort. Most institutions launch their largest campaigns without allowing enough time to test individual components. If your institution is looking to test various attributes of the marketing mix allow three months for testing before the actual hard launch date. 9. Value score migration. Similar to segmentation value score migration is an analysis of up-and-down movement of key market segments within the membership. Value scores are typically a combination of various data attributes including household profitability demographic and psychographic codes tenure age products per household and income. Over time this type of detailed tracking provides greater insight as to which specific marketing expenditures create the most activity. 10. Profit. Finally we arrive at what most CFOs believe to be the only true measure of marketing performance--profit. For each marketing effort you should ask to see the ratio of dollars spent to profit earned. Depending upon your institution you can measure either marginal or net profit. I prefer marginal profit as marketing has no tangible control over fixed overhead. Reporting on this level can be as simple as this one-sentence summary the auto loan campaign generated 100 in marginal profit for every one dollar spent. While it may seem daunting this list of measurements is important to the ongoing success of your business. Should you execute all ten No. But you should select those that are your key performance drivers. Gather your senior management team and agree to a set of rules for tracking so that expectations are set and everyone will accept the results as accurate. By doing this you will be setting up your marketing department to not only win but to excel as they become true profit generators for your credit union. Success in Marketing 7. Segment retention. It is common to find that the vast majority of your bottom line profits come from 10% of your membership base. Do you have specific measures in place designed to retain this group of members If not you have a big hole in your marketing plan. Conversely do you have a plan specifically designed to migrate marginally profitable members to a more profitable and engaged status These are important and often overlooked segments within a CU s membership and paying attention to both segments is critical to driving up profit and mitigating attrition. Analysis that records the retention and migration of these two segments should be performed as part of every marketing campaign. In fact specific campaigns should be developed around these two segments as they generate both immediate and Tony Rizzo is the general manager and creative director of ongoing profits. MARQUIS Software Solutions. MARQUIS is the largest provider of MCIF CRM solutions to credit unions worldwide with a 8. Multivariate testing. With both digital direct mail and email the ability to test offers and long-standing reputation for excellence. www.cubusiness.com January 2013 credit Union BUSINESS 29 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 Currency Coin Handling What Does Automating Your Currency Handling Needs and Providing Self Service Coin Redemption do for Your Branch It Gives Your Tellers Tools for Success Increases Branch Teller Increases Cross Selling Efficiency Opportunities Helps to Meet Member Strengthens Member Expectations Retention Reduces Costs Adding to your Bottom Line What Does it Take to Learn a Little More Not a Lot... Just ask your Magner Representative Phone 800-243-2624 Email solutions magner.com Online www.magner.com Let s talk about doing things the right way... Self-Service Coin Centers Currency Dispensers Currency Recyclers Proven Performance and Quality 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 Having Heart T By Sharon Sweda he Midwest is known for its bountiful harvests solid family values and people who do what they say they will do. Mild winters and calm storms are not included on the list of things for which the Midwest is famous and you ll find that some of America s coldest winters and most torrential spring rains occur in the Midwest. Midwesterners are used to their turbulent seasonal changes and think of them as just another piece in the fabric of their lives. So it comes as no surprise that Ascentra Credit Union considered weather as well as financial service products when they built their community service platform. Even though Ascentra Credit Union is a multi-state organization and a recent recipient of CUNA s Diamond Award for outstanding marketing and business development in the category of institutions with assets of 100-249 million it has modest roots. The Aluminum Company of America formed the employee credit union in 1950 and ran the operation from the basement of their Riverdale Iowa plant. The Riverdale location served members for twenty-six years when they moved their base of operations to Bettendorf Iowa. In 1980 the field of membership was expanded to include all ALCOA employees and family members as well as Select Employee Groups (SEGs) and businesses unable to support their own credit union. This new structure ignited more than 30 years of continued growth and development and the once local employee credit union is now a robust financial institution serving nearly 25 000 members--all of whom live the Midwestern life and face its climatic challenges. Ascentra offers members a mind boggling list of services and every imaginable interactive financial tool can be easily accessed from their extensive website menu within a click or two of arrival. The site also offers informational resources aimed at guarding protecting and increasing member financial stability. The product offerings are vast and comprehensive making Ascentra an unyielding competitor in the financial services arena. Like other credit unions the heart of this Midwestern financial institution focuses on the financial services that provide security for members. One of their unique product offerings is flood insurance a service that might not be relevant in many other parts of the country. Ascentra s insurance platform also offers a variety of other insurance products including life auto boat and even pet insurance. Yet in a region where flooding is commonplace offering flood insurance directly speaks to the CU s commitment to serving members while protecting their primary investment. But caring for others extends beyond serving members. Becky Hansen Executive Vice President of Compliance and Product Development introduced Ascentra to King s Harvest Clothing Ministry which helps to clothe the needy. Through Hansen s efforts the Ascentra team came to the rescue when the ministry needed two hundred pair of blue jeans. The company website is filled with heartwarming notes of appreciation and thanks for Ascentra s participation in all types of community service efforts including helping families facing difficult times and school districts raising money by sponsoring benefit events providing volunteers and through donation. From their free furnace give-away to special Casual Day participation fees donated to someone in need--the actions of this Midwestern group reveal the true heart of Ascentra. Sharon Sweda is a freelance writer who has worked in the real estate and finance industries for the past 28 years. Contact Sharon at SharonSweda Sweda.com to SpotLite your CU. 32 credit Union BUSINESS January 2013 www.cubusiness.com WITH T Sta C d t U ATM a ss v C dtU CU24 p s s t a sa ti b s ati d sp d a d sa ty h lps s d l v p s v y day W j y th h gh st l v l s v a d p ss al s th CU ACHIEVE MORE Visit us at Booth 324 MEMBERSHIP GROWTH AND RETENTION Th la g st ati al dt d PIN d b t t k J ffK dy P s d T Sta C d t U Oly p a WA t MORE th CU Call Judy Lazzerini toll-free email visit 2013 MORE OUR MEMBERS GET PSCU Member-Owners Outperform. PSCU Member-Owner credit unions outpace the industry with higher membership growth greater net income better credit card penetration rates and stronger checking account growth. Membership rose 3.6% double the rate of non-PSCU institutions. Net income climbed 22.2% compared to 18.6% for non-members. pscu.com 888.918.7357 Credit card penetration rate was 18.5% versus 13.2% for all others. Checking accounts grew 6.4% versus 4.4% for non-Member-Owner credit unions. PSCU Member-Owner credit unions grow and prosper. Are Growth rates based on data sourced from Callahan & Associates for 2012. you with us